Decoupled Debit Cards are gaining momentum in Europe. In the future, fintechs will provide the interface between transactions and customers’ money. Liechtenstein needs to be part of that megatrend.
A decoupled debit card is a card linked to a bank account that hasn’t been provided by the bank that holds the funds. They are usually offered by fintechs and provide a way to tie digital-first features to legacy bank accounts.
What is that good for?
With a decoupled debit card, the fintech issuing the cards can add features that the bank doesn’t support. Simoultanelsay it can lower its own costs by using cheaper payment rails to move the funds. On the users’ side, these cards can give people modern app-based debit cards without having to open accounts at neobanks like Revolut or N26.
There are different card models: Germany’s Solarisbank and Belgium’s Aion Bank offer decoupled debit cards as white-labeled services to fintechs. NumberX International from Vienna partners with smaller banks which don’t have the means to offer digital apps to their customers.
A trend in Europe
Decoupled debit cards are gaining traction in Europe. Fintechs offering them are licensed as card-based payment instrument issuers under the EU’s PSD2. This license enables them to link their cards to their customers’ bank accounts through open banking APIs, meaning they don’t need to hold any funds on their own books. The card issuer then settles their cardholders’ transactions with merchants through the Visa and Mastercard networks. They make their money with the interchange revenue.
The general trend goes towards nonbanks starting to offer financial services products to their customers. For example, a retail chain could issue decoupled debit cards to its customers to pay whenever they shop in their stores and then pay them rewards. The retailer could offer this product without having to also offer checking accounts.
Liechtenstein needs to be involved
Liechtenstein-based banks and fintechs should take note of the trend. The European banking landscape is fragmented, with many smaller banks that can take advantage of these cards. They don’t want to develop their own digital tools, but they do have a high level of customer trust. That creates opportunities for co-branding and revenue sharing for fintechs and banks.
The role of banks will likely change fundamentally over the next years. Fintechs will provide interfaces between payment transactions and customers’ money at their bank. That’s a major opportunity for Liechtenstein, which has a long-standing history of banking and now tries to establish itself as a fintech hub. Being a member of the European Economic Area means Liechtenstein-based businesses can relative easily jump on the trend and play a leading role.