Credit card co-brands are essential because they can add scale to issuers who manage the relationships. When properly engineered, programs can accelerate portfolio growth, increase partner loyalty, and provide cardholders with an opportunity to save and earn rewards.
Our recent report on co-brands explained some of the volatility in the market. Some issuers question the net value of the relationships, as other partners expect more revenue than they receive. However, some co-brands are lasting and become an important part of how an issuer addresses the market. Think about Citi’s multi-decade relationship with American Airlines, Chase with United, and Amex with Delta.
As 2022 rolls out, three significant changes are in play.
- Chase announced their Instacart/Mastercard co-brand, their first move into the grocery delivery space. Instacart is a privately held company where contractors and employees fulfill personal shopping for a fee. The sector is hot because of the convenience and the demographics and is an excellent addition to Chase’s already broad role in credit card co-branding. And instead of aligning with airlines during a pandemic, or retailers facing challenges, Instacart is a refreshing look at a hot industry with plenty of growth opportunities.
- Alliance Data, a firm toiling with accelerated credit losses, lost one of its largest clients, BJ’s Wholesale Club, to Capital One. Just as that shift happened, BJ’s sued ADS, according to Seeking Alpha.
On Tuesday, BJ’s (B.J.) sued ADS (ADS) in Massachusetts Superior Court, alleging that the company is slowing down the process of transferring the existing card accounts, the WSJ said. In addition, BJ’s contract with ADS expires this year, the lawsuit said.
- T.D. Bank, a Canadian firm with roots in the U.S., announced a win with BrandSource. The BrandSource site indicates that Citi Retail Services currently offers the card.
We are still early into 2022 but expect to see co-brands playing an essential role in payments. Yesterday’s discussion on Amazon/Visa/U.K. is the tip of the iceberg. Expect plenty of activity in co-branding as the year continues.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group