Postmodern card issuance is here. Top things builders need to get right when you can securitize and reward identity, assets, and networks
- Chloe Zhu
- May 7
- 7 min read
The era of postmodern card issuance is here.
The card issuance landscape has entered its third phase of growth since its dawn in the 1970s and its rapid modernization phase in the 2000s. We call the current phase the era of postmodern card issuance.
The postmodern phase is enabled by two technology unlocks: tokenization and AI-powered workflows. Specifically, tokenization unlocks liquidity previously trapped in seemingly offline assets and experiences, allowing builders to reimagine access to credit on a much broader plane. AI-powered workflows turn previously unprofitable distribution channels and rewards delivery mechanisms into new possibilities, allowing builders to reach and reward customers in more personalized and exciting ways.
While the dawn of card issuance (1970s to 1990s) was the era of plastics and the modern card issuance phase (2000s to 2010s) was the era of software, the era of postmodern card issuance (2020s-) will be remembered by the securitization of identity, assets, and networks.
The first two phases of card issuance have created multi-billion dollar outcomes and the next phase undoubtedly will create new giants.
At Ensemblex, we’ve been building card businesses since the dawn of the card issuance across big banks (Capital One, Citi etc.), high growth fintechs (Mission Lane, Monzo, Ready Finance etc.), and every layer in between.
Below we break down top six things a builder need to get right in the era of postmodern card issuance.
Start with your WHY
Post modern or not, first things first: start with your WHY.
We can’t emphasize this point enough.
Before you write the first line of code or raise your first dollar of funding, ask yourself: who am I building this card for and is there a real need among my target audience?
Too many times, we hear card pitches that center around tech features but ignore real customer needs. For example, a spend control/ auto card-freeze feature may sound nice in a business card setting, but is it really going to fly among enough consumers? Imagine the embarrassment someone feels when their card is declined at dinner in front of their friends.
The card space creates $100bn successes and is also littered with many failed attempts. Before you launch, be brutally honest about your value prop, iterate quickly, and remember to study history.
Feeling insecure about a secured card?
Did you know that most crypto credit cards today are secured credit cards? Secured cards historically only represented <5% of total TAM [source].
Looking beyond status quo, stablecoin cards will produce venture-scale businesses — but only for teams that escape the secured-card trap.
Before we get there, first some context on secured vs. unsecured cards.
The black/platinum cards in your wallet are unsecured credit cards. Meaning, your credit card company-once it gains confidence about your credit risk profile-doesn’t ask you to put up collateral in order to access your credit limit. The unsecured cards create convenience for hundreds of millions of consumers.
In contrast, a secured credit card requires you to put up collateral, aka security, before you can access your credit limit. This extra requirement is typically in place to achieve one of two objectives: to broaden access to credit or to provide better pricing.
To broaden access, a secured card typically requires consumers to put up cash collateral before activating the card. This requirement traps liquidity for these consumers, allows credit card companies to underwrite previously “unbankable” consumers, creating a pathway to unsecured credit for millions of Americans. To provide better pricing, a card issuers may tap into other assets a consumer owns, such as home equity, car ownership, or in the case of stablecoin card, stablecoin assets.
The vast majority of secured cards today fall into the first category: broadening access. Due to the inconvenience of these cards, they represent only <5% of total credit cards outstanding today [source].
Does this mean stablecoin cards are limited by the 5% TAM ceiling?
We believe not.
Many pathways exist to unlock the remaining 95% of TAM.
We see exciting opportunities leveraging smart product design, pricing strategy, and data moat.
The winners in postmodern cards won’t be the ones who liquidate fastest. They’ll be the ones who apply the right restraint when needed.
Are you correctly balancing programmatic money and empathetic money?
A key marker of the postmodern card stack is the programmatic nature of the collateral and the associated money movement. Meaning, when a card holder defaults on their payments, the card issuer can liquidate the collateral (aka stablecoin pledged as security) nearly instantly and at an unprecedentedly low cost.
In theory, stablecoin cards are superior to other secured form of lending. Any secured lender knows the pain and hassle of sending a tow truck to impound a car or taking a borrower to court to garnish wages.
In practice, though, programmatic collateral may miss the mark.
Rapid, automated liquidation - for missed payments or collateral volatility - can destroy long term value and cause unnecessary customer churn. For the cardholder, it severs a relationship that could have been recovered. For the card issuer, that loan might have been profitable in the long run. Liquidating collateral to pay off the loan is a last resort after better options are exhausted.
Case in point, during the 2023 Circle depeg, loans collateralized with USDC were liquidated during the ~48 hours it took for USDC to recover. Imagine the chaos if millions of Americans had been relying on USDC-collateralized cards for their daily spending - and suddenly facing a margin call.
At the end of the day, stablecoin cards-and all credit cards-are a way to solve real financial problems for real people, be it daily liquidity, emergency funding, or access to better credit.
Purely programmatic money ignores the human aspect of finance and will struggle to scale.
Credit card unicorns can be built on empathetic money. We’ve built a few.
Programmatic money enforces contracts. Empathetic money creates lifetime value.
Is your rewards program attracting the right customers?
The postmodern card issuance game is quite fun and rewarding. Consumers and small businesses are being rewarded in novel ways doing mundane things such as paying rent; and they are earning newer and cooler rewards, such as stablecoin or concert tickets.
We all love giving consumers more and better choices.
What we love more at Ensemblex is keeping a promise.
Too many rewards programs are short lived because the math simply doesn’t work in the long run.
Brex devalued their mile conversion program five years into their journey (see screenshot below)
Chase lost hundreds of millions of dollars offering exceptional perks while growing the Sapphire Reserve card. But Chase can sustain those losses (Jamie Dimon quipped they should have lost more), holding on long enough to make the acquisition costs pay off.
Before you launch a rich rewards program, make sure you’ve built in enough capital reserve.
And then there’s the illusion of product market fit.
An aggressive rewards program gives the illusion of PMF, especially upon launch.
The generous rewards make a big splash, the card goes viral in the age of social media, millions sign up.
Some founders mistake viral rewards for product-market fit — and then build a company on a mirage
However, we know there’s always a plot twist-don’t underestimate the savviness of your cardholders. A popular rewards card once required customers to use the card at least five times per month to unlock maximum rewards. The result? Some customers purchased 5 bananas individually to clear the bar; then they tuck the card away until the next month. You don’t have to be a math genius to figure out that these customers are negative LTV.
The said card issuer reportedly lost their partner bank $10 million per month. It recently restructured the entire rewards program.
In short, be strategic with your rewards design, anticipate rewards gaming, and make sure your pockets are deep enough.
Is your revenue model relying on a starvation diet called interchange?
A common “wisdom” in fintech is that card businesses monetize via interchange alone.
For a no-fee neobank, this was the case.
For a credit card business, the ARPU is MUCH MUCH bigger.
Think fee charges. Think interest charges.
While interchange may pocket a card issuer 1% to 2% GMV, the other levers can easily 5x that, if not more.
In the era of postmodern card issuance with rich rewards, fees and interest revenues are not only nice to have, they are essential in supporting a venture-scale card business in the long run.
How can a credit card business design an optimal pricing strategy?
This is a complex topic. Pricing, with unexpected nth-order effects, might be the trickiest part of running a credit card business. For example, a conservative pricing strategy (high rates, high collateral requirements, strict terms), often favored by new companies testing the waters, can backfire. The less appealing your pricing, the more desperate the consumers who accept it. This affects your default rates, but also the success of your card as an acquisition tool. Balancing growth and credit profitability is an art. Ensemblex Partner Brandon broke down the balance act really well here.
In summary, make sure you design a sustainable business model using all pricing levers available to you.
Can your card processor outlive your founding team?
This is one of the most foundational choices you’ll make, and you should dedicate thought, time, and expertise accordingly. Many founders optimize for speed and ease of launch when choosing their BIN sponsor and processor, assuming they can evolve together. But systems built to support non-credit or non-stablecoin businesses are clunky with credit. BIN sponsors might not share your risk appetite beyond debit. We’ve seen this bite founders time and time again.
Switching sponsors or processors is painful and expensive. Imagine pausing all product roadmaps to undertake a two-year long re-platforming endeavor, while your runway drains… Make sure all of your partners are fully aligned with, and have a concrete track record supporting, your long-term vision.
Want to nerd out on key considerations when assembling your tech stack? Dive in here.
We’ve spent decades navigating these tradeoffs, building big, profitable businesses at the frontier of fintech. The next generation of card issuance giants will be built by founders who understand securitization, empathy, and software as one system. If that’s you, Ensemblex should be in your first five calls.