For organisations outside of the U.S. the ability to extend payment capabilities to America presents both opportunities and challenges.
For many businesses, the idea of launching a card program or extending issuing and processing capabilities to the U.S. is an attractive prospect, but there are a great number of technical, regulatory and economic considerations to be navigated.
Going to America
The reasons for wanting to enter the American market are as diverse as the entities that undertake it. A business with an embedded finance capability may want to enter the U.S. market as a natural part of its global expansion. Equally, a programme manager may seek better economics by adding U.S. issuing capabilities, or a financial entity may be drawn to the resilience of America’s card market, the country’s most popular payment method.
The U.S. is one of the world’s largest payments markets. And by large we mean massive, with debit and prepaid card transactions exceeding $5 trillion annually. It’s no surprise then that the market’s sheer volume and penetration rates continue to represent a significant revenue opportunity for many foreign businesses.
These factors combined with the market's openness to payment innovation and the availability of spending data, make the U.S. an attractive prospect many.
Addressing compliance
If compliance requirements from the Consumer Financial Protection Bureau (CFPB), Office of Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve Bank (FRB) weren’t enough, there’s Dodd-Frank, the Durbin Amendment and a handful of other regulations with which to get acquainted when entering the U.S. market. In addition, the U.S. maintains strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations to ensure customer identity verification and prevent money laundering.
The Durbin Amendment is particularly noteworthy for new U.S. market entrants. Prior to the Durbin legislation, some U.S. issuers only enabled networks owned or controlled by a single entity, e.g. Visa or Mastercard. The Durbin Amendment mandates enabling at least two unaffiliated networks on a debit card, promoting competition and in theory, innovation.
This is an important consideration in that integrating and managing multiple networks can add complexity to an issuer's operations which in turn might require additional staff and resources.
Assembling the right value chain and controls
Integration with a BIN sponsor and major U.S. payment and ATM networks are of course crucial steps in entering the American market, but much more than “who connects to what”, these and many other decisions are best approached from the point of view of assembling a well-considered value chain with corresponding requirements.
It’s one thing to be compliant with applicable laws and regulations, but new entrants will also need help navigating the complexities of transaction monitoring and regulatory risk, as well as the kinds of things that their sponsoring bank will expect of them.
The ideal partner will help steer the course on these questions and just as importantly, the impact they might have on programme economics.
Programme economics and platform
Having grasped the laws and regulations in a chosen value chain, there's also the important matter of understanding business model, economics, and the platform on which to build, implement, and service a programme.
From an economics perspective, expertise in interchange analysis and the ability to advise on the implications of various business decisions will be key.
From a technology perspective, cloud-driven issuing and processing will be a key consideration, helping with quick and nimble design, build and delivery.
In summary, tapping into the U.S. payments market requires a strategic approach that balances compliance, technical integration, and economic considerations. By assembling the right partnerships and leveraging modern, agile technology, businesses can successfully navigate the complexities and seize the immense opportunities this dynamic and lucrative market offers
Want to know more?
Download our latest guide, Launching In America, for a detailed exploration of the U.S. landscape.
