As a consumer, you may have noticed that more and more non-financial-service companies have started to provide debit cards or credit cards. Recently, brands like Apple, Uber, DoorDash, Instacart, and even sports teams have jumped on the card issuing bandwagon. If you have used any of these services, you’ve likely benefited from the emergence of card-as-a-service (CaaS) offerings.
What is card-as-a-service?
The concept of white-labeled credit cards or partnership credit cards isn’t new at all. Many department stores have them, but airlines probably provide the most well-known use case of such products. Their cards are usually developed and powered by traditional banks such as Citibank or Mastercard. However, every time an airline company wants to issue a new card with a new kind of screening process, limitation, or rewards, it needs to renegotiate terms with issuing banks, hammer out the details, and build everything from scratch. The process usually takes two years.
The new CaaS players are different from traditional banks, mostly in speed. CaaS company Deserve, for instance, trims the time that is needed for clients interested in issuing their cards by taking the process in-house or by working with conventional banks.
CaaS companies do a great job streamlining the process for their clients. They help clients with origination, underwriting, bank and bureau integration, customer service, compliance, and risk management. Simply put, CaaS companies provide a comprehensive, top-to-bottom solution, from determining which customer is eligible for a credit card to setting the interest rate that should be charged on loans. They create the physical card and deal with know your customer and anti-money laundering procedures. CaaS companies also establish security systems to prevent fraud.
CaaS players are paving the way for the future of non-financial service cards.
Pure-play card issuance enablers
- Marqeta: Established in 2010 in the US, the company went public on the Nasdaq in 2021 with an initial market capitalization of USD 15 billion. Marqeta is the enabler behind the curtain that helps DoorDash, Uber, and Instacart to issue their cards. Marqeta’s platform enables partners to quickly launch debit and credit cards with flexible controls, including the ability to turn on or turn off parameters such as annual percentage rates, rewards, and credit lines in real time and with minimal friction. The company allows partners to activate new users instantly, and lets users embed their cards in digital wallets.
- Cardless: Established in 2019 in the US and backed by Greycroft, Cardless mainly targets clients that are not of digital-native platforms or big tech companies. The company’s current major clients are sports teams such as Manchester United, Cleveland Cavaliers, and Boston Celtics.
- Nudge: Established in 2020 in Japan by serial entrepreneur Takashi Okita, Nudge allows influencers, KOLs, creators, and celebrities to issue their own branded reward credit cards.
Expansion from banking enablers or payment enablers
- Banking enablers: We previously introduced the concept and the major players in the field of banking enablers, or banking-as-a-service (BaaS). Most of these companies do not just provide savings account, but also issue cards as part of their offering. Players in this category include Solarisbank, RailsBank, and Synapse.
- Payment enablers: These companies started operations by helping SMEs and larger companies with their B2B payments. They later included CaaS offerings. Notable players are Rapyd, Issuing by Stripe, Adyen, Bond, and Nium.
- Nium: Established in 2015 in Singapore, Nium is the first B2B payment unicorn from Asia. Nium helps companies accept and make B2B payments, while assisting companies with issuing their own cards. The firm has already issued more than 30 million cards, and holds card issuance licenses in more than 11 jurisdictions. Nium, which recently raised USD 200 million, is known for acquiring Wirecard’s business in India.
Traditional banks and financial institutions
Similar to the landscape of BaaS, there are incumbent financial institutions that stay competitive by reacting quickly to new trends.
Goldman Sachs: Apple Card, powered by Goldman Sachs, might be the most well-known use case of CaaS. At first glance, it looks like an old-fashioned white-labeled partnership, but Goldman Sachs actually built out a modern system with an advanced application programming interface for this product. Goldman Sachs announced that it is seeking to replicate the Apple card model with other partner companies.
The bigger picture
CaaS, or card issuance enablers, are just a fraction of a bigger embedded finance trend. If you want to learn more about fintech enablers, check out our intro to fintech enablers and embedded finance.