Launching a card is a complex process with the potential for long-term financial gains—if executed flawlessly. Yet, it moves quickly, with an average timeline of just six to seven months from concept to launch.
Any major player in today’s financial landscape—from legacy banks to fintech apps to fledgling retailers—has at least considered launching a card. But before diving in, there are critical questions to answer: Who is the target market? What will make this card stand out from others already on the market? Which partners are essential to ensure its success?
A white paper from Galileo outlines the key steps to designing and bringing to market a successful credit, debit, or prepaid card program.
Defining the Objectives
The first step is to clearly define the objectives for the card. These may include building brand awareness, enabling easier customer payments, or serving as a central element of a financial offering rather than simply a secondary tool.
An important consideration is determining how the card will stand out from competitors in the market. There should be a compelling use case that encourages customers to choose it over other options in their wallets, which begins with a strong value proposition.
The value proposition explains why customers would prefer this card over others. For instance, the fintech app Wise, known for international money transfers, ensured that its first debit card supported spending in multiple currencies. This aligned with customer expectations and filled a niche that many other cards do not address.
That’s another important part of the value proposition: tying the card to the firm’s brand. A successful card will reinforce those expectations. A well-planned card will address specific problems for its customers. Users of a travel website, for instance, might want to integrate spending with planning, paying for a hotel at the same time it is booked.
These capabilities can also evolve after the card is launched. The strategy can be iterated if something turns out not to work as intended. For example, a debit program might falter because customers don’t have enough cash in their accounts to feel confident making purchases, and it may need to be supplemented with a prepaid card. No plan is written in stone; if the market sends a signal that differs from the original plan, the market should be heeded.
Special Challenges for Credit Cards
When a company chooses to launch a credit card, there are special challenges that must be anticipated. This means entering the lending business with all that entails.
“The whole essence of the business is that you have to be ready to bear the risk of the portfolio,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “If I open up 2,000 accounts with a $1,000 credit line, all of a sudden I have to have $2 million in the bank just reserved against those funds because I’ve got to qualify my lending capacity by the total exposure on day one.”
It makes sense to target a certain level of credit quality in line with the brand’s positioning. Consumers holding Walmart credit cards are likely to have lower scores than those using a card from a high-end hotel chain. This will affect revenue from the card. Higher credit scores are generally associated with more reliable payment behavior, while lower scores may result in greater profits from late fees and interest.
“Conceptually, you have control over the customers’ scores, but there’s a reality here,” said Riley. “You could say you want to target people with FICO scores of 760 or better. However, if you do that, you’re going to compete against American Express and Citi. You better bring your ‘A’ game, and it’s rare that a small issuer is going to do it. So you end up going to segments of the market that tend to be less robust.”
What Type of Customer Are You Serving?
Now it’s time to move from planning to execution. Understanding the potential customer base is an important part of putting together a launch plan. A simple metric, like the size of the potential audience, is a critical factor that will determine the team—both internal and external—needed to launch the product.
The target market may already be defined, but each customer niche has specific needs. A small business card will require a range of services—more than a simple consumer card, but less than a large enterprise card. A card focused on cross-border payments must have access to the best available exchange rates to remain competitive. An e-commerce business might seek to establish a physical presence by offering a plastic card rather than relying solely on a digital one.
“An e-commerce vendor doesn’t have that physical brand presence that a lot of cobranded cards are going to have,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “The blessing of a physical card is that it’s present in the customer’s wallet. When they’re out shopping, they’re going to open their wallet and physically see that card in there. In the e-commerce world, consumers can get lost in the kind of the myriad of different payment forms that are available. It’s all about trying to keep that brand top of mind.”
It’s important to devise branding for the card that aligns with the overall image of the customer. A jeweler may want to maintain a more prestigious feel than a grocery chain, while a fintech card targeting the upper end of the market may aim to convey elegance in its presentation.
The card should reflect the same design principles and values found on the website or in physical stores. The full brand experience should be integrated into the card’s design.
That can extend to the physical appearance of the card as well. For example, an outdoor retailer like REI might consider a wooden card or another environmentally conscious material to better align with its customers’ sensibilities.
This is also the time to consider developing a loyalty program. In today’s market, almost no card is launched without some type of rewards program, offering benefits that go beyond encouraging repeat visits.
“For a competitive rewards program, you have to offer X percent back because using the rewards program does cause a little bit of pain on the consumer side,” said Danner. “You have to make sure that you’re using your loyalty number and that you’re using, for example, the right gas station. But the payoff for the retailer is that you have spend data on the customer. And this applies to your partner bank as well. One of the wins for them is having this large database of loyal customers that they can collect data and interchange fees on.”
Do You Have the Resources to Launch?
The final phase of launching the card is assembling the team that will bring it to market. Smaller cards often require a great deal of external support to launch. Key partners to consider include:
- Issuing bank: Issues the cards and manages the accounts. These banks often collaborate with payment networks and hold licenses to issue cards.
- Processor: Manages the processes involved in authorizing, clearing, and settling electronic payment transactions on behalf of the financial institutions. They also provide services such as cardholder customer care, error and dispute resolution, and chargeback management.
- Manufacturer: Produces the physical card, including the plastic and embedded technology, and provides the onboarding materials that customers receive in the mail.
There’s also the crucial role of the program manager, which many card issuers choose to handle internally. Program managers establish and evaluate the goals and objectives of the card while collaborating with the partners who help operate the program. This role requires familiarity with factors such as compliance requirements and the key objectives the card is intended to achieve.
Outsourcing program management allows the issuer to focus on areas of expertise, such as user experience or branding, while partners handle specialized functions. Whether program management is handled internally or through a partner, getting this aspect right is essential for the success of a new card.
Fortunately, outsourcing card program management isn’t an all-or-nothing decision. Many vendors can offload certain functions without taking on responsibility for managing the entire program. Other positions will may still require outside support, especially for smaller or first-time card programs.
One increasingly popular option is combining these services in a Banking-as-a-Service (BaaS) platform, which can simplify and shorten the launch path. BaaS providers generally place clients on a shared Bank Identification Number (BIN), which can make it easier to get a card program off the ground. However, migrating to another platform later will require obtaining a brand new BIN for the program.
As a trusted advisor with more than two decades of experience helping banks and fintechs develop successful payment programs, Galileo can play many of these roles. For first-time issuers, having a payment card expert is essential to provide fair advice based on real-life experience with hundreds of clients and millions of their cardholders. Whether it involves compliance, marketing, or building a fresh tech stack, Galileo has been there.
Getting to Top of Wallet—and Staying There
The entire purpose of this exercise is to reach the top of the customer’s wallet, becoming the first option they turn to when making any type of payment. Debit and credit accounts often struggle to differentiate from competitors, so the only real way to remain top of wallet is by creating a feature that truly sets the product apart. The launch of the card is the opportunity to establish that differentiator.
The rest of the planning, including building the infrastructure to manage the program, is essential to maintaining top of wallet status. Both elements are necessary for the long-term success of the card and the business.
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