Featured Article: Highnote’s Card Account Processing Platform

Highnote was featured in the Nilson Report. We've included the full feature below.

By David Shipper

Fintech Background Information

Founded in October 2020 and out of stealth mode in September 2021, Highnote is a cloud-native, modern issuer-processor platform headquartered in San Francisco that can support a variety of business and consumer card use cases. Although Highnote is relatively new to the card issuance space, the company is primed for growth, with more than half a dozen new clients contracts signed between its launch in September 2021 and year-end 2021. Highnote is a certified Mastercard direct issuer-processor and is working to obtain its Visa certification in the near future. Table A provides summary information.

Fintech Pitch

Highnote believes that it owns the most modern issuer-processor platform in the world, offering a cloud-native, developer-friendly GraphQL low-code platform. Although new to the issuer-processor market, Highnote already supports a wide variety of commercial and consumer card use cases: commercial prepaid, charge card, secured credit card, fleet card, and consumer prepaid and debit. Additionally, the company has additional card product types on the roadmap. Highnote is also a program manager and provides an end-to-end program management solution designed to handle all or most of the operational heavy-lifting needed to manage a card program.

In addition to offering a modern issuer-processor platform, a significant differentiator cited by Highnote is its highly scalable immutable general ledger based on double-entry account principles. The Highnote ledger system helps streamline the program reconciliation process by automating most of the transaction reconciliation requirements and can be easily integrated into finance tools via API.

Primary Target Market and Clients

The ideal Highnote client is an emerging or mid-market digital enterprise that has successfully launched digital products and wants to add card issuance to drive greater end-user engagement and loyalty, and develop new lines of business and sources of revenue. Current commercial use cases include corporate expense, corporate spend management, open-loop fleet card programs, accounts payable invoice processing (via virtual cards), small business card issuance and bank services, and earned wage access programs. Additionally, the Highnote platform supports a wide variety of debit card or prepaid card use cases.

Key Value Proposition and Market Challenges Addressed

Highnote highlights the three capabilities as differentiators that it believes are critical to launch and scale a successful modern card program:

• Full-stack issuer processor platform: Built from scratch and directly integrated into the card networks, the Highnote full-stack issuer processor platform provides clients with greater control of the payment transaction lifecycle and the ability to build out unique card payment use cases that would be difficult or impossible with a legacy or incumbent processor. Highnote clients can build and offer virtual DDA accounts, customize their physical and virtual card designs, support push provisioning of digital cards to a mobile wallet, create custom digital wallets, integrate and offer rewards programs, customize spending control rules at a program, account, or card level, enable collaborative transaction authorization, and more.
• Modular program management: Highnote fundamentally believes that offering a limited number of program management services or forcing clients to utilize all features is too limiting for today’s enterprises and makes it challenging to scale a program over time. Therefore, the Highnote program management capability was designed to provide functionality and services in a modular way so that program owners can take ownership of functionality as they scale. Highnote’s modular program management enables program owners to in-source or build additional enhancements on top of the Highnote program management platform to maximize operational efficiency and minimize costs.
• General Ledger: Highnote has built a highly scalable, immutable, general-ledger based on a double-entry accounting framework that customers can control and have visibility into. The Highnote general ledger is available to all clients and saves the trouble of building a custom general ledger, which can require significant resources to develop and maintain.

Aite-Novarica Group’s Take

Highnote is one of the newest players in the issuer-processor space and offers an innovative platform that will help its clients to compete in the increasingly competitive card issuance market. In addition to offering a modern card issuance stack, the Highnote ledger system can help improve back office efficiencies for its clients. While some providers might overlook innovating and adding efficiencies around the ledger system, this detail speaks volumes to Highnote's work to create its card issuance platform.

Overall, the features and functionalities of the Highnote platform will be attractive card programs that want to offer a competitive card product with functionalities that can provide a great cardholder experience. And the fact that Highnote can provide program management will be attractive to companies that are unable to take on most or all of the operational requirements of running a card program. Overall, while Highnote is entering market with other competing issuer-processor platforms, it appears to offer a solution that will be attractive to both new or legacy card programs.