What You Need to Know about Cards to Get to Market Fast
Treasury Prime & Marqeta: What it means and how it works
Treasury Prime, the leading Banking as a Service (BaaS) company, recently announced a new partnership with Marqeta, the global modern card issuing platform. This means fintechs can now use a single API and contract to access banking services, partner banks, and card issuing. The partnership is offered with LendingClub Bank (successor to Radius Bank) and Piermont Bank.
Here is what you need to know about navigating card issuing and getting to market fast.
Credit vs. debt
From the consumer perspective, the difference between a credit and debit card is pretty simple. With a credit card, you’re borrowing money; with a debit card, you’re pulling money directly out of your account. But for fintech companies deciding whether to offer credit, debit, or both, the question is a bit more complicated.
Marqeta’s head of enterprise accounts, Justin Wee, says the difference centers on the question of who maintains the system of record for the card. The issuer of a debit card must track whether there is enough money in the person’s bank account. A credit card provider must track whether the user has available credit to spend. Credit cards also charge interest, which may be capped differently in different states. The differences may sound subtle, but from a technical perspective, they are substantial.
“There are two different systems of record that have to be built,” says Wee. Marqeta is working on building out its own internal system of record for both credit and debit cards.
Then there are prepaid cards. Marqeta allows customers to carry a zero balance on prepaid cards, which adds convenience and security. With a zero balance, transactions get routed to the customer for approval before they go through. But you also have the option of using prepaid cards in a more traditional manner by putting money on the cards ahead of time.
Interchange refers to the fee that a merchant pays a card issuer to enable a transaction via a card’s network. Interchange fees are “a common, or even the primary mode of revenue for fintechs,” says Treasury Prime VP of Strategy Mark Vermeersch.
These fees can vary based on a number of factors. For example, fees may differ depending on whether someone is punching in a card number online, or swiping a card in person. Credit card transaction fees will tend to be higher than debit interchange fees. Whether the use case is commercial or consumer can impact fees. Interchange rates may also depend on the merchant category. Rates for a sporting goods store, for example, may differ from rates for a travel company.
The size of the financial institution affiliated with the card also matters. The 2010 Durbin amendment, passed in 2010 as part of the Dodd-Frank law, lowered the debit card interchange fees larger banks could charge retailers. Financial institutions with less than $10 billion in assets are exempted.
“The only way you're really going to know what your interchange is going to be is to build and launch a program, and start to see that data come through” says Vermeersch.
Evaluating a card issuing solution
Given the complexity around issuing cards, it’s important to really understand potential card issuing solutions. Several questions can help you assess providers.
- Who are the sponsor banks?
- Does the fintech have a direct relationship with the issuing bank or BIN sponsor?
- Who does the program management?
- Does the company have consumer and commercial BINs set up?
- Will the card issuer manage the printing processor or does the fintech need to do it themselves?
- What are the timelines for card design approval, printing, and shipping?
- Are there card order minimums?
Both Treasury Prime and Marqeta have program management baked into their offerings. That means the companies can manage details like card printing, helping you with card design, ensuring they are compliant with regulations, rendering cards virtually, and issuing them into digital wallets such as Google Wallet and Apple Wallet.
To learn more about issuing debit and credit cards as a fintech, watch the full webinar. Developers can also experiment with Treasury Prime’s API in our Sandbox.