How Card Programs Can Level The Playing Field In Payments To Drive Business


Meg Nakamura is CEO and Co-Founder of Apto Payments, based in San Francisco.

Until fairly recently, financial services was an intimidating and difficult industry to crack for new participants. Historically, large legacy banks and service providers have dominated the space, and the regulatory and compliance burdens required to get started favored established or known entities. This environment generated a small concentration of players, which in turn led to a relatively homogenous set of offerings. If you wanted a banking partner or a credit card issuer, for example, you had to choose from a very limited set of options. This was great for those established incumbents but terrible for entrepreneurs and ultimately end users or customers because innovation was stunted.

The good news is that recent advancements in technology have dramatically changed the landscape. The cost of starting a company has meaningfully decreased with the rise of infrastructure-related innovations. Cloud-based computing, distributed server systems and software that automates previously arduous business tasks provide a strong foundation for anyone who wanted to start a company nowadays. These and other infrastructural advancements were foundational in enabling the explosion of innovative internet businesses that we know and love today.

The Rise Of Payments-As-A-Service

The companies that produced the infrastructure for entrepreneurs to build on — like AWS and Twilio, for example — have dramatically reduced the costs of doing business and enabled verticals in internet business that would have been pipe dreams just a decade earlier. Sensing a huge opportunity, entrepreneurs looked to create these types of foundational building blocks for financial services. Now, infrastructure-level innovation in financial technology is creating a faster, more diverse and more effective industry. “Payments-as-a-service” is now a thing!

A great example is Stripe, which has created an inexpensive and easy-to-use platform for any company to start accepting and processing payments. Other recent innovators and banking-as-a-service providers have simplified the regulatory and technical hurdles and modernized access to archaic banking systems like ACH. The next generation of fintech companies can leverage these infrastructural building blocks to enable features that previously would have required months, if not years, of compliance work and legal approvals. Naturally, this will lead to even greater innovation as companies think about how they want to build on top of the stack instead of just sweating their way toward re-creating a piece of it.

Card Issuance: A New Frontier

One exciting and relatively underserved area within payments-as-a-service is card issuance, the ability of companies to design, build, launch and scale branded debit and credit card programs. Card usage has been on the rise for years as the migration from cash continues, and the recent Covid-19 pandemic only accelerated consumer preference for contactless card-based payments, virtual cards and digital wallets. For companies looking to grow their businesses, branded card programs can be an effective and fun way to retain and engage customers while offering rewards and a convenient payment option. (Full disclosure, my company offers issuance programs/services, as do others.)

Unfortunately, small companies looking to launch such card programs have historically bumped up against many bottlenecks and hurdles. Though much progress has been made, companies have had to work with legacy players, which charge hefty fees and require months-long buildouts, or recreate the wheel and assemble an expensive financial technology stack of their own. Thanks in large part to the rise of “payments-as-a-service,” building blocks and developer-first platforms are emerging that allow companies to bypass the time-consuming and expensive steps needed to offer banking services and issue cards.

So why should entrepreneurs want to launch a card program? As the financial services industry evolves, there are many business benefits:

• More revenue streams: By introducing a card program and putting credit and debit cards in the hands of customers, companies can make money on interchange and from partnerships as well as eliminate or reduce fees they may be facing elsewhere.

• Better customer understanding: Card programs generate transactional data that delivers better insight into the habits of customers, enabling businesses to gain unprecedented visibility into their customers’ wants and needs.

• Improved customer experience: Ultimately, businesses with card programs can deliver greater personalization and targeted opportunities. They can develop rewards programs, features and an experience that better serves their customer base, increasing retention and attracting new customers.

Card Program Challenges

Although disruption in card issuance bodes well for many companies, card programs may not be right for all businesses. Companies that don’t have a clear value proposition for their card program, for example, will struggle to find adoption. There are plenty of ways to make and accept payments, and while there are many benefits to a card program, it isn’t for every company.

Similarly, though much payments-as-a-service progress has been made, it is still early days for transforming the traditional card issuance industry. Legacy players still capture a large majority of the market, and entrepreneurs new to the space should realize that while disruption is a powerful thing, it doesn’t happen overnight.

That being said, as momentum away from cash payments continues, I believe card programs will be a powerful channel for entrepreneurs in many industries to grow and retain their customer base. In the years ahead, it will be exciting to see how today’s infrastructural advancements in payments and card issuance pave the way for entirely new types of businesses and use cases.


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