A card programme is a system or service that allows businesses to issue payment cards such as credit, debit, and prepaid cards under their brands. These programmes typically involve collaboration with card networks (e.g. Visa, Mastercard) and can include features customised to specific customer needs or business goals. Their branding, technological features, reward schemes, spending controls, and security measures can vary depending on a business’s goals and its intended customer base.

Card payments have increased year over year, with the global transaction volume from the major card networks growing from 625 billion transactions in 2022 to more than 687 billion in 2023. Businesses can take advantage of this growth by launching their own card programmes to boost customer loyalty and brand recognition. In this article, we’ll explain how businesses can create a card programme.

What’s in this article?

• How do card programmes work?
  
• Why would a business launch a card programme?
  
• Challenges with creating a card programme
  
• How to create a card programme
  

How do card programmes work?

• Application and approval: An individual or business sends a card programme application to a card issuer. The issuer assesses financial factors such as credit and income to determine eligibility and set credit limits.

• Card issuance: The card issuer provides the applicant with one or more physical or virtual cards for the programme. These cards contain unique identifiers such as card numbers and security codes.

• Transaction processing: The cardholder uses their card to make a purchase, and the payment processor sends the transaction details to the card issuer for authorisation. The issuer verifies the card’s validity, checks available credit, and authorises the transaction.

• Settlement: The business completes the sale and submits the approved transaction to its acquiring bank for settlement. The acquiring bank forwards the information to the card issuer’s network for clearing and settlement.

• Billing and payment: The card issuer generates periodic statements for cardholders that detail their transactions, outstanding balances, and minimum payment requirements. Cardholders must make payments by the due date to avoid late fees and interest charges.

• Rewards and benefits: Many card programmes give rewards and benefits to cardholders such as cash back, points, miles, and access to exclusive services.

• Customer service and support: Card issuers provide cardholders with customer service and support to address enquiries, resolve disputes, and help with other card-related matters.

Why would a business launch a card programme?

Businesses use card programmes to simplify payments, boost customer loyalty, manage expenses, and gain insight into spending patterns. Fintech companies might launch card programmes to expand their product offerings, differentiate themselves in the market, or create new revenue streams.

Here are the main reasons why businesses create card programmes.

Customer loyalty and engagement

• Businesses can incentivise repeat purchases and strengthen customer loyalty with attractive rewards and benefits tied to card usage. This can increase sales volume and customer retention.

• Businesses can deepen a customer’s connection with the brand by giving cardholders exclusive access to events, promotions, or services.

Brand awareness and recognition

• Every time a customer uses the branded card, that serves as a small advertisement that increases brand exposure and awareness. This can attract new customers and reinforce brand presence in the market.

• Businesses that launch co-branded card programmes can expand brand reach and introduce themselves to new customer segments.

• Card programmes offer businesses another channel to communicate with customers, share promotions, and announce new products or services.

Additional revenue streams

• Businesses can offer optional value-added services such as extended warranties, travel insurance, and purchase protection for an additional fee. This can further diversify their revenue streams.

• Additional revenue streams might also be generated from interest charges and late payment fees.

Payments and cash flow

• Financial institutions typically process card payments faster than they do traditional payment methods such as checks and bank transfers. This can improve cash flow and reduce the risk of late payments.

• Card programs can help businesses simplify their payment processing operations, increasing cost savings and efficiency.

Customer insight

• Card programmes give businesses insight into customer spending habits, preferences, and purchasing behaviour. Businesses can use this information for product development and inventory management.

• Businesses can analyse customer data to create highly targeted marketing campaigns and promotions. This increases the likelihood of conversions and of maximising return on investment.

Challenges with creating a card programme

Here are the possible challenges businesses need to be aware of when launching a card programme.

Regulatory compliance

• To comply with financial regulations, businesses must make substantial investments in legal and compliance expertise, technology, and internal controls.

• Businesses must continually keep up with and adhere to evolving regulations.

• If a business is found to be non-compliant, it risks fines, penalties, reputational damage, and a loss of its operating licence.

Operational complexity

• Businesses must implement and maintain a wide range of resource-intensive operational tasks, from card issuance and transaction processing to customer service and dispute resolution.

• Businesses must have comprehensive, often costly technology infrastructure that can handle card management, transaction processing, fraud detection, and data analytics.

• Businesses must manage relationships and technical integration with third-party providers such as payment processors, card networks, and fraud prevention services.

Financial risks

• If cardholders default on their payments, businesses with credit cards risk major financial losses.

• Businesses must implement strong fraud detection and prevention measures to protect against identity theft, counterfeit cards, and unauthorised transactions.

• Interruptions to card programmes due to operational failures such as system outages, data breaches, and human errors can result in financial losses and reputational damage.

Competition

• To attract customers in a market filled with established players and new entrants, businesses must differentiate their card programmes.

• Businesses can face pressure from competitors to reduce fees. This can affect the profitability of card programmes.

• Businesses must stay ahead of the curve with new features and benefits to attract and retain customers.

Customer acquisition and retention

• Businesses must convince potential customers to sign up for a new card programme. This can be difficult in a market saturated with options.

• Businesses must keep cardholders engaged and active. They must continually provide value and incentives to prevent customers from switching to competitors.

How to create a card programme

Here’s a step-by-step guide to planning, creating, and launching a card programme.

Define your objectives and target audience

• Clearly articulate your reasons for launching a card programme. Do you want to increase customer loyalty, generate additional revenue, simplify payments, or achieve other specific objectives? Conduct market research and competitor analysis to validate your goals and identify potential opportunities.

• Define your target audience. What type of card programme would resonate with your ideal customers? What features and benefits would they find most appealing? Create detailed customer profiles to guide your programme design and marketing efforts.

Choose a card programme model

• Decide whether you want an open-loop programme (in which your card can be used anywhere) or a closed-loop programme (in which your card can only be used at your business). Weigh your target audience’s preferences and your desired level of control over card usage.

• Consider whether you want to partner with another company for a co-branded card or launch a stand-alone programme under your own brand. Evaluate the potential benefits and drawbacks of each model in terms of brand reach, customer acquisition, and shared responsibilities.

• Choose the type of card (e.g. credit, debit) that best suits your objectives and target audience. Consider factors such as credit risk, customer preferences, and regulatory requirements.

Select a card issuer and network

• Partner with a reputable card issuer that can provide the necessary infrastructure, technology, and support for your programme. Compare different issuers based on their fees, capabilities, and experience serving your target market.

• Choose a card network (e.g. Visa, Mastercard, American Express) with your preferred features, benefits, and acceptance. Evaluate network fees, brand recognition, and access to value-added services.

Design your card programme

• Develop a compelling value proposition with rewards, benefits, and perks that appeal to your target audience. Conduct focus groups or surveys to gather feedback on potential features and confirm they meet customer needs.

• Carefully structure your fee schedule and interest rates to balance profitability with customer satisfaction. Benchmark against competitors and conduct pricing sensitivity analysis to refine your fee structure.

• Create a visually appealing card design that reflects your brand identity and resonates with your target audience.

Develop your technology infrastructure

• Establish a card management system to handle card issuance, transaction processing, fraud detection, and customer service. Compare different software providers and choose a solution that is able to grow, secure, and integrate with your existing systems.

• Integrate data analytics capabilities to gain insight into customer behaviour and spending patterns. Then, use data visualisation tools and machine learning algorithms to personalise the customer experience.

• Consider developing a mobile app and integrating with digital wallets to improve the customer experience. Provide features such as real-time transaction notifications, balance enquiries, and rewards management through the app.

Prepare for regulatory compliance

• Consult legal and compliance professionals to confirm your programme adheres to applicable regulations. Conduct thorough compliance audits and establish risk management practices.

• Develop strong internal controls to monitor and manage risk. Communicate clear policies and procedures, and regularly train staff.

• Keep up with regulatory changes and update your programme as needed. Maintain open communication with regulatory bodies and participate in industry forums.

Launch and market your card programme

• Develop a comprehensive marketing strategy to promote your card programme and attract customers. Use a mix of online and offline channels such as social media, email marketing, and direct mail. Offer sign-up bonuses or referral incentives to encourage adoption.

• Implement ongoing communication and engagement strategies to keep cardholders active and loyal. Send personalised offers and rewards based on spending behaviour and preferences.