Credit Card Companies Bank Hard on Consumer Brand Loyalty Cards

 

Stiffer Competition Forces Credit Card Companies to Bank Hard on Consumer Brand Loyalty Cards

While consumers seem to have a greater liking for brand loyalty cards, credit card companies are clamoring for such consumers. Branded cards offer consumers a greater deal of offers and rewards, and this is exactly what drives their brand loyalty. For instance, you can start comparing qantas credit cards to research into these types of loyalty cards that offer a wide variety of bonuses to benefit from. In this saturated market, issuers are partnering with top brands and producing co-branded credit cards to attract creditworthy customers.

With other profit centers having been dented by low interest rates, rising cost of compliance, and uneven loan demand, banks are eyeing on expanding their credit card portfolio by joining hands with big brands to grab customers.

According to Simmons National Consumer Survey data, the number of co-branded card users in the country rose from 46.4% in 2010 to 53% in 2014. The survey was compiled by the marketing firm Packaged Facts.

 

Rising Competition

There is a scramble for controlling co-branded card portfolios among issuers. As a result, an increasing number of brands are switching to different issuers.

Costco Wholesale Corp. struck a deal with Citigroup Inc., dropping its 16-year-old association with American Express Co., on the Visa network.

Similarly, BP PLC is switching from J.P. Morgan Chase to former Synchrony Inc.

Co-brand deals seem quite lucrative to merchants, which are looking for bank partners for a co-brand card for a larger loyalty program. While issuers see co-branded cards as a potential growth area, brands seek to grab consumers’ buying power through such efforts. According to industry executives, merchants try to bargain for lower card fees and may be happy to share the revenue earned from the card through a co-brand relationship.

Charles Schwab Corp has made an announcement to launch a new card with AmEx in 2016. The online brokerage brand, which was earlier offering a co-brand card, asserts that it is making constant efforts to cater to the needs of clients. However, not all lenders are interested to choose merchant partnerships, and Discover Financial Services is one such example. It has decided to end associations with co-brands after its nine-year-old relationship with its previous partner Wal-Mart ended in 2014.

The co-brand market has become increasingly tough as far as financial terms are concerned.

 

Affinity Cards

Amid the co-branded credit card rat race, Commerce Bank has taken a different approach. The regional leader in Kansas City is entering into “affinity” card partnerships with universities, colleges, and specialty organizations that are targeted at such consumers that share some kind of affiliation with an institution.

Recently, the Commerce Bancshares declared its plans to enter into agreements with alumni associations from both North Dakota State University and Southern Illinois University. This year, it is expected to sign many more affinity deals, according to Carl Bradbury, the card products director.

In the 1990s, affinity cards enjoyed huge popularity. However, these cards lost charm after the Bank of America’s acquisition of MBNA Corp. in 2005. Additionally, Charlotte, N.C., bank dismissed many such deals after the financial downturn. The crisis forced the bank to overhaul its lending businesses.

 

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