24 March 24
Who Can Issue Payment Cards? Beyond Banks to Fintech and E-Money Institutions
1. Traditional Card Issuers: Banks and Credit Unions
Integrated Services: These institutions offer linked checking or savings accounts, overdraft protection, and credit lines managed under standardized banking regulations (e.g., Basel III capital requirements, Anti-Money Laundering rules).
Brand Trust: Consumers trust established banks for deposit protection (e.g., FDIC in the U.S., FSCS in the U.K.) and robust dispute-handling processes.
2. E-Money Institutions & Payment Service Providers
E-Money Licenses: Under directives like the EU’s PSD2 (Payment Services Directive) or equivalents elsewhere, non-bank entities can obtain e-money licenses to issue “stored value” cards or wallets.
Prepaid and Virtual Cards: These issuers offer standalone prepaid cards or virtual cards linked to digital wallets. Funds are held as e-money rather than traditional deposits.
Regulatory Oversight: E-money firms must safeguard client funds in trust accounts and meet capital-reserve requirements—though often lighter than full banking rules—allowing nimble, cost-effective card programs.
3. Fintechs and Challenger Banks
Challenger Banks: Digital-only banks like Revolut, N26, and Monzo operate under either banking or e-money licenses, issuing physical and virtual cards with innovative features (dynamic spending controls, instant notifications, multi-currency support).
Specialized Fintechs: Companies such as Curve, TransferWise (now Wise), and Brex partner with licensed issuers or obtain direct membership in card schemes to offer branded cards targeting niche markets—travel, business expense management, or cryptocurrency spending.
API-Driven Issuance: Modern Visa and Mastercard programs provide “banking-as-a-service” APIs. Fintech teams can integrate card issuance—embossed, virtual, or tokenized—directly into apps, shortening development cycles.
4. Scheme Membership & Principal Issuance
Principal vs. Program Managers: A principal member has direct contracting rights with card networks, bearing full liability and operational responsibilities.
Program Managers: Licensed entities can operate under a principal member’s sponsorship, handling marketing, distribution, and customer support while outsourcing core network integration and compliance.
Partner Models: Co-branding agreements let retailers or fintechs launch cards under their brand, backed by a sponsoring bank or e-money institution.
5. Regulatory & Security Standards
EMV Certification: All issuers must adhere to EMVCo standards for chip-card security and global interoperability.
PCI DSS Compliance: Entities that store, process, or transmit cardholder data must meet the Payment Card Industry Data Security Standard (PCI DSS), regardless of banking or e-money status.
KYC/AML Requirements: Know-Your-Customer and anti-money-laundering regulations apply universally, ensuring issuers verify identities and monitor suspicious activity.
6. Benefits of Expanded Issuance Options
Greater Competition: Non-bank issuers drive innovation in fees, rewards, and niche product features—benefiting consumers with more tailored offerings.
Faster Time-to-Market: Fintechs leveraging APIs and program-management models can launch new card products in weeks rather than years.
Enhanced Inclusion: E-money and prepaid cards enable underbanked populations to access digital payments without full bank accounts.
7. Choosing the Right Issuer
When evaluating card options, consider:
Regulatory Safeguards: Does the issuer hold a recognized banking or e-money license with deposit or fund-safeguarding protections?
Security Posture: Are your data and funds protected by EMV, PCI DSS, and robust KYC/AML procedures?
Product Features: Does the card meet your needs—multi-currency, virtual wallets, real-time spending alerts, or integration with other financial services?
Customer Support & Dispute Resolution: Look for transparent policies, 24/7 support, and clear channels for refunds or chargebacks.
The era of “only banks issue cards” has passed. Today, a vibrant ecosystem of banks, e-money institutions, and fintech innovators empowers consumers and businesses with diverse, secure, and feature-rich card solutions. By understanding the licensing frameworks and security standards behind card issuance, you can select a provider that delivers the right balance of convenience, protection, and innovation for your financial needs.
Full Banking License: Historically, only banks and credit unions held the regulatory permission and infrastructure to issue cards directly under major card schemes (Visa, Mastercard, American Express).
Integrated Services: These institutions offer linked checking or savings accounts, overdraft protection, and credit lines managed under standardized banking regulations (e.g., Basel III capital requirements, Anti-Money Laundering rules).
Brand Trust: Consumers trust established banks for deposit protection (e.g., FDIC in the U.S., FSCS in the U.K.) and robust dispute-handling processes.
2. E-Money Institutions & Payment Service Providers
E-Money Licenses: Under directives like the EU’s PSD2 (Payment Services Directive) or equivalents elsewhere, non-bank entities can obtain e-money licenses to issue “stored value” cards or wallets.
Prepaid and Virtual Cards: These issuers offer standalone prepaid cards or virtual cards linked to digital wallets. Funds are held as e-money rather than traditional deposits.
Regulatory Oversight: E-money firms must safeguard client funds in trust accounts and meet capital-reserve requirements—though often lighter than full banking rules—allowing nimble, cost-effective card programs.
3. Fintechs and Challenger Banks
Challenger Banks: Digital-only banks like Revolut, N26, and Monzo operate under either banking or e-money licenses, issuing physical and virtual cards with innovative features (dynamic spending controls, instant notifications, multi-currency support).
Specialized Fintechs: Companies such as Curve, TransferWise (now Wise), and Brex partner with licensed issuers or obtain direct membership in card schemes to offer branded cards targeting niche markets—travel, business expense management, or cryptocurrency spending.
API-Driven Issuance: Modern Visa and Mastercard programs provide “banking-as-a-service” APIs. Fintech teams can integrate card issuance—embossed, virtual, or tokenized—directly into apps, shortening development cycles.
4. Scheme Membership & Principal Issuance
Principal vs. Program Managers: A principal member has direct contracting rights with card networks, bearing full liability and operational responsibilities.
Program Managers: Licensed entities can operate under a principal member’s sponsorship, handling marketing, distribution, and customer support while outsourcing core network integration and compliance.
Partner Models: Co-branding agreements let retailers or fintechs launch cards under their brand, backed by a sponsoring bank or e-money institution.
5. Regulatory & Security Standards
EMV Certification: All issuers must adhere to EMVCo standards for chip-card security and global interoperability.
PCI DSS Compliance: Entities that store, process, or transmit cardholder data must meet the Payment Card Industry Data Security Standard (PCI DSS), regardless of banking or e-money status.
KYC/AML Requirements: Know-Your-Customer and anti-money-laundering regulations apply universally, ensuring issuers verify identities and monitor suspicious activity.
6. Benefits of Expanded Issuance Options
Greater Competition: Non-bank issuers drive innovation in fees, rewards, and niche product features—benefiting consumers with more tailored offerings.
Faster Time-to-Market: Fintechs leveraging APIs and program-management models can launch new card products in weeks rather than years.
Enhanced Inclusion: E-money and prepaid cards enable underbanked populations to access digital payments without full bank accounts.
7. Choosing the Right Issuer
When evaluating card options, consider:
Regulatory Safeguards: Does the issuer hold a recognized banking or e-money license with deposit or fund-safeguarding protections?
Security Posture: Are your data and funds protected by EMV, PCI DSS, and robust KYC/AML procedures?
Product Features: Does the card meet your needs—multi-currency, virtual wallets, real-time spending alerts, or integration with other financial services?
Customer Support & Dispute Resolution: Look for transparent policies, 24/7 support, and clear channels for refunds or chargebacks.
The era of “only banks issue cards” has passed. Today, a vibrant ecosystem of banks, e-money institutions, and fintech innovators empowers consumers and businesses with diverse, secure, and feature-rich card solutions. By understanding the licensing frameworks and security standards behind card issuance, you can select a provider that delivers the right balance of convenience, protection, and innovation for your financial needs.
