The Visa Stack

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Musings by Arvinda

10 min readAug 2, 2021

In the second post in this series, we decided that we would like to introduce an international Visa/Mastercard Prepaid Card program as the next step in our process. This third post will now be for us to figure out the logistics of doing this.

For the purposes of simplification, we will choose to stick with Visa as the card program provider as we continue to explore this.

This post will be part explanation of the Visa stack, and part outline of my steps for exploring a Visa-based solution and what I have found so far. I still don’t have the full picture, but I chose to stop pushing further when I came up on some more systemic issues that would need to be resolved before being able to continue with this approach. The next post in this series would go into these issues in more detail.

The Visa Network

To understand the intricacies of getting access to a Visa Prepaid Card program, it is helpful to first understand what Visa is and its role in a “payment flow”.

When we swipe or insert our Visa card at a merchant’s terminal what we expect is that the terminal somehow magically allows money to move directly from our bank account to the merchant’s bank account. You would be right in thinking this is all like magic, but you would be very wrong if you thought there was any sort of direct payment happening.

Visa exists to allow us to be able to use a little piece of plastic to make payments practically anywhere in the world. This is no small task. Think back for example to the previous post where we explained that money held in a Scotiabank account is technically “Scotiabank TTD Money”. How would you for example, convince a merchant in a Greek island that your “Scotiabank TTD Money” is good, and how would you even get it to them given that Scotiabank has likely never even heard of whichever small Euro-denominated community bank they use.

This is where Visa comes in, and there are 2 layers to the Visa stack:

Issuing Banks (Issuers) & Acquiring Banks (Acquirers)
The Visa Network

Issuer & Acquirers

Understanding the concepts of an Issuer and an Acquirer are the key to understanding the entire raison d’être of Visa as an entity.

Using our example from above and sticking with Scotiabank on our side, let’s say our Greek vendor banks with the hypothetical “MykonosBank” which holds deposits in “MykonosBank Euro Money”. There are two separate elements at play here when we are making our payment.

I have a card that was issued to me by my bank; Scotiabank is the issuer
The vendor can acquire payments via a Point-of-Sale (PoS) terminal that they have from their bank; MykonosBank is the acquirer

This is an important distinction because the business of issuing and the business of acquiring are two very different types of businesses.

Issuers are the ones responsible for creating cards and making them available for their customers. They are the ones who offer credit to their customers, manage their accounts and process any payments they send.

Acquirers are the ones responsible for distributing PoS terminals and making online payment gateways available to their customers (usually merchants). They are the ones who underwrite the merchant’s receivables from customers when a payment is made (because no funds are transferred yet) and they are responsible for processing any payments received.

We often hear about the acquirer side of this business, for example when folks try to figure out how they can accept a payment online or open an e-commerce store. Companies like PayPal, Stripe, Payoneer and WiPay traditionally all work on this acquirer side and I have written a bit on this before. We rarely hear about the issuer side of this equation, and this is the side that we would be concerned with for our own card program.

The Visa Network

Given our issuers/acquirers on our first layer, there now needs to be some way to connect these two groups to complete the loop and allow funds to flow freely from customer to merchant. What these two groups would ideally need is a single common global layer that everyone interoperates with. The larger and more globally adopted this layer is, the more efficient the connections and the easier it is to reach anyone in the world

This is where entities like Visa come in, and why they operate at the huge scales they are currently at. They are the common standard that connects issuing banks to acquiring banks and allows payments to freely flow around the world. Both issuer and acquirers would form a relationship with Visa to get access to their Visa network and this in turn allows them to effectively conduct their issuer/acquirer business strategies.

The Makeup of a Visa Card Program

Given the above context, to get set up with a Visa Prepaid Card program would mean that we would need to find some way to partner with an issuing bank that has an issuing license from Visa that grants it access to the Visa network.

Visa’s website was actually fairly helpful in providing the resources for understanding how to navigate its internals. Broadly, you’d need:

BIN Sponsor

BINs or Bank Identification Numbers are the first four to six numbers that appear on a payment card. This set of numbers identifies the institution that issues the card and is key in the process of matching transactions to the issuer of the card.

The BIN Sponsor is usually a credit institution (bank) or a licensed electronic money institution. It has the ability to delegate all or part of a range of BINs to organisations that are not financial institutions and that wish to offer card programs to their customers.

They help to fulfil the “issuance” side of the Visa equation.

Barring the existence of a suitable BIN Sponsor, you can also explore being licensed as an issuer yourself, which is likely too onerous for the level of operation we’re considering here.
Payment (Issuer) Processor

This entity would facilitate connecting your cards to the payment network and would usually help with services like card fulfillment (physical manufacture of cards), fraud management and settlement. The BIN Sponsor would usually already have a relationship with this entity, and in the Caribbean the likely processor would be First Atlantic Commerce.

Fintech Examples of Card Programs

Since the process can sometimes be somewhat opaque, it is helpful to look at how other fintechs in the past have tackled the problem of getting access to Prepaid Card programs to bootstrap their operations.

Monzo Bank

Previously “Mondo Bank”, Monzo Bank is an upstart bank in the UK that first started with virtual balances accessible via Mastercard Prepaid Cards. Their strategy was to bootstrap a current-account-centric user experience in their app before they had the licensing to offer current accounts.

At the time of their launch, they leaned on the services of Wirecard, a German payment processor that supported a large number of payment card programs and that has since become insolvent following some unfortunate events.

Wirecard would have handled all the functions of a BIN Sponsor and would have given them automatic access to Payment Processor services at the time, likely through some sort of light touch arrangement.
CashApp

Square’s digital payments app that now has a card program attached to it. This program is administered by Sutton Bank which again provides an end-to-end solution to the Card Program problem.

The way this comes together is, CashApp is still responsible for providing simple non-bank cash balance accounts for their users, but users are able to spend from these accounts via an interface that loads the prepaid card with funds from the CashApp cash balance accounts when the card needs to be used.
Chime

A U.S. challenger bank that uses Bancorp to fulfill it’s Card Program needs. This is an example of building an application layer atop an existing bank and tying back directly to their core banking services. Chime also offers things like full spending and savings banking accounts that are ultimately administered by Bancorp via their banking licenses.

This is as opposed to a simple example as with CashApp where these accounts can’t do things like pay interest or be leveraged for making loans to their customers.

Issuance-as-a-Service

We have very recently started seeing companies aggregate all the requirements for becoming an issuer and offering issuer services as very simple bundles. This is similar to how larger companies like Stripe have been aggregating service on the acquirer side of the business for years.

Lithic for example is a recently pivoted company that offers card programs on demand at a range of scales for any fintechs requiring such services. They have taken on the business of bundling everything that someone looking to issue cards would need into a single easy API. This goes beyond simply being an issuer and their services also include setting up all the relevant connections to payment processors, handling any card fulfillment needs and hand-holding their customers through any special regulatory and compliance requirements.

Accessing a Card Program

The above examples were for fintechs in jurisdictions outside of the Caribbean. For our potential solution we would need to either:

find an entity that already does BIN sponsorship in our region, or
work with an entity that already has an issuing license (like our local commercial banks) to figure out a BIN sponsorship arrangement

We would also need a BIN sponsor that can facilitate a USD-denominated program. Securing this would be the key to unlocking a prepaid card program in T&T that works for our broader vision.

Once this arrangement is secured, there are technical providers who can then help with the rest of steps in implementing a card program in a fairly straightforward way. Some of these can be found in listings like the Visa Partner Directory for example.

It’s worth saying that at this point I’ve found that finding a BIN sponsor and forming a suitable partnership with them is no trivial task, and there are no clear routes for us in the Caribbean to do this so far.

Hooking in to T&T

Assuming we can get an appropriate program setup, we would then need to consider how funds can move from local TTD accounts into and out of prepaid debit card USD balances.

Topping up

For persons to use their prepaid cards there would need to be some way to move funds from a TTD-based local bank account into the USD-denominated balance on the card.

By card payments

Visa has options for card-to-card transfers that can likely be explored as one alternative. This is a relatively new feature called Visa Direct where balances can move directly from card to card. It’s unclear how viable this is though when you add folks with cards from other networks like Mastercard to the mix.

A second route could also be to set up a credit/debit card merchant endpoint and facilitate payments to an appropriate entity working with us to receive and aggregate payments, and credit these to user accounts. This route would likely require some work on the regulatory front to ensure all AML/KYC/CFT requirements are met and the appropriate “money services” licenses are secured. Its is especially tricky because it would put us into the acquirer side of the business as well as being on the issuer side as planned so far.
By bank transfer

This option could work by us carrying floats in different accounts in both TTD and USD and netting transfers off internally as funds move from place to place.

For example, to top up an account our user Alice could send a TTD transfer to our TTD account in one of the local banks. We would then be responsible for converting that amount to USD and eventually wire transferring a batch of transactions to an accessible account where we can load the funds into the prepaid card. Our USD float in the accessible account would facilitate immediate load-in for Alice and the subsequent wire transfer mentioned above would simply be to reconcile our internal positions.

Withdrawing

After users have loaded funds into the card and transacted a bit, they may need to bring these funds back out to their TTD-based local bank accounts. There are a few options we can think of for this.

At ATMS

The prepaid cards should be compatible with ATMs across the country (and internationally as well) and users would be able to withdraw cash from these using their cards up to a pre-determined daily limit.
By bank transfer

As with the bank transfer option describe above, floats and internal reconciliation transfers across TTD and USD can be used to move money out of accounts back to TTD in a way that feels instant to the end user.

Before exploring this any further though, the next post will go into the strategic feasibility of undertaking a card program as described here, and how well these proposed integrations might work with T&T financial system.

The Series: