Advantages of a co-branded credit card

A co-branded credit card is a type of partnership agreement between three parties: the card issued, the
card brand and the company that wishes to be co-branded. The primary purpose of a co-branded credit
card is to enhance brand identity and promote the company’s business activity.

EFSAG boasts a wealth of knowledge with regards to offering online payment solutions such as co-
branded credit and debit cards.

The benefits of co-branded credit cards

There are a number of reasons for companies and card issuers to combine their influence and adopt a
co-branded partnership by producing a co-branded credit card. Some of these benefits are outlined
below:

Customer Loyalty

With a number of companies seeking to enter a partnership with a card issuer, it is evident that they are
capitalizing through customer loyalty of their clients. For example: air miles points are rewarded to
particular credit card holders, as the card issuer is in partnership with airline company.

New Clients

As a growing number of companies partner with card issuers, they are offering various benefits to their
co-branded card holders – thus attracting clients to bank with them.

Studying Trends

The co-branded credit cards enable the parties involved to study the spending patterns of their card
holders. As a result of this they are able to obtain a better understanding of their customers’ preferred
shops and locations, as well as spending trends.

Brand Awareness

As the logo of both the card issuer and its co-branding company will be physically present on the co-
branded card, it will enable both parties to enhance their brand awareness.

Building Business Relations

A co-branded credit card allows banking institutions and branding companies to build and maintain
valuable and long lasting business relationships.

Pros & Cons of Having a Co-Branded Credit Card

While the novelty of seeing your company’s logo in people’s wallets might seem appealing, you need to
first thoughtfully weigh the pros and cons of co-branding before you enter the space.

Pros

 Customer Loyalty: Having a co-branded credit card often leads to substantial growth in customer
loyalty. Your existing customers will be less likely to turn to your competitors as they know they
can reap better benefits and rewards if they make their purchases with you.
For example, if you have a co-branded credit card for Macy’s, you will most likely make all of your
purchases there instead of JCPenney (since you know that you’ll be able to earn rewards and therefore
get an effectively discounted price).

In addition, your brand name will have increased visibility as customers – and everyone around them –
will be exposed to it every time they reach for their credit card. Not only does this ensure their loyalty,
but it also strengthens it.

 Customer Growth: Co-branded credit cards also win you new followers in addition to securing
your existing customers, especially if you give lucrative and practical rewards. Someone who
used to shop with your competitor might opt to shop with you now.

For example, an individual who normally flies with American Airlines might begin flying with United
Airlines simply because United Airlines offers a better rewards deal on their credit cards. Not only does
this increase your customer base, but it also cuts down your acquisition costs as your co-branded credit
cards do the marketing for you.

 Lower Costs: One of the biggest costs that retailers complain about are interchange fees on
credit cards. Under the terms of most co-branding relationships, retailers are absolved from
paying these fees for transactions made using their co-branded credit cards.

 Shared Consumer Loyalty: When a credit card issuer and merchant decide to co-brand a credit
card together, they inevitably pool their customer databases, too. This symbiotic alliance
enables the issuer to access the merchant’s customer base and vice versa.

For example, Chase might gain new followers simply because the consumers desired a Macy’s credit
card. On the flipside, Macy’s might acquire new customers simply because the consumers were regular
customers with Chase. As a result, both parties achieve increased visibility and exposure with the public.

Cons

 Misalliances: For the same reason that someone would pick your co-branded credit card due to
the affiliation you harbor with your partner, they might choose not to if they dislike your
partner. In other words, shared consumer loyalty could backfire.

This isn’t likely to be too big of an issue, though, as most consumers will be oblivious to the bank issuing
your card, instead thinking they just have a “[Insert Merchant Name] Credit Card.”

 Managerial Attention: A successful credit card program necessitates significant resources and
attention. Your company must therefore be comfortable making the requisite investment in
order to get value from a co-branded credit card or risk turning it into an overall negative brand
experience.