In this episode we're talking about the revenues and costs of issuing payment cards. Discover direct benefits such as interchange fees and indirect benefits like increased sales. Understand the complexities of card issuing costs and make informed business decisions.
SPEAKER 1: All right, so today we're diving deep into how businesses can make money, serious money, with payment cards. And not just any cards, we're talking about the virtual kind, especially those living rent-free in your financial apps.
SPEAKER 2: You hit the nail on the head. It's a hotbed of opportunity right now. And what's really fascinating is who's getting in on the action. It's not your grandpa's bank anymore issuing these cards. Right.
SPEAKER 1: We've got the fintech wallets, obviously, but then you've got crypto wallets muscling in.
SPEAKER 1: Insurance companies are issuing cards now. Think about it, your insurance payout, boom, right on a virtual card, ready to spend.
SPEAKER 2: It really speaks to how businesses are finding creative ways to use these cards to add value for their customers, making things easier, smoother, more convenient. And, my friend, that translates into big wins for the businesses themselves.
SPEAKER 1: Happy customer, spending customer. Isn't that how the saying goes?
SPEAKER 2: Bingo.
SPEAKER 2: That's the essence of indirect revenue. But there's another side to this coin.
SPEAKER 2: Businesses are increasingly interested in the direct revenue opportunities that come with issuing their own cards, especially within financial apps.
SPEAKER 1: Okay, let's unpack that a bit. What exactly do we mean by direct revenue when it comes to cards?
SPEAKER 2: Well, we're talking about five key areas where businesses can generate revenue directly from those cards. Interchange fees, then there are currency conversion fees, user fees, and transaction fees. And last but not least, value-added services.
SPEAKER 2: Each one has its own quirks and possibilities, especially when you're talking about virtual cards plugged into a financial app.
SPEAKER 1: So it's not just one stream, it's a whole network of potential revenue streams, each with its own ins and outs. Now we're talking. All right, so let's dive into those juicy revenue streams. You teased five key areas. What's first up on the list?
SPEAKER 2: Well, first up, let's talk interchange fees. Basically, think of it as a tiny cut the business gets every time a customer whips out their card. Like a micropayment for making the transaction happen.
SPEAKER 1: So if your financial app is handling tons of transactions, those little cuts could really add up?
SPEAKER 2: You got it. Now, here's the interesting bit about these interchange fees.
SPEAKER 2: They're not one size fits all. The amount you rake in depends on a bunch of factors. The country where the transaction's happening, what kind of transaction it is, even the type of card being used.
SPEAKER 1: Right, because you're dealing with this whole network of players. Each with their handout for a piece of the pie. Yeah. So figuring out your target market and what kind of transactions you want flowing through your app, that's crucial.
SPEAKER 2: Absolutely.
SPEAKER 2: Now, moving right along, we've got currency conversion fees. These babies come into play when a customer makes a purchase and their card's currency doesn't match the purchase currency.
SPEAKER 1: Ah, yeah, that's got to be huge for financial apps with a global user base. Yeah. Think about all those international transactions.
SPEAKER 2: Exactly. And what's wild is the range of these fees. We're talking anywhere from a measly half a percent, 0.5 percent, to a hefty 8 percent of that transaction amount. Which currencies are involved, the type of card, even the card issuer's own policies, they all factor into that final percentage.
SPEAKER 1: Wow, that's a pretty big difference.
SPEAKER 1: Okay, now let's dig into user fees.
SPEAKER 1: I have a feeling this one's going to be a goldmine for those financial apps with virtual cards.
SPEAKER 2: You're singing my tune. This is where subscription models, the bread and butter of financial apps, come in. You offer those premium features tied to your virtual card, like super-duper security, personalized rewards, you name it, boom, recurring revenue stream.
SPEAKER 1: It's about creating an experience so good, people are happy to shell out for it. And user fees aren't just about subscriptions, right?
SPEAKER 2: Not at all. Think one-time fees for things like, maybe you offer expedited card delivery, Fancy card designs, or even annual fees for a whole suite of perks.
SPEAKER 2: It's all about finding that sweet spot that aligns with what your app's all about and what your users expect.
SPEAKER 1: Makes sense. Okay, so we've tackled interchange fees, currency conversion fees, user fees. What's next in our lineup of moneymakers?
SPEAKER 2: Let's not forget transaction fees. These little guys are everywhere, even beyond those ATM withdrawal fees we all know and love.
SPEAKER 1: Oh, tell me about it. It seems like every time you turn around, there's a transaction fee lurking.
SPEAKER 1: Buying something at a store, online shopping, it's never a free ride.
SPEAKER 2: You said it. And while they might seem like small potatoes on their own, those tiny fees can really stack up, especially when you're talking high transaction volumes. So got to factor this into your revenue model, especially if your financial app is buzzing with activity.
SPEAKER 1: Small margins, big impact.
SPEAKER 1: All right. We've covered four out of five. What's the final piece of this revenue puzzle?
SPEAKER 2: Last but certainly not least, we have value-added services. This is where things get really interesting, especially for those businesses that want to stand out from the crowd with their financial apps. Think beyond the basics of what a virtual card can do.
SPEAKER 1: Okay, paint me a picture. What kind of value-added services are we talking about here?
SPEAKER 2: Imagine this. Travel insurance baked right into your virtual card. Peace of mind for your users who are always on the go.
SPEAKER 2: Or how about a dedicated concierge service? Ready to handle any card-related issues.
SPEAKER 1: It's like that VIP treatment that makes your app indispensable.
SPEAKER 2: Exactly. And because these services are tailored to specific needs, they're a fantastic way to unlock new revenue streams. You're providing premium solutions that solve real problems and make your financial app even more valuable.
SPEAKER 1: This has been eye-opening. We've gone through five distinct revenue streams.
SPEAKER 1: Interchange fees, currency conversion, user fees, transaction fees. And those value-added services, each one packed with potential, especially for businesses looking to ride the wave of virtual cards within their financial apps.
SPEAKER 1: But before we get too carried away with all this potential revenue, let's shift gears and talk about the flip side, the costs that come with issuing these cards. You're right. We can't just chase those dollar signs without looking at the costs. Got to keep it real, especially for those virtual cards in our financial apps. It's all about finding that balance.
SPEAKER 2: And when we break down those costs, we're looking at two main categories. Those fixed costs and those variable costs.
SPEAKER 1: Ok, fixed costs, those seem pretty straightforward.
SPEAKER 1: What are the big ones that businesses need to keep on their radar?
SPEAKER 2: The usual suspects are the one-time fee for issuing a card, which covers getting that card set up and produced. And then there's the monthly fee per card that usually covers all the behind-the-scenes stuff, maintenance, processing, that kind of thing.
SPEAKER 1: So even if a card's just sitting there gathering digital dust, you're still on the hook for that monthly fee.
SPEAKER 2: That's usually how it works. Now, these fixed costs, they're generally not going to break the bank, especially compared to all that revenue potential we were talking about. But you definitely don't want to leave them out of your calculations.
SPEAKER 1: Makes sense, especially when you're thinking of the big picture, lots of users, every penny counts.
SPEAKER 1: Ok, now what about those variable costs? I'm guessing those are a bit more, well, variable.
SPEAKER 2: Exactly. These costs can swing up or down depending on a few things, mainly how many transactions are happening and what kind of fancy features you're offering. Transaction fees, those are a big one in the variable department. Now, you might be collecting transaction fees from your users, but remember, you're often paying them, too, to all the different players in the payment processing game.
SPEAKER 1: It's like this whole chain of fees. Everyone takes a little nibble as the transaction makes its way through the system.
SPEAKER 2: That's the idea. And then we've got costs tied to those special services you might be offering, like 3DS operations fees.
SPEAKER 1: Okay, I got to be honest, 3DS operations fees, that's a bit of a head scratcher for me. What exactly are we talking about here?
SPEAKER 2: Think about those extra security steps you got to go through when you're buying something online. You know, verifying your identity with a text message or doing that whole song and dance with your banking app. That's 3D secure. And it comes with a price tag, those 3DS operations fees.
SPEAKER 1: So those extra security measures. They're great for keeping things safe and building trust, but they're not free.
SPEAKER 2: You got it. Speaking of costs for those snazzy features, we can't forget our digital wallet friends, Apple Pay and the like. Super convenient, very secure, but they come with their own set of fees for businesses. Per card and based on your transaction volume, the fun never stops.
SPEAKER 1: It's wild how even those services we use every day have these hidden costs behind them.
SPEAKER 1: Really makes you appreciate the importance of understanding all the moving pieces in this whole card issuing world.
SPEAKER 2: You said it. And we've been focusing on your costs as a business, wanting to bring virtual cards into your financial app. But there's another layer to this whole thing, the costs for the card issuers themselves.
SPEAKER 1: Oh, right. Someone's got to actually create and manage these cards behind the curtain. What are some of those big ticket items for them?
SPEAKER 2: One of the biggest chunks of change they shell out is for those payment scheme fees. That's what they pay to the big dogs, Visa, Mastercard. For the right to use their networks and infrastructure. And then there's the cost of those payment processors. Companies like Verestro, they're the ones connecting all the dots, making sure those transactions flow smoothly between businesses, card issuers, and those payment networks.
SPEAKER 1: That's like the invisible engine that keeps the whole card issuing machine running.
SPEAKER 2: Exactly. And even though we're all about virtual cards today, let's not forget those physical cards still need to be made and personalized, which comes with its own costs.
SPEAKER 2: Then, of course, you've got the... Ever-growing world of regulatory compliance, making sure everyone's playing by the rules.
SPEAKER 2: And last but not least, security. That's a constant investment for those card issuers. They're always on the front lines, fighting fraud, protecting data, trying to outsmart those pesky cybercriminals.
SPEAKER 1: It's a wild world out there, that's for sure, with a whole bunch of costs to keep in mind. We've gone from those concrete costs like producing cards and those transaction fees to those sneakier expenses like the digital wallet fees and that never-ending battle for online security.
SPEAKER 1: So for our listeners today, especially those thinking about diving into the virtual card game with their financial apps, what's the key takeaway from all of this?
SPEAKER 2: The name of the game is understanding both sides of the coin.
SPEAKER 2: Yeah, the revenue potential is exciting, but you've got to have a clear picture of the costs involved, too. It's about finding that sweet spot where you're providing real value to your users, creating an experience that's smooth and enjoyable, and generating a revenue stream that makes sense, all while navigating that complex world of card issuing.
SPEAKER 1: It's a tightrope walk, no doubt. But as we've seen today, the opportunities are huge. Tapping into those different revenue streams and coming up with those creative value-added services. The potential to shake things up in the financial world with these virtual cards is definitely there.
SPEAKER 2: Absolutely. And with technology changing faster than ever, who knows what exciting new possibilities are just around the corner for card issuing. But one thing's for sure, it's a journey worth taking.
SPEAKER 1: And there you have it. From those tantalizing revenue streams to the nuts and bolts of the costs involved, we've covered it all. Diving deep into the world of card issuing with a special focus on those virtual cards making waves in financial apps.
SPEAKER 1: Until next time. Keep exploring, keep innovating, and keep on diving deep into the ever-evolving world of fintech.