Upon selecting their processing partner, their efforts to launch the program raised several compliance issues that were not evident in their review analysis. These issues caused concern for the First Merchants’ executive team. “Our selected processor failed to meet expectations, there were errors that were identified and caused us concern, which was frustrating” stated Todd Patrick.
The First Merchants team had specific concerns about relying on their chosen processor to ensure their program met rigorous regulatory requirements related to issuing credit cards. So much so that the executive team opted to terminate their processing relationship and move back to an outsourcing solution.
First Merchants fully re-engaged with Elan in an agent program in December 2019. Todd Patrick stated, “It was a no-brainer to partner with Elan as compliance is a priority to both parties. Launching the program with Elan was clear and transparent and we always have had a strong relationship with our account executive.” He went on to state “re-engaging with Elan was the right choice.”
Compared to last year, First Merchants is already seeing a 93% increase in new account openings in 2020.
SELF-ISSUE VS. OUTSOURCING CONSIDERATIONS
This situation can serve as a lesson to those evaluating this difficult decision: to launch and keep the program in-house or find an experienced partner in an agent program. The following are key considerations for financial institutions when evaluating self-issuance:
- Does your team have the correct and exhaustive information to make the decision?
- What is your financial institution’s experience with managing unsecured loan assets?
- What is the appropriate risk threshold for your institution?
- How should you align pricing with risk to optimize risk-based returns?
- Is there adequate staff to take on launching and managing a new card program across all functions?
- Are you confident that your processing partner will keep your card program compliant?
There are other issues to consider relative to entering the card issuing market. Card issuing is proving to be very much a scale game, where national issuers hold almost 90% of total assets across all card issuers.