A co-branded card is a credit or debit card that a retailer issues in partnership with a card network or financial institution. These cards can be used everywhere where bank cards are accepted. What makes co-branded cards stand out among other card products is that it brings cardholder certain benefits when making purchases at a particular retailer, such as discounts, bonuses, miles, cashback, points, or rewards.
Usually, both the logo of the retailer and the bank or card network are imprinted on such cards, as the issuance of co-branded cards is sponsored by two parties. The main goal of such a partnership is to attract customers and incentivise them to make purchases at certain businesses.
Department stores, warehouse clubs, airlines, and gas station chains are most likely to offer co-branded cards.
If a business decides to launch a co-branded card, the essential thing to do is to partner with a financial institution. It can be a bank or a card network.
Frequently, the first go-to option is the acquiring bank that already handles processing for this retailer. In this case, there’s a chance to kickstart a card-issuing partnership much faster because the bank already knows the retailer.
A partnership with a card network, like Visa, Mastercard, or American Express, is much harder to establish. For example, to get assisted by Visa on your co-branded card with one of their issuers, you need to develop a business plan and define the competitive advantages of your card. Then, determine the co-branded credit card issuer that aligns with your strategy and prepare a request for proposal. In case it works out, such a partnership is likely to get some media coverage and word-of-mouth publicity, resulting in more customers being reached.
Regardless of the financial institution involved, the bonuses that customers collect when shopping at the retailer using co-branded cards are accumulated by the card-issuing institution.
The card-issuing banks are also interested in co-branded card projects, as partnering with a well-known retailer brings customers to the bank.
As for the money, the co-branded card partnership conditions depend on the agreement. For instance, financial institutions may pay retailers a referral fee for every approved application for a co-branded card or cover the rewards customers earn, enticing them to keep making purchases with their card at the particular retailer.
Co-branded cards provide benefits for both the retailer and the cardholder.
For the retailer, a co-branded card can attract new customers and keep existing ones by offering special incentives and rewards. Customers who have a co-branded card are more likely to shop at the retailer, as they can take advantage of exclusive offers, such as discounts, cashback, miles, or loyalty points.
For the cardholder, co-branded cards offer an opportunity to save money and earn rewards while shopping at their favourite store or merchant. Co-branded cards typically come with perks that are not available with regular credit or debit cards, such as exclusive access to sales, free shipping, and other benefits. Cardholders can also earn rewards for every purchase made using their co-branded card, which can be redeemed for future purchases, travel, or other rewards. Co-branded cards can also offer additional benefits such as extended warranties, price protection, and travel insurance.
There are also potential cons of co-branded cards for both retailers and cardholders.
For retailers, it's a fact that co-branded cards usually come with higher processing fees. When customers use co-branded cards, the retailer may have to pay a higher processing fee to the card issuer compared to other cards. This can be a significant expense, especially for smaller businesses.
For cardholders, the cons may be the following:
Co-branded cards are sort of a marketing tool, so getting yourself one isn’t difficult at all. In the US, 29% of adults have co-branded credit cards. It’s more than 73 million people!
You’re likely to be offered a co-branded card when shopping at a retailer that has such a partnership. Alternatively, you can ask the retailer or a bank about their co-branded products and the conditions of getting them.
Make sure to learn about the fees and limitations before you sign up for a co-branded card. It’s also better to examine the reward program rules to avoid misunderstanding and failed expectations.
Co-branded cards are often confused with store, private label, and affinity cards. The reason is that these card types have certain similarities, but there are also distinctions worth knowing.
So, store cards are proprietary retailers’ cards. Same as co-branded cards, they allow customers to receive benefits, discounts, free deliveries, etc. But unlike co-branded cards that can be used everywhere where bank cards are accepted, store cards can only be used at one particular retailer. A private label card is just another name for store cards.
An affinity card is similar to a co-branded card because it also involves two parties, one of which is a financial institution. But with affinity cards, the other party is usually a charitable organisation. A percentage of every purchase a customer makes with an affinity card goes to that particular charity.
A co-branded credit card is a type of credit card that is issued by a financial institution in collaboration with a retailer, airline, or other business.
Let’s take a look at the most popular co-branded credit card examples.
A co-branded debit card is similar to a co-branded credit card, but instead of providing credit, it allows users to access their own funds in a linked checking or savings account.
We’ve just found out about three co-branded credit card issuers, but not only credit cards can be co-branded. Here are a bunch of debit card programs.
Co-branded credit cards have become increasingly popular in recent years, with more and more companies partnering with banks to offer them. According to the Nilson Report, the co-branded credit card market in the US had a purchase volume of over $800 billion in 2019. This represented a 9% increase from the previous year.
Another report by Research And Markets projected that the global co-branded card market will grow at a compound annual growth rate (CAGR) of 6.8% between 2020 and 2025. The report attributes this growth to the increasing demand for co-branded credit cards among millennials and the growing popularity of loyalty programs.
In terms of trends, there has been a shift towards more niche co-branded cards targeting specific demographics and interests. For example, there are co-branded cards that offer benefits to travellers, sports fans, and even pet owners. Additionally, there has been a rise in the use of co-branded debit cards, particularly among younger consumers who are wary of taking on credit card debt.
Overall, the co-branded card market is expected to continue to grow in the coming years, driven by the increasing demand for loyalty programs and the desire for more targeted rewards and benefits.
