Competing For Consumer Loyalty Through Co-Branded Offerings

The competition for consumer loyalty often peaks at “tent pole” holidays like Thanksgiving and Christmas.

As consumers rely more heavily on digital wallets to make payments both online and in brick-and-mortar stores, brands like Amazon have turned to credit products as an extension of their customer experience strategy. This goes beyond traditional use cases like offering monthly membership perks, discounts and promotions – and can extend into personalized rewards programs based on the purchasing habits of individual card owners.

Simon Khalaf, CEO of card issuing platform Marqeta, says that when it comes to credit, customers have clear preferences that brands can’t afford to ignore. Consumers are paying attention to the experience of using their credit cards, and the lines are blurred when it comes to who is responsible for delivering it.

According to the company’s 2023 State of Credit Report, 62% of U.S. consumers who own a co-branded credit card consider themselves a customer of the brand or store vs. the bank that issues and manages it.

“Consumers have high expectations when it comes to brand experience,” said Khalaf, “and this extends well beyond the website, storefront, checkout, digital channels and expensive marketing campaigns. Most brands know that individual personalization is the key to loyalty – but don’t realize that this approach needs to extend into their credit strategy.”

“Co-branded cards are an opportunity for brands to drive traffic and influence purchase behavior, not just a payments tool, and should be part of the modern marketing mix, especially when it comes to driving engagement and loyalty,” said Todd Pollak, chief revenue officer at Marqeta. “Many businesses don’t realize that co-branded cards offer an opportunity for creativity and a competitive edge – to surprise and delight customers – and frankly, it’s a missed opportunity that rewards are static and owned by the co-brand partner. The best co-branded card programs in the market are built based on targeted buyer personas, with incentives that keep customers coming back vs. maxing out on rewards and moving on to the next program.”

Credit Cards as the New ‘Homepage’ for Digital Experience

Marqeta’s survey found that 36% of US consumers plan to apply for a new credit card in the next 12 months, with that number booming to 55% among 18-44 year olds. Not surprisingly, 74% of cardholders also believe there is more room to personalize rewards based on individual spending habits. Khalaf believes that the credit card, if executed properly, “can be the launchpad of the brand’s digital experience – the co-branded card is the new “homepage”.

Why aren’t more brands taking advantage of their co-branded credit cards?

Khalaf said the challenge is two-fold -irst, traditional approaches to credit treat all cardholders the same, providing customers with identical rewards and offers. Many brands aren’t aware that they have choices when it comes to incentives and if they are, implementation and ongoing management can seem slow and overwhelming due to technology constraints. These factors often result in generic programs that don’t actually “reward” the customer, incur risk to brand reputation or end up delivering customers to the front door of a bank (while losing potential sale opportunities).

“Embedded finance has unlocked a pivotal role for financial services in branding. Beyond transactions, each financial interaction paints a picture of a brand’s identity, helping to create experiences that delight customers and foster lasting trust and loyalty,” David Shipper, Strategic Advisor, Retail Banking and Payments at Datos Insights.

Using Co-Branded Credit to Power Loyalty and Meet Customers Where They Are

As PwC estimates a spending increase of 7% this holiday season, Marqeta found that 46% of consumers see credit as essential to making ends meet, with 61% revealing that they plan to use a credit card to make purchases.

Penny Lee, president and CEO of the Financial Technology Association noted that fintech companies excel at giving customers a frictionless and high-quality user experience, especially during the holiday season.

“Holiday shoppers can take advantage of a host of fintech products such as Buy Now Pay Later to better manage their cash flow, maximize their savings, and shop responsibly,” she said. “Workers picking up an extra holiday shift can get paid in real-time with Earned Wage Access. And, consumers can truly Shop Small thanks to digital financial tools that help small businesses bring their products to market.”

As the 2023 holiday shopping season wraps up and the new year begins, Pollak says that businesses that want to drive loyalty through their co-branded credit cards should claim full ownership over the customer experience by embedding the card, incentives/rewards and spend management within their own branded experiences.

For example, they can do this by eliminating the need for customers to log into a bank website to manage a card. Retailers can avoid sending away shoppers who simply want to make a payment, check on rewards or take advantage of sales.

“A recent survey by LendingTree showed that an estimated 27% of Americans are likely to apply for store credit cards this holiday season alone, indicating the widespread appeal of co-branded card offerings,” said Shipper. “This trend underscores the opportunity for merchant brands to be the face of customer relationships by integrating financial services via embedded finance, offering innovative and personalized credit solutions.”

Consumer loyalty is ever-evolving, and brands that are willing to take advantage of innovative technologies that create new and more personal touchpoints with consumers will maintain a competitive advantage.