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The Pros and Cons for Retail Brand Card Programs today

Branded cards have been in circulation for over 100 years now. There’s evidence that U.S-based department stores and oil companies started with branded cards in the 1920s. Cut ahead to the 21st century and we can see the growing popularity of co-branded credit cards from the likes of Starbucks, Amazon, Apple, and Uber.

Numbers suggest that the future also looks healthy and promising. One in every two Americans owns a co-branded card, while 64% use them at least once each month.

But the retail landscape is changing. It’s become apparent that consumers are changing and so is their behavior. As retailers embrace the digital world or switch to the eCommerce mode, do branded cards and loyalty programs still offer business value? Let us look at the pros and cons.

Pros of Branded Credit Card Programs

First, let us look at the following 4 pros or advantages of branded card programs:

Improves customer retention and brand loyalty

90% of brands have some form of loyalty programs, while over 50% of U.S consumers join the loyalty program of the brand that they make frequent purchases from. Further, all but 8% of customers consider rewards as important to their purchasing decisions.

According to Chris Shaw of IBM, retail merchants “recognize that the more you are tied to their brand, the more likely you are to be a brand advocate.”

In short, brand card loyalty programs have a direct impact on customer retention as well as business revenues. Loyalty members are known to spend between 5 to 20% more than non-members, thus adding to business profits and covering loyalty costs. And of course, credit cards are deeply tied to loyalty programs. As an added bonus, they allow the brand to extend their relationship with the consumer beyond direct transactions and into other aspects of their daily life, all the while feeding into the loyalty kitty.

Builds accurate and relevant customer data

When retail shoppers register for branded cards or loyalty programs, they leave behind a wealth of information for retail marketers to tap into. This includes what type of products do they go for, how often do they make purchases, and what are their preferences beyond the immediate brand. The 2018 Loyalty report states that 87% of American consumers are fine with brands tracking their online activity in exchange for personalized rewards.

Retailers operating through online channels, physical stores, or omnichannel strategies can utilize customer data to determine their buying behaviors and habits and plan their marketing, communication, and inventories accordingly.

Cost-saving and revenue sharing

Overall, credit cards make financial sense in themselves. They are a profitable business due to the volume of transactions and charged interest. MasterCard data shows that American cardholders spend $5,000 more on branded cards than any other payment card. Reward and loyalty programs also encourage 67% of consumers to spend more money and purchase more frequently at retail stores.

Branded cards also save retail companies money when it comes to processing transactions. Many credit card issuers do not levy the same transaction charges on branded cards as they do on other credit cards. Eric Lindeen, a retail marketing consultant, also observes that “consumers also tend to pay back branded credit cards first.”

Stronger brand image

The 2019 Loyalty report states that 73% of consumers are more likely to recommend brands with efficient loyalty programs, while 79% of consumers state loyalty programs are likely to make them continue to do business with the brands. By sharing their brand experience, happy customers are also likely to recommend your brand with family and friends, thus attracting new customers.

In short, branded cards and loyalty programs can improve the brand image and establish the brand as a major player in the “crowded” retail space. One such example is the launch of the Uber Visa card where loyal customers received an annual subscription credit of $50 from Uber.

Cons of Branded Credit Card Programs

Branded card and loyalty programs do have their fair share of limitations. Here is a look at the 3 major cons of branded card programs:

Complex impact on the company’s bottom line

On average, even a 5% discount through the loyalty program can reduce retail profit on the transaction by 50%. That can easily become a race to the bottom as consumers can now benefit from more retail brands offering better reward options. For example, the Uber Visa card is offering a significant 4% cashback on purchases made at restaurants. Such schemes could create mid to long-term landmines for future balance sheets. Retailers need to balance this out by ensuring that these programs encourage repeat purchases or “buys” with a higher-order value. The onus shifts to the program managers to plan for the short as well as the long term to prevent such issues.

Inconsistent outcomes

Retail brands that depend on branded card sales do seem to assume a higher share of financial risks because of the credit burden they assume. As reported by Michael Corkery and Jessica Silver-Greenberg, “retail profits could dry up if customers fall behind on their due payments.” Further, customer data may not always be a true representation of their brand loyalty. Consumers may purchase a product for different benefits like discounted price, convenience, or earn reward points. Adding to that, a large base of loyalty program members does not necessarily translate into sustainable business value. Inactive members that do not make in-store or online purchases cannot be considered as adding to a successful business model.

It becomes the responsibility of the program manager to come up with innovative plans to engage new consumers and offer them what they value, to encourage them to transact more. In some ways, this is an exercise in agility as the card program tries to always stay ahead of shifting customer needs. This shines the spotlight on the technology infrastructure of the card program too. Is the technology nimble enough to allow the card program to stay responsive and relevant?

Changing spending habits

While customer data can reveal their purchase history, there are ongoing changes in the consumer’s lifestyle, income levels, and needs, which could impact their buying patterns in the future. The Money Pulse report finds that only one-third of millennials (aged between 18 to 29) own a credit card. Mike Cetera writes, “this generation hasn’t warmed to the idea of using credit as a financial tool.”

Given this reality, card issuers must be agile and flexible enough to offer credit card services with value propositions that can be modified quickly to adapt to changing market and consumer needs. What is needed is a customer-centric and agile credit card processing system that is rich in technology features and nimble enough to adapt to changing dynamics.


To summarize, what is next for retailers? Retail brands must look for a new way. That may include a digital-first alternative in place of branded cards that are now primed for disruption. Retail brands like Target are rebranding their branded credit cards and looking for alternative modes to boost their customer loyalty.

While brand loyalty-led card programs are here to stay, retailers must be positioned to differentiate themselves from competitors and ensure proper implementation by offering the right value proposition. This is possible only through an efficient and agile credit card processing system, which can be seamlessly managed by your cards program manager without any hassle.

This is where CoreCard’s credit processing platform can help by designing a complete customer loyalty program that works for your retail business. Learn how to revamp your cards program with CoreCard? It’s time to contact us.


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