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According to a recent TechCrunch report, Google is planning to launch its own co-branded payment card. This move comes after Apple introduced its own credit card last year in collaboration with Goldman Sachs and MasterCard. Co-branded cards are gaining popularity globally, with many notable brands and fintech companies developing their own versions. In India, various private players have released co-branded cards in partnership with banks, such as Flipkart, Practo, Apollo Hospitals, SlicePay, Ola, and MoneyTap. This series aims to explain the value proposition and life-cycle of these card programs.
Program Design
Co-branded cards are created under the guidelines set by central banks across different countries. In India, only banks regulated by the Reserve Bank of India (RBI) can issue payment cards. Therefore, non-banking entities must partner with a bank (known as the sponsor or issuer bank) to issue cards to their customers. These cards are usually EMV or contactless and can be used at any POS terminal, online merchant, or ATM.
Why Co-branded Cards?
For Brands:
– Increased Revenue: Higher average revenue per user (ARPU) due to repeat usage and higher spending.
– Loyalty: Enhances retention and word-of-mouth marketing, improving lifetime value (LTV) to customer acquisition cost (CAC) ratio.
– Brand Building: Differentiates products and keeps the brand top-of-mind among users.
– Revenue Sharing: Shares interchange revenue with the sponsor bank, contributing to profits.
– Customer Insights: Gathers data on customer spending patterns, aiding in pricing optimization, personalized experiences, and credit risk assessment.
– Risk Management: Implements controls over spending channels and velocity to mitigate loan risks.
– Strategic Alliances: Builds investment opportunities and collaborative marketing efforts through alliances with banks and networks.
– Complementary Offers: Provides bundled offers and discounts, generating commission earnings.
For Customers:
– Community Belonging: Delivers a sense of exclusivity and priority services.
– Savings: Offers customized discounts and benefits.
– Personalization: Enhances relevance and reduces spam.
– Access to Credit: Provides alternative financing options in credit programs.
– Financial Management: Facilitates budgeting, pre-approvals, and spending controls for businesses.
For Banks:
– Revenue Sharing: Benefits from interchange revenue sharing.
– Customer Acquisition: Gains new user accounts at a lower acquisition cost and opportunities for cross-selling.
– Loan Generation: Creates new loan accounts, generating interest earnings.
– Activation Rates: Achieves better activation rates than conventional bank cards.
– Usage Ratio: Records a higher active usage ratio compared to traditional bank cards.
– Brand Visibility and Float: Gains brand visibility and benefits from the pre-funded settlement account in debit products.
How Co-branded Cards are Issued:
1. Value Proposition Design: Brands must define why they want to issue a card and why customers should opt into the program.
2. Program Approval: Brands need to find and secure approval from a sponsor bank and network (Visa, MasterCard, RuPay, etc.) for the card program.
3. Card Design: Design the card according to the bank’s and network’s guidelines, and get the design approved.
4. Card Processing: Decide whether to build a transaction processing platform in-house or use a platform-as-a-service (PaaS) provider like Matchmove, M2P, Zeta, or Happay.
5. Card Printing: Choose a card manufacturer/printer considering factors like minimum order quantity, lead times, logistics, and personalization options.
6. Third-Party Services: Finalize other third-party providers for activities like customer KYC and card dispatch.
7. Experience Design: Plan how users will enroll in the card program, including KYC options, card activation, dispute resolution, and fund settlements, ensuring all these aspects are integrated into the user experience.
In cases where banks offer full-stack services, the operational launch is easier for brands, although this may limit customization and impact the customer experience.
Reach out if you’d like to discuss further at bits.ankit@gmail.com or https://www.linkedin.com/in/a4ankit/.