How to choose the right bank partner for your co-branded credit card?
Co-branded credit cards are a great way to bring value to your customers. It allows your customers to earn points, discounts, and other perks for spending money on your products or services that help attract new customers and strengthen your bond with existing ones.
Now that you have decided to launch a co-branded credit card, the next critical step is to partner with a bank. Not just any bank but with a suitable bank to get optimal results for your credit card program.
We can compare a co-branded credit card to a marriage of your brand to a bank because both are significant, life-changing relationships that require mutual trust and involve money, and both need to continue working together towards a common goal of delivering value to all stakeholders! 🙂
There are many banks to choose from. How do you choose the right bank partner to get the best results from the credit card program? Remember, it’s a big decision for you. While much is written about how issuing banks evaluate and select co-brand partners, we tell you how to choose the right bank partner when doing a co-branded credit card in this blog.
Think Digital
In this digital age, delivering a digital credit card experience is paramount for your customer’s convenience and sustainable for your relationship with the customers. Customer experience trumps everything else in the long run. Hence, always look for these two things in a partner bank:
(a) Belief that digital is essential
(b) Ability & willingness to act on it
A digital first experience is essential in today’s connected world and you should ensure your customers are able to sign-up for the card, manage card settings and access offers, benefits digitally.
Embedded Experience
In a co-branded credit card, there are two key areas:
(a) Acquisition
(b) Card management
As a Co-brand, you should have control over both.
Customer acquisition is vital to ensuring that the top of the funnel can be driven by business objectives. Embedding the card experience empowers you with the elasticity in creating demand, and you can optimise your efforts and spend in acquiring the right customers digitally.
Further, when your co-branded credit card experience is embedded in your app and site, you can engage meaningfully with your customers with offers and promotions.
To explain, imagine it is the year-end, and you wish to boost sales to meet your revenue targets. You should be able to run a targeted marketing promotion offering extra cashback to all your cardholders who would be the high spenders.
Scaling the Card Program
It would be best to know the scale you wish to achieve. If you want to issue 1 million cards, ensure the Bank has enough balance sheet strength to issue cards at scale in the market.
Additionally, you must ensure that the Bank earmarks these many cards in their roadmap for the next few years. Otherwise, there is the danger of the Bank signing up more co-brands and maxing out on their issuance capability.
Card issuance strength is dictated by the balance sheet strength of the Bank. It would also be prudent to analyse the current size of the Bank, recent growth and future growth prospects.
Co-funding the CVP (Customer Value Proposition)
If you are an e-commerce company, you will need aggressive co-funding of the card benefits from your bank partner. Such support must be perpetual, and most CVPs are co-funded by both the Bank and the brand. It would be best to negotiate with the Bank for the maximum support they can offer. In reality, the Bank’s ability to fund these would be limited.
Also, each Bank approaches marketing differently. While a larger bank may provide limited marketing support, a relatively new one may aggressively give more value in accelerated rewards and offers to your co-branded credit cardholders.
Approval for ETB (Existing-to-Bank) with existing card
Banks tend to reject applications wherein the customer is an existing-to-bank and is already a carded customer. This limits your cobranded card program if the Bank is already a large issuer.
It is in your best interest to negotiate with the Bank that they should approve every customer that the Bank deems as credit-worthy.
Brand Equity of the Bank
Customers are conscious of brand associations. Choose banks that have a minimum acceptable level of brand awareness. This is particularly true if you are an e-commerce firm.
If you are a fintech firm going after the NTC (new-to-credit) segment, then you can roll the dice with a bank that doesn’t have significant brand equity.
Incentive Alignment
It is vital to align the Bank to set the right incentives for the program’s success. Banks lose interest if the program fails to achieve the minimum level of traction as measured by card uptake and usage. This is the death valley that your program needs to cross.
To achieve this, it is best for both you and the Bank to incentivise you for continued card usage rather than paying upfront for every customer (like the DSA model). This sends the signal to your team and the Bank that you prefer to have skin in the game.
Amazon Pay ICICI Bank and Flipkart Axis Bank co-branded credit cards are fantastic examples of large successful credit card programs with a continuous effort from both the Co-brand and the Bank.
Speed to Market
Choose the Bank that will move fast with the program creation and tech integration. A longer integration timeline may make the card value proposition ineffective, considering how quickly user preferences change today.
Summary
To summarise, the following points will help you evaluate your bank partner for your co-branded credit card product:
- Think Digital – Digital journeys for both onboarding and post-onboarding experience
- Embedded Experience – Execute in-app strategy instead of relying on the Bank’s channels
- Co-funding the CVP – Ensure that the Bank contributes to the card benefits
- Maximum Approval – Ensure approval for existing-to-bank and already carded customers
- Brand Equity– Brand awareness and equity of the issuing Bank
- Incentive Alignment – Ensure that the incentives are well aligned for ongoing usage of the card rather than a one time payout
- Speed to Market – Move fast!
A co-branded credit card is a powerful strategy to increase customer loyalty, strengthen customer retention, and scale growth. For fintech firms, it is essential to issue a key financial product. However, you must invest time and effort to select and work with a suitable partner bank.
Hyperface can be your one-stop destination and ally to help you find the right bank partner to launch a powerful co-branded credit card. We’ll help you through your co-branded credit card journey, from selecting the right partner bank, building a customer value proposition, integrating securely with the Bank, and embedding a powerful digital credit card experience in your mobile app with a faster go-to-market.
Do feel free to contact us!
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