Card lifecycle management is the management of a payment card from issuance to deactivation. This includes creating and personalising the card, distributing it, monitoring it for security, renewals, reissues, and its eventual replacement or expiry. Effective management ensures that active cards remain secure, functional, and meet customers’ needs. This helps businesses keep their customers happy and also reduces the risk of fraud.

Lifecycle management is increasingly important, with the number of payment cards in circulation worldwide expected to increase from over 26.7 billion in 2023 to almost 30 billion by 2028. Below, we’ll explain the workings of card lifecycle management: the different stages, best practices, and challenges that businesses are likely to encounter.

What’s in this article?

• Why effective card lifecycle management is so important
  
• Stages of the card lifecycle
  
• Challenges and risks of card lifecycle management
  
• Best practices for card lifecycle management
  

Why effective card lifecycle management is so important

Card lifecycle management can impact record-keeping, fraud prevention, and compliance. Here’s why lifecycle management is so important:

• Financial control and visibility: Managing the lifecycle of payment cards helps businesses closely control their financial transactions. This includes tracking the issuance, use, and expiry of cards, as well as monitoring for fraudulent activity. Effective management ensures card transactions are legitimate and authorised, which helps maintain accurate financial records and reduce the risk of financial losses.

• Risk mitigation: Card lifecycle management is an important part of a company’s broader risk management strategy. By overseeing a card’s entire lifespan, businesses can keep security measures up-to-date, whether they’re implementing chip technology, enabling or disabling cards, or quickly responding to suspected fraud. These actions can greatly reduce the risk of data breaches and unauthorised transactions.

• Operational efficiency: Effective card issuance and cancellation processes can improve operational efficiency. For instance, when employees leave a company, promptly deactivating company cards can prevent unauthorised purchases and simplify account reconciliation. Automating parts of the card management process such as renewals and limit adjustments can also free up staff to focus on more strategic tasks.

• Customer experience: For card-issuing businesses like banks or retailers, effective lifecycle management can improve the customer experience with fast, accurate card renewal processing, limit changes, and replacements. Effectively managing these processes builds trust and encourages an ongoing business relationship.

• Compliance: Different industries and regions have different regulations governing the issuance and use of cards, including data protection laws and financial reporting standards. Proper management helps businesses stay compliant with these regulations to avoid legal issues and potential fines.

Stages of the card lifecycle

A payment card goes through many life stages before it’s ultimately deactivated. Here’s a closer look at each stage in the cycle.

Issuance

The business creates a card and issues it to a cardholder. First, a customer submits an application, which is reviewed to verify their identity and evaluate their creditworthiness or eligibility depending on the card type (e.g. credit, debit, prepaid). Once the business approves the application, it personalises the card for the individual. It does so by printing personal details, encoding data on the magnetic stripe, and embedding a chip, if applicable. The company then securely packages the card and posts it to the cardholder, often with activation instructions.

Here’s what to remember during this stage:

• Know Your Customer (KYC): Thoroughly verify the applicant’s identity and assess risk levels to prevent fraud, in line with KYC guidelines.

• Credit check: Evaluate creditworthiness to determine appropriate credit limits and interest rates.

• Fraud detection: Use advanced analytics and machine learning to identify suspicious application patterns.

• Card personalisation: Ensure the cardholder’s information is accurate and branding is consistent for a positive customer experience.

• Secure delivery: Protect sensitive card details while the card is in transit to prevent unauthorised access.

• Digital onboarding: Use simplified, online application processes to accelerate issuance.

• Instant issuance: Provide immediate access to virtual or physical cards for faster customer satisfaction.

• Tiered card programmes: Include various card options with distinct features to cater to diverse customer needs.

Activation

Activation verifies that the card has been received by the correct person before use. This stage typically requires the cardholder to confirm receipt of the card and verify their identity – usually through a phone call, a mobile app, or an online banking system. Card activation protects against fraud by ensuring that the card hasn’t been intercepted and used by someone other than the intended recipient.

Here’s a closer look at this stage:

• Authentication: Verify the cardholder’s identity before activation for security.

• User experience: Give clear instructions for activation through multiple channels (e.g. text messaging, email, app). Make the activation process simple and intuitive.

• Fraud prevention: Monitor activation attempts for unusual activity or possible fraud.

• Multifactor authentication: Require additional verification steps (e.g. one-time passcode, biometrics) for enhanced security.

• Self-service activation: Allow customers to independently activate cards through online portals or mobile apps.

• Real-time notifications: Inform customers of successful activations and any suspicious verification attempts.

Usage

The cardholder uses their card for transactions. These uses can include purchases, withdrawals, and online payments. Throughout this phase, the issuer monitors transactions for signs of unusual or suspicious activity such as high transaction volumes over a short time period and transactions in unexpected locations. Security features such as PIN codes, card verification value (CVV) numbers, and one-time passwords help safeguard transactions.

During routine usage, consider the following:

• Transaction monitoring: Track spending patterns to detect fraud, unauthorized use, or unusual activity.

• Credit limit management: Ensure cardholders stay within their approved credit limits to mitigate risk. Dynamically adjust credit limits by balancing spending behaviour and risk.

• Dispute resolution: Implement efficient processes to handle transaction disputes and chargebacks. Empower customers to report and track disputes online or through mobile apps.

• Customer engagement: Offer rewards schemes and personalised recommendations and use proactive communication to boost usage.

• Real-time fraud alerts: Immediately notify cardholders of potentially fraudulent transactions.

Renewal and replacement

Card renewal and replacement occur when a card is expiring or in instances of loss, theft, or damage. Renewals typically happen automatically as the expiration date approaches, with the issuing bank sending a new card with updated security features and an extended validity period. With a replacement, the issuer sends a new card under the existing account when the original card is compromised or no longer physically functional. This stage requires careful handling so old cards are securely deactivated when new ones are activated.

Here are some elements to consider:

• Proactive renewal: Send new cards to eligible customers before expiration for uninterrupted service.

• Lost or stolen card management: Quickly deactivate lost or stolen cards and issue replacements to prevent fraud. Immediately provide virtual or physical replacements.

• Upgrade or downgrade options: Give cardholders flexibility to change card products as their needs change. Recommend relevant card upgrades to customers based on their usage data.

• Data security: Securely handle cardholder information during renewal and replacement. Use encryption and tokenisation to protect sensitive cardholder information.

Expiry and deactivation

Cards have expiry dates so they can’t be used indefinitely, which would pose security risks due to wear and potential technological obsolescence. Once a card reaches its expiry date, the cardholder cannot use it for transactions and must deactivate it. To do so, cardholders follow instructions to destroy expired cards, preventing fraudulent use. Deactivation also involves removing the card’s details from active files and either terminating or transferring all linked services to a new card.

The expiry and deactivation stage also includes the following:

• Grace period: Inform customers of upcoming expiry dates and renewal options well in advance. Allow a reasonable time frame for cardholders to transition to new cards or update payment methods.

• Account closure: Properly handle account closure requests and ensure all outstanding balances are settled. Provide convenient online or in-person options for closing card accounts.

• Data retention: Comply with data retention regulations and securely dispose of cardholder information. Use certified data destruction methods to eliminate sensitive information.

• Fraud prevention: Monitor deactivated accounts for any unauthorised access or suspicious activity.

Challenges and risks of card lifecycle management

Card lifecycle management presents certain risks and challenges, such as the following:

• Fraud management: As cards progress through their lifecycle, the risk of fraudulent activities can increase. Financial institutions must constantly update their fraud detection and prevention tactics to counter new threats such as counterfeit card production, online fraud, and misuse of lost or stolen cards.

• Integration: Each technological update must easily integrate with existing card systems to maintain transaction security. This might include incorporating EMV (Europay, Mastercard, and Visa) chips, contactless capabilities, or mobile payment options.

• Regulatory compliance: Card management must comply with regulatory requirements such as the Payment Card Industry Data Security Standards (PCI DSS), the General Data Protection Regulation (GDPR), and local banking regulations. Non-compliance can result in large fines and reputational damage.

• Card issuance and renewal processes: Delays or errors in the issuance, renewal, and replacement of cards can lead to customer dissatisfaction and slower operations. Issuers should send new cards before old ones expire and replace lost or stolen cards swiftly.

• Customer experience management: The customer experience requires management throughout the lifecycle. This includes clear communication about card features, usage, and benefits, as well as customer support for any issues that arise. A poor customer experience can lead to higher attrition rates.

• Data security: Institutions must keep customer data safe throughout the card’s lifecycle. Any breach can lead to substantial financial and reputational losses. Strong encryption practices, secure authentication methods, and constant vigilance can protect against potential security threats.

• Cost management: Institutions must manage costs associated with card production, technology upgrades, fraud prevention, and regulatory compliance. They must also balance them against the need to offer competitive products without compromising on quality or security.

• Product differentiation: In a highly competitive market, card products need a unique edge to meet diverse customer needs. This can involve continual market research and product development efforts to stay ahead of competitors.

Best practices for card lifecycle management

Here are some best practices businesses should remember for every stage of the card lifecycle management strategy.

Issuance

• Behavioural biometrics: Incorporate behavioural analysis during the application process to identify anomalies and potential fraudulent actors.

• Alternative data: Use non-traditional data sources like social media and utility bills to better assess creditworthiness and meet KYC requirements.

• Digital identity verification: Use advanced ID verification tools such as facial recognition and document scanning to simplify onboarding and deter fraud.

• Predictive analytics: Use data modelling to anticipate credit risk and identify potential high-value customers.

Activation

• Just-in-time activation: Allow cardholders to activate their cards only when needed to reduce the chance of fraud.

• Gamified activation: Make the activation process engaging and rewarding to improve the customer experience.

• Risk-based authentication: Dynamically adjust authentication requirements based on the perceived risk level of the activation attempt.

Usage

• Machine learning-powered fraud detection: Continually adapt fraud detection models to stay ahead of changing fraud tactics.

• Contextual spending analysis: Consider transaction context (e.g. location, time, merchant type) to improve fraud detection accuracy.

• Personalised spending insight: Give cardholders detailed spending analyses to promote financial literacy and responsible card usage.

• Proactive dispute management: Use predictive analytics to identify possible disputes and proactively resolve them.

Renewal and replacement

• Contactless card provisioning: Allow cardholders to activate new cards using contactless technologies for their convenience.

• Biometric card security: Incorporate fingerprint or facial recognition for card authentication for an extra layer of protection.

• Card recycling programs: Promote eco-friendly practices with card recycling options.

• Digital card management: Empower cardholders to manage card features and settings through mobile apps or online portals.

Expiration and deactivation

• Account migration: Offer transition options so cardholders can upgrade or switch to new products as cards expire.

• Data anonymisation: Implement data anonymisation techniques to comply with privacy regulations while retaining valuable insight.

• Post-deactivation fraud monitoring: Continue monitoring deactivated accounts for a set time period to detect any unauthorised activity.