All you need to know about producing a Payment card: Stakeholders and Value chain.
A rare explainer series on Payment Cards — 1.
It’s arguable but Payment Cards are the most popular and the most useful Payment token of the century.
Long before Apple Pay, GPay, and any of the new shinier Payment methods, there was a Payment card. If you are curious about Payments, you might already be familiar with the 4-party model diagram showing how a transaction is processed from the customer to the Merchant, Acquirer, and then to the Issuer.
But if you really want to layer your knowledge well, we need to take a step back and discuss what happens before a card lands in the hands of a customer.
So specifically, we’ll look at who is involved in making a Payment card. What are their roles and what is the process involved and what systems do they use?
That is everything that happens in the black-ish box leading to a card in the hands of a Bank, Fintech, or customer.
A lirru History lesson 📜
We’ve all heard the popular story of the guy who forgot his wallet when he went to eat and how that birthed the card. But a worthy mention of how cards started is this device below called a charga-plate.
It was manufactured by Farrington Manufacturing Co and given to regular customers by merchants. The card identified the customer and allowed them access store credit which would be paid off earlier. This was happening as early as 1928. You can see a lot from here was carried into the operations of Payment cards today including the relationship between merchants and customers.
Card manufacturers
A lot has gone on since then; Farrington Manufacturing Co doesn’t exist anymore 😔, it was dissolved in 1980 — what a shame, they would have filed a patent for Smart cards. But many card manufacturing companies have used technology and material science to create tokens that can store more data, do complex calculations, are lighter and environment-friendly.
Card Manufacturers are the entities that start off the lifecycle of a payment card.
They create different physical cards using materials like Plastic resin which goes through processes like compounding, molding, lamination, printing, and embossing to form the physical card. Various security features like holograms are also put in to prevent cloning. Companies like Idemia, Gemalto, Kona, and Oberthur Technologies are popular card manufacturers.
Card resellers, Issuers, and Processors.
Card manufacturers usually don’t manufacture cards for fun. They receive an order from a licensed Financial Institution ( like a Bank or a Fintech), who will be issuing the card to the customer or their representative e.g. Processors or Perso companies.
These orders have specifications based on what the customer wants — Smart cards or Magnetic stripe cards and other details like tech features of the card and what kind of apps/functionality in the card.
When the order is received. The FI does things like branding the card and registering stock. Then they produce the card according to requests from customers.
Now that is confusing, right? Didn’t we just produce/manufacture the card? What is this new production about?
Card production is the process of putting in data that will make the card operational ( this means a lot of things) and customized to a specific customer ( putting your name on the card) etc.
This production process is done on 3 types of platform:
- CRM- The Customer Relationship Module prepares customer-specific information.
- CMS- Card Management System prepares card-specific information. This is where we specify the Card scheme ( Visa, Verve, Mastercard, CUP, etc) and other parameters like the AID, Limits, currency, and a whole lot more.
- Data Prep Module — This step applies to only Chip cards and special data needs to be prepared securely to put in the chip of the Payment card.
2 more stakeholders to go.. just take a breather, you’ve got this.
Perso companies.
The output from the step above is an encrypted file. Encrypted because at this stage it has a lot! of sensitive data. This data is securely handed over to the next stakeholder which is the Personalisation company. Perso companies as they are called input the data into the card. They either put data on the magnetic stripe and/or the chip of the card.
If you are offering a virtual card product, you can forgo this step as it isn’t necessary.
Because their tasks are delicate and have a great impact on the correct functioning and security of the card, they need to be certified by the Card schemes. Something to check out when you engage with Perso companies.
After this step, you have a Physical Payment card ready to be dispatched to a customer- Yay,!!.. but hold on⛔ a few things are left.
System Providers/enablers
As you have seen, a lot of collaboration goes into making a card. To ensure everything is tied up nicely, a few stakeholders are needed to dot Is and cross Ts. Take a look
- Card Delivery: To prevent the card from getting into the wrong hands, a card needs to be delivered securely. This involves sorting and packaging it in tamper-proof material as well as using reliable logistics. It all depends on if the card is delivered directly to the customer or to the bank branch.
- Card Activation: Card Activation is also very important. It specifies how the card will get active. This is specified right from the card production step.
Most Companies bundle delivery and activation in a service called Card Fulfilment.
- Pin Management: Most cards use a PIN to authenticate transactions. If your pin gets into the wrong hands, your money will likely get into the wrong hands as well. Pin Management methods such as Envelop delivery and Customer Selected exist.
- Transaction Security: Finally other things are needed to make a card function properly like a second layer of authentication ( known as 2FA), 3D-secure, and Card management software( the ability to turn your card off and on or put customized limits). These need to be appended or activated on the card to make it functional.
And we are done🍾🎈🥳 , this diagram below is a TL;DR of everything we have discussed.
If you’ve found this useful, check out my other articles and subscribe to get the other articles in this series on Payment Cards when they drop. Cheers
