What Are the Financial Benefits and Costs of Card Issuing Models?
- Krzysztof Drzyzga
- 1 day ago
- 4 min read
Thinking of launching your own payment card program? The world of card issuing can seem complex, but understanding the three main business models - co-brand, affiliate license, and principal membership - is the first step. Each model offers a different path, with unique benefits and costs. This guide breaks down the financial and operational aspects of each, helping you choose the right one for your business.
Table of Contents:
Co-brand Model: The Quick and Easy Launchpad
This is the most straightforward and cost-effective model for businesses new to card issuing. With a co-brand model, you partner with a BIN sponsor (a company that already has the necessary licenses) to issue cards.
How It Works
The BIN sponsor handles all the heavy lifting, including card production and settlement with payment schemes like Visa or Mastercard.
You get a branded card visual and a dedicated BIN range to issue cards.
The relationship with the payment scheme is indirect; the BIN sponsor is the main point of contact.
The Financials
Costs: Low initial costs, typically around €10k-€20k to get started.
Revenues: You receive a significant portion (90-100%) of the interchange fees and a large share of currency conversion revenues.
Collateral: You'll need to provide collateral to the BIN sponsor, usually equivalent to 4-5 days of your projected turnover.
The Trade-offs
The biggest drawback is that the BIN sponsor will have a direct contractual relationship with your cardholders. This means users are formally opening an account with the BIN sponsor, not your company. However, for a quick and low-cost entry into the market, this model is hard to beat, with a typical go-live time of just 1-2 months.
Affiliate License: Taking the First Step to Independence
An affiliate license is for companies that want more control and a direct relationship with the payment schemes. This model is a stepping stone toward full independence, but it requires more commitment.
How It Works
Your company must already have a payment license (like an EMI) in the country where you operate.
The BIN sponsor registers your business as an affiliate licensee with Mastercard or Visa.
The payment scheme conducts its own verification, which adds about 3-4 months to the project timeline.
The Financials
Costs: Higher than the co-brand model. There are additional monthly fees (around €2k-€4k per month) paid to the payment scheme, plus collateral.
Revenues: You receive a detailed breakdown of payment scheme fees and 100% of the interchange fees.
Settlements: You still settle fees with the BIN sponsor, but you can see a detailed breakdown of all settlement information.
The Trade-offs
The key advantage here is that your company has a direct contractual relationship with the cardholders, eliminating the need for a separate contract with the BIN sponsor. The main disadvantages are the extra time (3-4 months) and additional costs involved.
Principal Membership: Full Ownership and Control
This is the most advanced and complex model, offering complete control over your card program. A principal membership is for established businesses with significant resources and a clear long-term strategy.
How It Works
Your company must be a licensed payment institution.
You operate without a BIN sponsor. Verestro, in this scenario, would act as a processor, supporting you with integrations and operations.
You handle all aspects of the program, from plastic card operations to chargebacks and liquidity management.
The Financials
Costs: This model is the most expensive and time-intensive. Payment scheme fees can run up to €100k-€150k. Implementation can take 5-10 months.
Collateral: You'll need to provide collateral directly to the payment schemes, which can range from nothing at the start to millions of euros as your program scales.
Revenues: You get 100% of all interchange fees and currency conversion revenues.
The Trade-offs
This model gives you total autonomy, and your company is the sole party contracting with users. However, it requires a significant operational team (at least 5-10 people) and a large amount of liquidity to manage settlements directly with the payment schemes.
Which Card Issuing Model is Right for You?
Choosing the right model depends on your business's size, goals, and resources. Here’s a quick summary to help you decide:
Co-brand: Ideal for startups or companies looking to test the waters quickly and cost-effectively. Use it if you're not yet sure you will issue more than 200,000 cards.
Affiliate License: A niche model for companies that must have their own license and want to avoid a third-party contract with their users, but aren't ready for the full principal model.
Principal Membership: Best for large, established companies that are confident they will issue over 200,000 cards and have the capital and operational capacity to manage the program independently.
Remember, you don't have to be locked into one model forever. Many successful companies start with a flexible co-brand arrangement and seamlessly migrate to a principal license as they grow. This strategy allows you to scale at your own pace without having to make a difficult, high-stakes decision from the start.
