It’s normal to expect the application process for co-branded credit cards to weed out the less-than-qualified card seekers. That’s the job of the bank, as they carry the risk. Cardholders who may not pay or could default on their cards shouldn’t be extended the offer, as it doesn’t lead to a profitable business model for the bank as the card issuer.
But monetary and credit risk is only one part of the equation. Offering co-branded cards introduces risk to the brand, through customer expectations and experience. With a company’s name front and center on the card, the app, and at every touchpoint, brands risk customer goodwill.
The co-branded credit card customer experience (CX)
"Customer experience is significantly important for co-brand card customers. These cards have all the same experience drivers as bank brand cards… however, these co-brand cards have significant other components of satisfaction linked with the cobrand partner that involve the airline or retail partner experience."
— John Cabell, Director of Payments Intelligence at J.D. Power
For companies currently offering a co-branded credit card, the customer experience is defined by three critical stages:
- Application process
- Onboarding
- Card use and support
These are all in the realm of the card issuer and the card networks, completely out of the brands’ control. Let’s take a deeper dive into each.
Application process
Customer acquisition typically involves outreach to existing customers via email, text or in-person. The offers, crafted collaboratively with the issuers, entice customers to apply with attractive incentives and competitive APRs. The issuing bank then assumes responsibility for the approval or denial process, leveraging credit history and its own acceptance criteria. Typically these require the applicant’s legal name, Social Security Number (SSN), address, income, employment status, housing costs, and phone number. They also need to meet certain criteria, such as being at least 18 years old and having an established credit history. Requirements can vary by bank, but are not influenced by the brand.
Onboarding
Customers are either immediately approved or are denied a credit card. Those who are approved can apply the virtual card to purchases immediately, often to capitalize on significant discounts. The physical card follows via mail. The physical card can be activated online, over the phone, or through the issuer's mobile app. Cardholders will usually need to enter the card number, expiration date, their name, date of birth, and the last four digits of their SSN to activate the card.
Card use and customer support
Each time a cardholder wants to make a purchase, they see the brand - whether swiping their physical co-branded card or tapping their mobile wallet at the point of sale (POS). Their customer experience (CX) may also include an app to manage their card and points.
Cardholders reach out to the issuer’s toll-free number on the card for questions or assistance. Users are also directed to the website for either virtual or direct human help. At no time in the process does the cardholder communicate with the brand about the card.
Brand reputation at risk with no control
With the company’s logo and name on the front of the card, consumers don’t often differentiate between the brand and the issuing bank. This can work in favor of the brand, as each use keeps the company top-of-mind and can increase spending with the brand itself.
A recent PYMNTS survey found thirty-four percent of consumers said loyalty and rewards are the top reason they use store branded cards, while 38 percent said the same about their co-branded credit cards. Meanwhile, only 18 percent said loyalty perks drove their use of general-purpose cards.
Turning away your best customers
The downside of this arrangement is the loss of contact with the brand’s customers. While fronting the card in name only, cardholders are subject to the bank’s acceptance criteria, with no input from the brand. The brand’s best and most loyal customers are just applicants to the issuing bank. There’s no reward for customer intention or loyalty when it comes to a co-branded credit card. Every customer is simply a FICO score.
(Mis)handling your customers
Despite contractual agreements or promises at the outset, brands have no oversight or view into customer support from the bank for holders of the co-branded card. Expecting the same level of service they receive from the brand, cardholders may be subject to the standard card issuer’s support protocols, including chatbots, online virtual assistants, or call centers. Well intentioned, but perhaps operating at a lower standard than the brand’s promise, or what is expected by the customer.
The problem is that customers associate the service provided by the issuer to the brand itself, consciously or unconsciously. That same top-of-mind reminder on the front of the card can also tarnish the brand reputation with as little as one bad experience — again — beyond the brand’s control.
Ignoring potential new buying segments
Credit definitely has a place for buyers, as they can expand immediate affordability, and it allows cardholders to pay off purchases over time. However, there are consumer segments that may either not qualify for credit, or prefer a debit option. See our Guide to Co-branded Cards: Debit vs. Credit to understand the key differences.
Consumers may operate outside of the expected socio-economic bands. Saving for expensive trips, luxury retail items, or a vehicle is not just for the credit-worthy. Under- and un-banked populations are also consumers, often defying buying pattern stereotypes.
Credit-only card offers may also be limiting the appeal to younger generations, as they prefer debit. From EY, debit cards are Gen Z's favorite payment method, with more than two-thirds reporting daily or weekly use. Only 39 percent of Gen Zers reported frequent credit card use.
No one values your brand more than you
Reputational risk has a long tail, as consumers will replace one brand for another when confronted with a bad experience. And, they may never come back. The same care companies put into hiring, training, and managing their workforce needs to be applied to card programs that carry the brand’s logo.
Owning the co-branded debit card program, from acquisition to customer support, gives the issuing brand freedom to design the CX as intended, provide expected levels of care, and reward loyal customers. The brand stays front and center, providing value to the consumer without risk to the brand.
Card programs should be more than just discounts and points. They can be an extension of the company itself, honoring loyal customers and rewarding their willingness to trust the brand with their business. Respecting customer’s financial lives by owning the card program is a key part of that trust.
