Card infrastructure becomes a tax
Deb Bardhan, Chief Business Officer at Highnote, on incentive structures in card issuing
The key shift at scale is that card infrastructure stops looking like a growth unlock and starts looking like a tax on volume. Early on, program managers and issuer processors buy speed, compliance help, and lower setup cost. But once a card program gets large, every basis point of interchange kept by a middle layer shows up directly in gross profit, which pushes customers to renegotiate bank relationships, pull functions in house, or choose a provider that gives them more economics and modular control from the start.
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In card issuing, the stack has several toll collectors, bank, network, processor, and often a program manager. In a typical BaaS model, the program manager and bank both take part of interchange, and those take rates compress as customers grow and gain leverage. That is why scale customers start treating these layers as costs to strip out or reprice.
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The practical reason some larger customers still stay is if the provider keeps solving hard operational work they would otherwise need to build. Highnote argues that means modular program management, direct processor infrastructure, and a built in double entry ledger, so a customer can add debit, charge, and credit on one stack instead of stitching together multiple vendors and internal tools.
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There is a clear comparable in Brex. Brex built directly to Mastercard and uses that control to move faster on global issuing, instead of waiting on a middleware provider's roadmap. That shows what scaled customers are really buying, not middleware itself, but faster launches, better economics, and fewer outside dependencies when they need something specific.
The market is moving toward fewer generic middle layers and more providers that either own deeper infrastructure or bundle enough real operational value to justify their take. As embedded finance matures, the winners will be the platforms that let customers start fast without creating a strong economic reason to leave once volume gets big.