The Comprehensive Guide To Card Issuance APIs

What is a card issuance API?

As mentioned in an earlier article, ‘What Is A Payment API?’, an API is an application programming interface that helps different software components or technologies interact and communicate with one another. There are different types of APIs. To name a few, a payout API enables apps and websites to make and collect payments while a login API allows users to log in to a website or app using their Facebook or Google login, doing away with the need to create a separate login. Then there are card issuance APIs, which enable businesses to create, issue, and manage their own payment cards.

By working with a card issuance API provider, a business can create and issue physical or virtual cards on its own. The cards will be powered by popular card networks such as Visa or Mastercard but carry the company’s brand. Card issuance APIs support a variety of cards such as debit cards, credit cards, corporate cards, pre-paid cards, and co-branded cards.

How does a card issuance API work?

To understand the process, let's first go through the components of a card issuance API, or the functions it performs:

Card management

Apart from design, creation, and issuance, the API handles other card-related tasks. These include setting controls (spend limits, transaction-specific restrictions, etc), card activation and deactivation, offering options for instant card issuance or staggered delivery, and so on.

Authorisation

The card issuance API assesses each transaction on the basis of set rules before approving or declining payment. For example, if a corporate card is limited to making payments only to a specific supplier type, then the card issuance API will decline any transaction that falls outside this category.

Transaction handling

Apart from authorisation, the API processes payments and reconciles them to the company’s records. Within this function, the API makes important calculations such as currency conversions, transaction fees, and card network charges. It also manages dispute resolution and distribution of refunds.     

Risk management

While processing payments, card issuance APIs detect and flag fraudulent activities. To complete this task, they create algorithms that analyse transaction patterns and trends. They might even use a third-party data set or evaluation tool to sniff out fraudulent activity.    

Regulatory compliance

The card issuance API sees to it that the cards comply with local, regional, and international regulations, such as the Payment Card Industry Data Security Standard (PCI DSS) and KYC (know your customer) requirements.

Rewards programme management

Loyalty programmes are a key strategy to retain and expand the customer base, and an effective card issuance API must be capable of handling this aspect of the business as well. The API helps the business determine, offer, and manage rewards points and cashbacks based on card usage. It might even help design an advanced incentive card that features seasonal promotions, tiered rewards systems, and partnerships with other loyalty programmes.

Reporting and analytics

As with any data-driven system, card issuance APIs make use of the large volumes of information they go through to offer insights (on spending patterns, for example) and generate real-time reports, which help the company make data-informed decisions.

Now, when a business uses a card issuance API to develop its own cards, here’s what happens:

Authentication

The company initiates the card issuance process by providing the API with a set of instructions, telling it what it wants. The instructions include card type (debit or credit, physical or virtual, etc), expiration date, spend limit, spend category, user details, and so on. To instruct the card issuance API, the company uses an authentication tool called an API key.

Compliance checks

On receiving the instructions, the card issuance API performs a series of checks to confirm that the request complies with pre-defined requirements and formats as well as with the necessary financial regulations. It then gets in touch with the card network that will facilitate the card. This sets off another set of checks to verify if the issuing process meets the card network’s protocols.

Creation

After receiving the card network’s go-ahead, the card issuance API goes about developing the cards by creating new business accounts and setting transaction limits. In the case of physical cards, it also needs to activate them. Virtual cards usually get activated automatically.

Confirmation

The process is completed when the API sends the company a confirmation on each card that is issued. The confirmation includes card details and user name, which the company can use to communicate with the user (to send notifications, for example), monitor usage for reporting and analytics purposes, and integrate with its spend management systems.

Card management

The API also serves as a platform on which individual users can manage their cards. They can use it to make transactions, track them in real time, update their information, set spend limits, and a lot more.

Why do businesses need a card issuance API?

The main benefits of using a card issuance API are:

Streamlined card issuance

A card issuance API streamlines the card issuance process in more ways than one. It cuts short the lengthy lead times associated with traditional card issuing institutions, which take the long route to drawing up contracts, developing the card, and taking care of regulatory compliance. In contrast, APIs have pre-tested features that shorten the development and implementation processes. What's more, card issuance APIs have comparatively lower fees, offer packaged deals with transparent pricing, and don’t require any operational or infrastructure-related expenses.

Customisation

One of the biggest advantages of a card issuance API is easy customisation. Businesses can issue highly specific cards that are limited to certain types of transactions or merchants, have strict spend limits, and geographic restrictions. And they can update these parameters easily at any time. This gives the company greater visibility and control over its expenses. Thanks to dynamic customisations, an e-commerce firm can develop a card that is only meant for paying suppliers and that too a specific amount of money. Or, a travel company that facilitates hotel bookings on its app comes up with a multi-currency global card that it can use to pay the hotels anywhere around the world.

Enhanced customer experience

A corporate card bearing the company name and logo is a symbol of pride. A branded card helps businesses stand out from their rivals and gives customers the power to pay easily and securely. Customers also tend to associate the benefits and perks (rewards, cashbacks, etc) that come with branded cards to the company itself, greatly improving brand loyalty in the process.

Scalability

Growing businesses must constantly up their spend management game. Card issuance APIs allow them to do so without breaking the bank or overhauling their entire financial system. From introducing a new card or launching a loyalty programme to integrating additional services, card issuing APIs help businesses scale and keep up with evolving needs.

High-level security and compliance

Despite being an easier and more cost-effective alternative to legacy card issuing systems, card issuance APIs don’t compromise on security and regulatory compliance. They ensure that financial products adhere to the necessary regulations and have robust risk management and fraud detection features. These APIs are capable of keeping up with changing laws and rules, so there’s no need for your company to have an exclusive legal team or hire expensive external consultants for the job.

Card issuance API vs traditional card issuance

Card issuance APIs are quickly catching up to traditional card issuance systems. That said, many businesses still prefer to work with legacy systems. If you can’t pick between the two, here’s a helpful comparison on key parameters:
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How to choose a card issuance API provider

What do you expect from a card issuance API? The wishlist normally includes competitive pricing, a full suite of features, and tight financial controls. Here are five factors to consider when choosing a card issuance API:

Seamless integration

Even if a card issuance API has a user-friendly interface, its integration is often complicated. This is because the integration process involves several elaborate steps such as the movement of data from one location to another, staff training, and testing. Some API providers offer a smoother integration experience than others. Being aware of the fact that you will need technical expertise during the integration process and knowing that your chosen provider offers consultation and support and is actively responsive to your queries will make the process smoother. And, don’t forget to check if your accounting and expense management systems support the API.

Relevant customisation

The idea is not to get extensive customisation options but to get the customisations you need. For example, does the card issuing platform support multi-currency transactions? This would likely be a must-have attribute for an e-commerce business with a global footprint. For another use case, a company that gives its employees virtual corporate cards instead of reimbursing them for work-related expenses might want specific controls, such as restrictions based on time (a card that can only be used on weekdays) or expense type (travel expenses). If an API doesn’t cover all of a company’s specialised needs, then the business will need to expend time, money, and energy each time it needs a customisation beyond the API’s abilities.

Water-tight compliance

Although most card issuance APIs claim to manage regulatory compliance, any breach is ultimately the company’s responsibility. Instead of blind dependence, businesses must vet the compliance processes that are in place. A key factor to check is whether the API keeps up with changes or updates in financial regulations. Does it have strong security protocols to prevent data leaks, cyber attacks, and fraud? Can it differentiate between the different laws applicable in different jurisdictions?

Rewards and incentives

Reward programmes are an opportunity for businesses to forge a deeper connection with customers. Most cash issuance APIs support a variety of specialised incentive programmes such as loyalty cards and cashbacks. Now, let’s stay a coffee retailer is looking to partner with a card issuance API to come up with a loyalty card. It has envisioned a card that works as a digital wallet to which funds can be transferred. With each payment, the customer earns a point and after collecting six points, they earn a free coffee. Apart from these primary features, the retailer wants a cashback feature where cashback is loaded directly on to the card and can be used at the time of payment. It also wants the card to support seasonal promotions and special perks (like a free birthday beverage). Given that loyalty cards and rewards programmes have multiple layers (as seen in this example), give serious thought to how the API will manage your card programme and handle the distribution of rewards. Similar to the popularity of loyalty cards in the retail industry, a growing number of companies today give their employees corporate cards through which they can avail of incentives and rewards.

Comprehensive sandbox environment

Most card issuance APIs offer a sandbox or testing environment in which the API’s processes can be simulated before the actual integration. However, it’s not enough to check just for the mere presence of an API sandbox. Companies must ensure that all the core functions of the API are available for testing in the sandbox. This will ensure that bugs, if any, are identified and fixed right away. The API sandbox is essential to avoiding cost overruns, keeping risks to a minimum, and ensuring the smooth integration of the API and timely launch of the card programme.

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