What are co-branded credit cards? A guide for businesses


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  1. Introduction
  2. What are co-branded credit cards?
  3. Are co-branded credit cards the same as private-label or white-label credit cards?
    1. Co-branded credit cards
    2. Private-label credit cards
  4. How do co-branded credit cards work?
  5. Benefits of co-branded credit cards for businesses
  6. Drawbacks of co-branded credit cards for businesses
  7. How to create a co-branded credit card for your business

A financial product that has gained popularity recently is the co-branded credit card. The market for co-branded credit cards was valued at more than US$12 billion in 2022 and is expected to grow to nearly US$26 billion by 2030. As a result, businesses are increasingly considering whether to launch a co-branded credit card.

Co-branded credit cards are a collaboration between two distinct entities. For businesses, this collaboration can increase customer loyalty, diversify revenue sources and boost awareness with new demographic segments.

Below, we'll explain how co-branded credit cards work, what their advantages and potential challenges are, and the process that businesses can follow to decide whether to launch a co-branded card partnership.

What's in this article?

  • What are co-branded credit cards?
  • Are co-branded credit cards the same as private-label or white-label credit cards?
  • How do co-branded credit cards work?
  • Benefits of co-branded credit cards for businesses
  • Drawbacks of co-branded credit cards for businesses
  • How to create a co-branded credit card for your business

What are co-branded credit cards?

Co-branded credit cards are financial products that are offered jointly by a credit card issuer and a non-financial business, typically a retailer or service provider. These cards reward cardholders with benefits and incentives related to the non-financial business's products and services, encouraging loyalty and increased spending with that brand.

Are co-branded credit cards the same as private-label or white-label credit cards?

Co-branded credit cards and private-label credit cards are not the same. Although both involve partnerships between retailers and financial institutions, they serve different purposes and have distinct features. Co-branded cards can be more widely used and are affiliated with major credit card networks, while customers can only use private-label cards at the issuing retailer or its affiliates. Here is a more detailed comparison:

Co-branded credit cards

  • Partnership: co-branded credit cards are a result of a partnership between a retailer (or another type of business) and a financial institution or card network, such as Visa, Mastercard or American Express.
  • Usage: they can be used in any location where the card network is accepted, not just with the co-branding retailer.
  • Features: they typically come with rewards or other benefits that are tied specifically to purchases made at the co-branding retailer, and usually offer rewards or benefits for general purchases as well.
  • Recognition: the retailer's logo and the card network's logo usually appear on the card.

Private-label credit cards

  • Partnership: these cards are also the result of a partnership between a retailer and a financial institution, but they don't display a major credit card network logo.
  • Usage: they can only be used at the issuing retailer's locations or online shop. For example, a department store might issue a private-label card that can only be used for purchases at that shop.
  • Features: rewards or financing offers are typically limited to purchases made with the retailer. Special financing terms, discounts or other incentives might be offered.
  • Recognition: typically, only the retailer's branding appears on the card, without a prominent card network logo.

How do co-branded credit cards work?

Co-branded credit cards operate as a collaboration between two entities: a credit card issuer and a non-financial business. Here's how they function:

  • Issuance partnership: while the card issuer takes responsibility for credit approval, account management and billing, the non-financial business brings in its brand value, customer reach and marketing resources. This collaboration allows both entities to tap into new customer segments and increase customer lifetime value (LTV).

  • Reward structure: one of the defining features of co-branded credit cards is a reward system tailored to the non-financial business's offerings. Going beyond receiving general points for every pound spent, cardholders might receive multiplied points or cash back for purchases made with the partnering business. This nuanced reward structure is a direct incentive for cardholders to spend more with the co-brand partner.

  • Redemption options: while many credit cards offer generic rewards such as cash back, co-branded cards usually provide more specific redemption choices linked to the partnering business. For instance, a co-branded airline card might let cardholders redeem points for flights, seat upgrades or airport lounge access. A co-branded retail card could offer discounts, exclusive merchandise or early-access sales.

  • Marketing campaigns: beyond traditional marketing channels, co-branded cards benefit from dual promotional efforts. The non-financial business might use its retail spaces, websites or product packaging to advertise the card. Special offers, such as introductory bonuses or limited-time promotions, can drive customer acquisition quickly.

  • Loyalty reinforcement: over time, cardholders recognise the benefits of using their co-branded card, especially if they are frequent patrons of the non-financial business, and that can increase brand loyalty. As customers use the card more, they earn more rewards, prompting them to further patronise the partnering business.

  • Risk and revenue sharing: the partnership often involves detailed negotiations on how the financial risks and profits will be split between the two entities. Factors such as cardholder defaults, operational costs and marketing budgets are determined in these discussions. Revenue from interchange fees, annual fees or finance charges can be shared based on pre-agreed terms, ensuring that both parties find the collaboration beneficial.

Benefits of co-branded credit cards for businesses

There are so many co-branded credit cards available because – when executed well – they can provide significant benefits to some businesses. These benefits include:

  • Brand loyalty: through unique rewards and incentives, businesses can encourage repeat purchases, resulting in loyal customers. The more the customer uses the co-branded card, the more rewards they earn, which often translates into repeat interactions with the brand.

  • Data insights: co-branded credit cards can offer businesses valuable data about purchasing habits, preferences and behaviours. This information can guide marketing strategies, product development and service improvements.

  • Revenue streams: going beyond direct sales, the partners often share revenue from annual fees, interest and other card-related charges. This provides businesses with an additional source of income.

  • Targeted marketing opportunities: with a better understanding of cardholder buying patterns, businesses can create specialised promotions or offers to encourage more spending. This targeted approach can boost sales and deepen customer engagement.

  • Extended reach: the card issuer's customer base presents an opportunity for businesses to tap into a new audience. Promotion of the co-branded card by the issuer exposes the business's brand to potential new customers.

  • Operational advantages: card issuers are mostly responsible for billing, account management, customer service and managing fraud risk. This allows businesses to enjoy the benefits of a credit product without handling all of the financial complexities.

  • Exclusive partnerships: co-branding often implies exclusivity, meaning that competitors of the non-financial co-branding partner might not be able to form a similar alliance with the card issuer. This can provide a competitive edge in the market.

  • Enhanced reputation: associating with a reputable card issuer can improve the perception of a business's brand. Customers might perceive this collaboration as an endorsement, elevating customer trust and increasing brand value.

Drawbacks of co-branded credit cards for businesses

Co-branded credit cards offer a range of benefits but also present certain challenges to businesses. Those launching a co-branded card must clearly understand and proactively mitigate against these challenges to maintain brand integrity and customer trust. Here are potential problems:

  • Reputation risk: if the card issuer faces negative publicity or legal issues, the partnered business can experience collateral damage to its brand image.

  • Complex negotiations: establishing the terms of the partnership, revenue sharing and responsibilities can take a lot of time and might require significant legal and financial resources.

  • Customer service concerns: although the card issuer typically handles account management and customer service, any negative customer experiences can inadvertently reflect on the business, even if it wasn't directly responsible.

  • Limited flexibility: once the partners are locked into an agreement, it's difficult to make changes based on evolving business needs or market conditions. The business might have to adhere to stipulated terms until the contract is renewed or terminated.

  • Dependency: relying heavily on the co-branded card for customer retention can lead to vulnerabilities if the card issuer has problems processing transactions or if the partnership dissolves.

  • Financial risks: if the credit card product does not perform well in the market, expected revenue might not materialise. And if cardholders default at high rates, it could affect the profitability of the co-branded product.

  • Market saturation: if competitors enter into similar co-branding agreements, the market can become oversaturated, diluting the unique value proposition of the co-branded card.

None of these problems are unsolvable. Businesses entering a co-branding relationship with a card issuer must weigh the opportunities against the potential challenges. Although these cards can be powerful tools for brand loyalty and revenue generation, businesses must take an active approach to managing the associated risks if they want to have full access to the benefits.

How to create a co-branded credit card for your business

A co-branded credit card partnership can help businesses increase customer loyalty and diversify revenue sources. But launching a co-branded card requires thorough planning and execution. Here's a brief overview of how to get started:

  • Assess your business's suitability: before approaching potential partners, evaluate whether a co-branded credit card aligns with your business model, target audience and long-term goals.

  • Research issuers: identify credit card issuers that align with your business values, have a reputation for good partnerships and possess the technological infrastructure to support such a venture.

  • Draft a proposal: present your business's value proposition, showcasing data such as customer base size, average transaction value and growth prospects. This proposal will be important for initiating discussions with issuers.

  • Negotiate: once an issuer has expressed an interest, engage in detailed discussions to finalise the terms of the partnership, revenue sharing and responsibilities. Conduct a comprehensive legal review during this phase.

  • Develop the reward structure: collaborate closely with the issuer to design a reward system that will entice potential cardholders while being sustainable for both parties to manage.

  • Launch a marketing campaign: work together to design and execute a marketing strategy that targets existing and potential customers, and emphasises the unique benefits of the co-branded card.

  • Monitor and adjust: after the card's launch, track its performance regularly. Use customer feedback to adjust offerings, marketing strategies and other elements to better serve cardholders and achieve desired outcomes.

Entering a co-branded credit card partnership is not a decision that businesses should take lightly. It demands careful preparation, a clear understanding of mutual goals and continuous collaboration with the chosen card issuer. But under the right conditions and with effective strategies, this type of partnership can develop new avenues of growth, customer retention and revenue diversification for businesses.

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