Decoupled Debit Card: How It Works and More

A decoupled debit card is a type of debit card that is not linked to a specific bank account. This means you can use it without having to fund it from a specific bank account.

Decoupled debit cards are often prepaid, meaning you load money onto the card before using it. The card can be funded through various means, such as direct deposit, online banking, or even cash loads at participating retailers.

One benefit of a decoupled debit card is that it can be used to make purchases online or in-store without the need for a traditional bank account. This can be especially helpful for individuals who are new to the country or have poor credit history.

Decoupled debit cards typically have fees associated with them, such as activation fees, monthly fees, and foreign transaction fees. However, some cards offer fee-free options for certain types of transactions.

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The decoupled debit card offers a more seamless user experience. This is achieved through the separation of the card's payment functionality from its physical appearance, allowing for a more streamlined and efficient experience.

One of the key benefits of this approach is that users can easily switch between different payment methods and cards, without having to physically swap cards. This is made possible by the card's digital twin, which can be easily linked and disconnected from the user's account.

Decoupled debit cards also provide users with greater control over their spending, as they can easily see their account balances and transaction history in real-time. This is thanks to the card's integration with mobile banking apps.

In addition, decoupled debit cards can be easily customized with different designs and features, allowing users to personalize their payment experience.

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Account Management is a crucial aspect of decoupled debit cards. You'll have two main bank accounts associated with your decoupled card: a reference account and an internal account.

The reference account is your external bank account from which funds are pulled to settle your internal account balance when you make purchases with your decoupled card. This account remains untouched until the internal account balance goes negative.

The internal account is an account created specifically for your decoupled card, with an attached credit limit. This is where your purchases are settled, and the balance will go negative until you top up the account or transfer any positive balance back to your reference account.

Here are the different types of accounts involved in a decoupled debit card:

Managing your accounts with a decoupled card is a straightforward process. There are three main accounts involved: the reference account, internal account, and round-up account (if the customer chooses to opt for it).

The reference account is the external bank account from which funds are pulled to settle the internal account balance when purchases are made with the decoupled card.

The internal account is an internal account created for the decoupled card, and it's where the overdraft (or credit limit) is attached. This is the account where the funds from the reference account are credited via SDD (Standing Data Collection) to settle any negative balance.

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If the customer chooses to opt for a round-up account, they can specify a round-up amount for each purchase. This means that the SDD will include both the purchase amount (transferred to the internal account) and the round-up amount (transferred to the round-up account).

Here's a quick rundown of the accounts involved:

By understanding how these accounts work together, you can effectively manage your decoupled card and make the most of its features.

In Step 8, you'll need to create an internal account for each customer and attach the approved credit limit. This internal account is specifically designed for use with decoupled cards.

The internal account is not a full payments bank account and can only be used within the constraints of the decoupled card. You'll need to attach the approved credit limit to this account.

When a customer uses their decoupled card to make a purchase, the balance of the internal account will go negative, and the customer's external reference account will be debited in the amount of the negative balance. The SDD will be credited to this account for settlement.

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Here are the key things to keep in mind when setting up the internal account:

You can use a decoupled debit card for various purposes, including card payments and ATM cash withdrawals, as long as you have a credit limit available on your internal account. This allows you to make purchases and withdraw cash when needed.

To manage your card's account, you can top it up with cash by transferring money from your external reference account to your internal card account. This is a convenient way to add funds to your card without needing to make a new payment.

Your decoupled debit card also allows you to transfer any positive balance back to your reference account, giving you flexibility in how you manage your finances. However, you cannot transfer cash from the credit limit balance on your internal account to your reference account.

After receiving your decoupled card, you can choose between different card types, such as a physical or a virtual card.

You can tokenize the card to be used in any e-wallet, like Google Pay, Apple Pay, or Samsung Pay.

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Card usage is a key aspect of decoupled card functionality. Customers can use the card for card payments and ATM cash withdrawals, with the available credit limit on their internal account.

The card can also be topped up with cash by transferring money from the external reference account to the internal card account. This allows customers to replenish their credit limit.

Customers can transfer any positive balance on the card's account back to their reference account. However, they cannot transfer cash from the credit limit balance on the internal account to their reference account.

Here are the main use cases for decoupled card usage:

Note that payouts to the reference account can only be made if the account has a positive balance, and can only be made to the reference account(s) associated with the decoupled card.

Fintechs such as Affirm and Cash App took advantage of healthy debit margins available to smaller institutions.

The sponsoring bank model allowed fintechs to share debit interchange margin with their partners, expanding the utility of the model.

Decoupled debit economics underpin card transactions, enabling fintechs to offer broader financial services.

Affirm's initial proposition was its BNPL offering, but it now provides debit cards, including the Affirm Debit+ card.

The Debit+ card gives consumers a way to pay in full or via installments with no interest.

Fintechs like Affirm pay merchants through card rails, and are repaid by consumers over ACH rails.

This decoupled transaction model allows fintechs to make a profit from debit interchange revenue and ACH fees.

Affirm's share of debit interchange revenue is greater than its cost for originating ACH debit transactions.

The dual revenue sources, including debit interchange and interest revenue from BNPL loans, have supported Affirm's growth.

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Decoupled debit cards are revolutionizing the way we think about financial transactions.

According to industry experts, decoupled debit cards have the potential to increase security and reduce costs for financial institutions.

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In a decoupled system, the debit card is separate from the bank account, which means that even if the card is compromised, the account remains safe.

This is a significant advantage over traditional debit cards, where a single breach can compromise the entire account.

Decoupled debit cards also offer greater flexibility and convenience for consumers, allowing them to use their cards for online transactions and other services without exposing their account information.

With decoupled debit cards, consumers can enjoy greater peace of mind knowing that their account information is protected, even if their card is lost or stolen.

By decoupling the debit card from the bank account, financial institutions can also reduce their exposure to risk and lower their costs associated with fraud and chargebacks.

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A decoupled debit card is a type of debit card that operates independently of a traditional bank account. This means that the card's funds are stored separately from the cardholder's main account.

Decoupled debit cards are often used for specific purposes, such as paying for a particular service or product, like a gym membership or a streaming subscription. These cards can be loaded with funds as needed, making them a convenient option for one-time or recurring payments.

One of the benefits of decoupled debit cards is that they can help cardholders manage their expenses and stay within budget. By keeping their main account funds separate from the debit card funds, cardholders can avoid overspending and reduce financial stress.

Decoupled debit cards can be issued by banks, fintech companies, or other financial institutions. They often come with features like transaction tracking, spending limits, and alerts to help cardholders stay on top of their finances.

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