Module 9: Fees, Cross-Border Charges, and Revenue Modeling
🧠 Learning Objectives
By the end of this module, you will:
Understand the different types of fees associated with virtual cards
Learn how and why cross-border charges apply, even for USD cards
Break down how card networks, issuers, and processors make money
Build a realistic revenue model around your own card product
Learn to communicate fees transparently to users while protecting margins
Why This Matters
Most people assume card payments are free or that all costs are covered by the merchant. That’s a common misconception — especially in virtual card systems where issuers and platforms operate under tighter margins and higher risks.
If you’re launching a card product and don’t understand fees, you risk:
Losing money on each transaction
Getting surprised by network charges
Creating a poor user experience during “mystery declines” or FX markups
Building a product that can’t scale profitably
Types of Card Fees
Below is a breakdown of fees you may encounter or need to pass on:
| Fee Type | Who Applies It | Description |
|---|---|---|
| Card Issuance Fee | You or your platform | Charged to user (e.g., $1 per card created) |
| Top-Up Fee | You or your provider | Usually a flat fee per top-up (e.g., $1 per $100 loaded) |
| FX Fee | Processor or issuer | Applied when converting local currency (e.g., NGN) to USD |
| Cross-Border Fee | Card network (Visa, Mastercard) | Applied when a USD transaction is processed outside the US |
| Withdrawal Fee | Issuer | If cash withdrawal or POS is enabled (rare for virtual) |
| Dispute/Chargeback Fee | Issuer or processor | Cost of handling chargebacks |
| Termination Fee | You (optional) | Fee for replacing a terminated card |
Understanding Cross-Border Fees (Even in USD)
This is one of the most misunderstood aspects of virtual cards.
Even if:
Your card is denominated in USD
The user is in Nigeria
The merchant charges USD
You may still pay a cross-border fee. Why?
Because the location of the merchant's acquiring bank matters more than the currency.
Example: You buy Facebook Ads from Nigeria. Charged in USD. Facebook routes the payment through a bank in Ireland. Visa classifies this as a cross-border transaction. You get charged 2.5% + $0.50 — passed from the network to your processor, and to you.
This is not a bug — it’s a common reality of global payments infrastructure.
FX Fees vs. Cross-Border Fees
| Scenario | FX Fee? | Cross-Border Fee? |
|---|---|---|
| Pay NGN → Card in USD | Yes | Maybe |
| Card pays Amazon in USD | No | Maybe |
| Card pays a merchant charging EUR | Yes | Yes |
| Card pays a US merchant settled in the US | No | No |
Realistic Card Revenue Models
Let’s now look at how platforms make money on card products.
Flat Markup on Top-Up
Charge a fixed fee per load. E.g. Top up $100 → Fee: $1
Pros: Easy to communicate
Cons: Doesn’t scale with spend
Percentage Spread
Take a margin on top of what the processor charges. E.g. FX Rate 750 → Charge 765
Pros: Scales with spend
Cons: Must be justified and visible
Subscription Model
Charge users monthly for access to premium card features.
E.g. $2/month for higher limits, more cards
Pros: Predictable revenue
Cons: High churn risk if spend is low
Hybrid (Most Common)
$1 per card creation
$1 top-up fee per $100
2.5% FX markup on cross-border spends
Volume-based revenue share from processor (if available)
Revenue Stream Design for Different Audiences
| Audience | Monetization Tactic |
|---|---|
| Freelancers | Add fees to withdrawals or convert to USD card value |
| Consumers | Bundle with wallet product; charge creation and FX fees |
| Teams or SMEs | Offer budget control, charge monthly or per card |
| International Payouts | Pass FX markup transparently in quote process |
Internal Float Cost vs. Pass-Through
You may choose to:
Absorb some card fees to improve UX (loss leader model)
Pass through fees exactly as charged
Mark up to create a margin
Your strategy depends on your market, customer LTV, and whether cards are a product or a feature in a broader system.
How to Display Fees Transparently
Users respect honesty. Show:
Top-up cost in the confirmation screen
Cross-border fee warning after known merchants (e.g., Facebook, Alibaba)
$0.50 + 2.5% breakdown when showing statement
Refund policies and chargeback timelines
Freezing and termination costs (if any)
Avoid “surprise fees.” Those break trust.
Recap
Every card product has costs — some fixed, some per-transaction, some hidden in network rules
You must understand and model FX, cross-border, top-up , and operational fees
Monetization can be flat, tiered, or volume-based — design it to match your users
Transparent communication is not just ethical — it's good product design
