Small Banks and Credit Unions Turn to Direct Issuing for Top-of-Wallet

For banks and credit unions looking to modernize, the timing has never been better.

“Banks want to offer more competitive products, increase profitability and, critically, own the customer experience — especially credit unions that place a premium on member satisfaction,” Dan Hanks, senior vice president of global product management at i2c, told PYMNTS during a discussion for the Fireside Chat series.

Self-issued credit cards are no longer a luxury but a necessity for financial institutions, he said.

For decades, community banks and credit unions partnered with third-party issuers to offer credit cards, often ceding control over fees, rewards structures and cardholder engagement. While these partnerships provided convenience, they came at a cost — revenue leakage, diminished brand control and limited ability to innovate.

Bringing card issuance in-house allows community banks and credit unions to create digital-first offerings, enhance profitability and own the cardholder experience. By taking control of their credit card programs, financial institutions can unlock a new level of flexibility, profitability and loyalty.

“It’s growing in importance and growing in popularity,” Hanks said. “Smaller banks, some of whom thought they were too small before, now see a clear path to self-issuance.”

For mid-sized banks and credit unions, self-issued cards can be a strategic tool to generate recurring, predictable revenue streams as interest rate uncertainty rises and margins are squeezed.

The Power of Self-Issued Credit Cards

What’s driving the self-issuance trend? A demand for cutting-edge digital capabilities. FinTech startups and national players have set new expectations for digital-first, user-centric financial products. Self-issued credit cards give community banks and credit unions the tools to meet — and exceed — those expectations, Hanks said.

Modern consumers — particularly younger demographics — won’t tolerate traditional timelines, he said.

“The old style was [to] apply for a card, wait seven to 10 days for the plastic to arrive, then start using it,” Hanks said. “That’s not what customers expect today.”

For example, i2c enables instant virtual card issuance and digital wallet integrations, he said.

“Within 30 seconds of approval, we can issue a virtual card, push it to Apple, Google or Samsung Wallet, and have you making a purchase at the point of sale,” Hanks said. “It’s a better experience for the customer and better for the bank. You want to get the card to top-of-wallet status as fast as possible, and nothing beats engagement minutes after approval.”

Self-issuance also unlocks personalization, a concept that has evolved into a must-have for financial institutions. Traditionally, community banks and credit unions relying on agent bank relationships could only offer cookie-cutter credit products.

“When you control the card program, you’re no longer limited to generic solutions,” Hanks said. “You can build products that reflect your customer base — whether that’s students, rural communities or a specific region.”

The advantages of self-issuance, however, come with challenges. Hanks addressed concerns surrounding operational overhead and regulatory hurdles, particularly for smaller institutions with limited resources.

“Credit cards are largely a scale business,” he said. “Smaller banks aren’t going to have the scale to build their own call centers, manage disputes or handle fraud. The key is finding a partner that delivers these services end-to-end.”

Using Data to Inform Smarter Business Decisions

Data is at the heart of the self-issuance equation, and it’s another area where control matters. By owning the data, banks and credit unions can transition from reactive to proactive strategies, driving growth and mitigating risk.

“When you outsource card issuance, you’re also outsourcing the credit decisions,” Hanks said. “A bank might know a customer — maybe they’ve banked with you for 20 years, paid off a car loan and have direct deposits coming in. But when a third-party agent makes the decision, all of that history is ignored. You’re just another FICO score.”

Once a card program is up and running, the data becomes even more valuable. i2c’s own new analytics platform, C-Intel, allows smaller financial institutions to uncover trends and insights without relying on a large team of analysts, Hanks said.

“It’s realistic for smaller teams to use sophisticated tools without needing a dozen analysts,” he said.

With self-issued cards, banks gain insights that extend beyond credit.

“The spending behavior data creates natural cross-sell and upsell opportunities,” Hanks said. “For example, if someone just bought a house, maybe it’s time to market your credit card to help them furnish their home. Conversely, a great credit card customer might also be an ideal candidate for a mortgage or car loan. The data makes it easier to act at the right time.”

Ultimately, for banks and credit unions, self-issued credit cards are more than just a new product — they’re a strategy to stay relevant in a competitive, digital-first market.

“Personalization is the biggest trend, and it’s all about meeting customers where they are — whether that’s on a smartwatch at the point of sale or through targeted offers that reflect their lifestyle,” Hanks said.