Why Cards As A Service Has The Potential To Revolutionize The Digital Payments Ecosystem In The MENAP
Cards as a service (CaaS) can be the true equalizer by massively reducing barriers, particularly for startups, to finally be able to issue cards, a rite of passage that, until recently, was only reserved for banks
We have witnessed massive advances in digital payments over the past decade driven by technological developments and rapidly changing preferences by consumers and businesses. Although payments acceptance (merchants getting paid for selling goods and services) has continued to evolve, the issuing side of the business (with banks and other platforms issuing cards) has seen limited product innovation and cards have largely been limited to consumer payments.
As a result, differentiation between banks on consumer cards has been limited to features such as loyalty, rewards, and other card benefits. The potential for cards to digitize B2B payments remains largely untapped. In fact, a number of market trends have been driving demand for card issuance- these include:
Businesses demanding better payments experiences Digitally native businesses and increasingly traditional companies require payment methods that solve their unique business needs, and meet the standard hygiene requirements around being real-time (or near real-time), scalable, low cost, and ubiquitous. From expense management platforms looking for controls over how cards can be used to loyalty platforms seeking solutions to scale points' redemption via cards. From buy now pay later (BNPL) applications looking for widespread merchant acceptance, to gig platforms seeking to drive instant payouts to their workers, companies have varied business requirements, and they are demanding modular solutions that can be used to build unique payments experiences.
Changes in consumer behavior Consumer preferences are changing at a rapid pace, and they are forcing businesses to drive real innovation at the product level. These behavioral changes require delivery of features and use cases, such as the ability to instantly open accounts and use those accounts soon after, greater visibility and control over how, where, and when those accounts are used, aggregation of spend data, cleaner and enriched spend data, and more flexible rewards and loyalty features.
Proliferation of fintech companies The vast majority of fintech companies -expense management platforms, early wage access providers, savings, wealth management, crypto applications, and BNPL players, to name a few– require a card product as a minimum viable product (MVP), to solve a business problem (for example, instant payouts or scaling merchant acceptance), or as a complement to their offering (for example, consumer finance applications). They require a one-stop-shop to launch and manage their card programs, the ability to build custom products, and quick time to market with low upfront investment.
Technological innovation Technologies such as application programming interfaces (API) have transformed the way products are built and shipped out. Similarly, tokenization has driven adoption of digital wallets such as Apple Pay, eliminating the need for physical plastic, thereby reducing costs, and bringing us closer to the reality of instant gratification. In August 2022, Visa announced that the number of tokens it had issued had surpassed the number of cards in circulation for the first time, within just eight years since tokenization was introduced. A host of other innovations are taking place across the entire value chain involving know your customer (KYC), fraud detection, 3D Secure (3DS), data enrichment, analytics, and real-time contextual experiences.
The transformative potential of CaaS
Despite the massive demand from consumers and businesses for differentiated card products driven by the variety of use cases involving card, and available technologies to fulfil the need, card issuance is at a fraction of its true potential, particularly in the Middle East, Africa, and Pakistan (MENAP). This is partly due to regulatory impediments, but mainly because businesses that are looking to issue cards are not able to solve complexities around technology, operations, and compliance. This is due to lack of know-how, available solutions and access to payments infrastructure. This is where cards as a service (CaaS) players have the power to revolutionize card issuance.
CaaS players fulfil essential infrastructure needs for companies, particularly in the technology space, to issue cards, as they demand solutions without the hassle of navigating complex regulations, numerous partnerships, painstaking integrations, and managing ongoing financial operations. CaaS can be the true equalizer by massively reducing barriers, particularly for startups, to finally be able to issue cards, a rite of passage that, until recently, was only reserved for banks. Furthermore, CaaS players in the MENAP can support startups scale across multiple markets by future proofing expansion plans and helping create the next generation of leading digital players in the region.
My company, SimpliFi, is one such CaaS player that is leading the way in building the next generation card issuance infrastructure to transform this space in the MENAP. In 2021, 65% of consumers in MENA explored new payment methods indicating the upsurge in market demand. SimpliFi, with a presence in five markets in the region, is at the forefront of this transformation, and playing a role in the region realizing its true potential in the digital ecosystem.