Growing Loyalty Through Co-branded and Affinity Credit Cards

Kris Carrera
Business Line Executive, Credit
Posted on July 13, 2017

The interest in co-branding and affinity branding of credit cards is more than just back on the agenda, it is fast becoming a central pillar of loyalty, acquisition, revenue diversity and cross-sell opportunities for merchants and financial institutions.

Once the reserve of high-end retailers such as airlines, the metrics around co-branded cards are changing. Increasing numbers of retailers of all sizes are now getting interested in co-branding and affinity branding for what it gets them in terms of financial recognition and the potential uplift of customers coming to stores or e-commerce sites.

The Rise of Co-branded and Affinity Cards

Co-branded credit cards are taking off because they provide so many benefits to issuers and customers. The product of a partnership between a retailer and a credit card issuer often issued through an intermediary bank, they provide issuers access to a larger customer base. Cardholders, meanwhile, gain rewards and discounts from the retail brands they are most loyal to. In parallel, affinity cards target similar results for colleges, universities, charities and sports affiliations. These two cards are distinct from private label credit cards, also known as store cards, that are more restrictive and can only be used at their respective retailers’ stores.

Currently, nearly 50 percent of U.S. adult consumers own at least one co-branded or affinity credit card and they represent over one-third of all credit card purchases. Competition in the co-branded segment is fierce as a growing number of consumers seek more rewards in a finite universe of broader card features and benefits. We are now in the era of apply and buy. It is now feasible to request and be delivered a co-branded card directly at the store or e-commerce site point of sale (POS), and then immediately get a healthy discount on your purchase.

Co-branded and affinity credit cards increasingly serve a vital purpose for retailers and organizations that are looking to ignite loyalty from their customers. These cards provide an anchor to consumer engagement when the winds of economic change can threaten to steer consumers away from their favorite product or program.

Building Co-branded Loyalty

So, what are the top-of-mind principles and tactics retailers and organizations need to hold sacred as they push toward the primary objectives of driving loyalty and increasing spend?

In simple terms, consumers with a co-branded card are more likely to refocus on a single retailer rather than split their purchases across a number of competing providers. A recent article found that 40 percent of consumers surveyed said they were more likely to return to a retailer where they have a co-branded card, with millennials reporting as high as 60 percent. The result is greatly increased engagement and spending.

But it requires more than familiarity to drive this; consumers need to be incentivized through real value from a co-branded card. Typically, this comes in the form of instant discounts at the POS, or advantageous installment payment plans, such as zero percent interest. And consumers are fully aware of the various retail financing offers with almost 80 percent of consumers reporting they knew of or expected POS-based financing options.

The coveted millennial demographic consistently show a greater interest in co-branded card services, but they expect a more digital experience – specifically, mobile.

Do not underestimate the potential for shared consumer loyalty. When a retailer and credit card issuer co-brand a credit card together, they inevitably also pool their customer databases. This symbiotic alliance enables the merchant to access and market to the issuer’s customer base and vice versa. Financial institutions gain new customers simply because the consumers desired the retailer’s credit card. Likewise, the retailer acquires new customers simply because the consumers were regular customers with the financial institution. As a result, both parties achieve increased visibility and exposure to the public.

A Perfect Storm for Co-branding

Many financial institutions left the co-branding and affinity market following the 2008 financial crisis. That’s because the marketing dollars required to support programs dried up, while credit standards also tightened for consumers. At the same time, rewards on offer a decade ago were often too generous to maintain and offered little value to retail brands.

As those issues changed, so did the push for co-branding. Whereas, until recently, only a few leading retailers, airlines, and major league sports offered the service, many smaller retailers, and minor league sports organizations are looking to diversify in order to gain the promised benefits. The reward schemes are also evolving to become more in tune and more specific to the merchant or organization in question. Similarly, smaller national banks are looking to differentiate themselves with co-branded card services and moving into what was once the reserve of big banks.

Technology is another strong driver to the regeneration of interest in co-branding. On a purely logistical level, the printing of co-branded cards with customized logos and customized statements have become much simpler. The infrastructure needed to support additional cardholders needs investment, but the economies of scale favor those that follow a more aggressive customer acquisition strategy through embracing co-branding.

In addition, the cost of acquiring new accounts has become much cheaper over recent years. It is much quicker to credit check applicants with minimal manual intervention as automated know your customer (KYC) systems become more affordable. Overall account management costs also have fallen significantly, and technological advances have made customized messaging and marketing cheaper and more practical.

Engage Customers Effectively

Co-branding is with us for the foreseeable future. In an increasingly competitive card landscape, differentiation and diversification of revenue is vital. Financial institutions are now seeing credit services as a lead product for customer acquisition, and it’s a great opportunity to cross-sell more products. Co-branding allows merchants to drive brand loyalty, encourage repeat visits and generate higher spending. And both parties gain from customer data from which they can draw further marketing opportunities.

Although technology and consumer demographics change over time, the behavioral tactics that incentivize and drive loyalty and increase repeat spending generally stay the same. Strategically adapting to the changes outlined above is one way to start that exciting journey for your co-brand program.


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Kris Carrera
Business Line Executive, Credit

With over 25 years of international payments experience, Kris was responsible for the launch of the first successful cobranded card program. A leader in risk-based pricing and target marketing using predictive data analytics, she specializes in merchant services, credit cards and home equity. Kris has received Best Travel Card, Best Cobranded Card and Best Private-Label Program awards.