With credit loss chaos anticipated for the next three business quarters, it might seem to be the wrong time to enter the credit card market. Still, for well-positioned partners, it is the perfect storm.
Bloomberg reports today on Verizon’s new to market credit card product, with Synchrony providing the infrastructure to run the business. According to the article, it is “taking advantage of a rush among banks to rebuild reward programs after the coronavirus pandemic devastated spending on dining and travel.”
Mercator Advisory Group discussed the changing world of co-brands in our recent report titled “Credit Card Rewards 2020: Another COVID-19 Victim.” Our premise is that the co-brand model must adapt to the new world, where aspirational trips to Hawaii are less critical than cashback rewards. Grand hotels mean less than statement credits. First Class upgrades are no longer a priority.
Verizon has been planning the entry for months, and with the power of Synchrony, there are plenty of ways to enhance the card as time goes by. In the least two years, Synchrony developed a secured-private label credit card, an industry first. Synchrony also perfected a restricted authorization network. There is no shortage of creativity in Stamford, CT when it comes to payment cards.
- Cardholders who sign up for Verizon’s auto-pay feature will receive a discount on their bills of as much as $10 a month per line on specific plans. The card, which debuts Friday, offers 4% back on gas and groceries, and 3% on dining and takeout. Users earn so-called Verizon dollars, which are valued at $1 when used on Verizon purchases.
- Banks such as American Express Co. have been re-working some of their most popular rewards to adjust to changes in consumer spending. With pandemic restrictions in place, the card industry is aiming for new incentives at more homebound expenses such as mobile-phone bills and streaming services. AmEx’s Platinum card, known for its premium travel offerings, now gives users as much as $20 a month toward wireless bills.
The new Verizon card is positioned to be a winner. With 154 million subscribers, Verizon has the girth to make a splash in U.S. credit cards. With Synchrony’s ability to book, process, and service, the new product has the necessary infrastructure to tie it together.
And, the timing is perfect, as existing issuers stabilize their businesses during the credit crisis, and adjust their reward programs to meet the requirements of the Post-COVID consumer.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group