How Co-branded credit cards benefit the issuer, partner and the user

If you are a regular customer of departmental stores, you may be familiar with how stores try to pitch credit cards to customers at the payment counter. Though many times, you would just shrug off such offers with a firm ‘NO’, these cards might actually be a good addition to your wallets. Increased consumer confidence in various brands has encouraged banks to come up credit cards co-branded with online shopping platforms, airlines or retail stores. You can find HDFC credit cards co-branded with Snapdeal, SBI Card offers credit cards in collaboration with Yatra, IRCTC and Air India and Citi Bank has recently launched its Paytm Credit Card.

Popular Co-branding Segments for Credit Cards

Traditionally, co-branding started with retail stores wherein the customers would get points for every purchase done at the given store. Soon enough, credit cards gained much popularity in the market and so did the association of other brands and banks. Currently, travel is the most common segment for co-branding followed by fuel, online shopping and retail. Let us learn about the different segments and the types of benefit they offer.

Travel- Travel, being the most popular category, attracts a lot of customers mainly because of the benefits like-

• Complimentary travel tickets/vouchers
• Cash back on travel expenses
• Accelerated rewards
• Complimentary lounge access

Fuel- The second most popular category is fuel as the users look forwards to get rewarded in the form of-

• Surcharge Waiver
• Cash back/value back on fuel expenditure
• Accelerated reward earning
• Points redeemable at partner fuel station

Online Shopping- A number of banks, nowadays, collaborate with online shopping websites to offer various benefits to the users. These benefits may include-

• Flat discount at partner website
• Extra reward points
• Welcome/milestone vouchers

Shopping- Banks also collaborate with retail stores and departmental stores to offer co-branded credit cards. Most popular benefits would come in the form of-

• Complimentary membership to the store
• Accelerated rewards at the store
• Shopping vouchers on reaching set milestone
• Flat discount vouchers

Lifestyle/Hotels- Some of the banks also offer credit cards in association with lifestyle brands or hotels. These cards may have features such as-

• Invitation to events
• Premium membership
• Complimentary stay at hotels
• Flat discounts

So, why are banks launching so many co-branded credit cards?

Benefits for the Credit Card Issuer

Majorly, credit card issuers are only trying to cash-in on a focused customer base in order to improve their earnings. Some other benefits include:

Customer Engagement- Co-branded credit cards usually offer better rewards and additional perks with the given brand. A customer who gets the card would actually be a regular customer of the brand. This way, the banks can have greater engagement with the customers as there will be lesser chance of the user moving to a different brand.

Improved Sales- As per recent reports, co-branded credit cards are more popular among customers and have a higher activation rate. Regular credit cards, on the other hand, are not so sought-after and tend to go dormant more easily.

Increased Spending- With co-branded credit cards, users make more spending because of the specific benefits that they offer such as direct discounts or accelerated rewards.

Benefits for the Partner Brand

Co-branded credit cards are equally beneficial for the partner brand as well. Some of the advantages that the partners enjoy include:

Improved Brand Visibility- When a co-branded credit card is launched in the market, the brand will have two-fold advertisement as the card issuing bank will also pitch their product. Even the existing card users will be more aware of the discounts and deals on the brand.

Enhances Customer Loyalty- Since these cards offer various types of benefits when the user shops at the partner stores, he would have a better experience. This would work towards strengthening their loyalty for the brand.

Increased Sales- Having the co-branded card in their wallet, customers would naturally give preference to the partner brand thus increasing the sales.

Benefits for the Card User

This association of the brand and bank works out well for the cardholder. A user can enjoy the following benefits:

Customized Offers- With co-branded cards, users can enjoy benefits in multiple forms- welcome offer, discount voucher, etc. For example, if a credit card is launched in association with an airline brand, the welcome benefit may come in the form of a complimentary ticket or a discount voucher of the said airline. The bank may also reverse the joining fee in the form of a shopping voucher.

Milestone Benefits- All credit cards offer milestone benefits and in case of co-branded cards, the benefit will be brand specific. Travel vouchers, hotel stay vouchers, movie tickets or shopping vouchers, etc. may be offered.

Accelerated Rewards- When the user shops at the partner brand stores, the bank would offer him rewards at a higher rate. If non-partner brand expenditure earns 1 reward point for every Rs. 100, shopping at the partner store may earn 5 points for the same amount.

Additional Benefits- Over and above the brand-specific benefits, co-branded credit cards come with multiple other features such as insurance, golf access, lounge access, etc.

The Bottom Line

As brands look forward to increasing their customer base and keeping the existing customers loyal, co-branded credit cards have come to play a major role. Increased competition among various brands also encourages companies to find new ways of reaching out to their customers. Co-branding with a bank helps brands a lot.

For those who are already very loyal to a brand, getting a co-branded credit card can be the best thing. However, customers should not opt for co-branded cards just for the sake of extra rewards or minimal benefits. Other factors such as fees and charges and terms of card use should also be kept in mind. Talk to the bank or read about the benefits on non-brand expenditure and then decide whether it would make sense to opt for the card.

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