Branded Cards

Lower CAC: Say yes to more card applicants with debit

You want to say yes when customers raise their hands to sign up for your loyalty programs. For many brands, co-branded cards play a central role in increasing customer lifetime value (CLV), loyalty, and overall financial return. But unfortunately, some of your customers applying for a co-branded credit card may never get one.

One in four Americans don’t qualify for a credit card, with low scores and limited credit history as top reasons for denials. Although you have a customer who is actively seeking a card with your brand, you may have to say no. The financial institution determines who is approved for a card, and who isn’t. For the brand, there’s still a price to pay. In most co-branded card programs, brands carry the customer acquisition cost (CAC), which skyrockets with low acceptance rates. You’ve paid to generate interest in your co-branded card, with no control or influence over the ultimate acceptance rate.

Offering another option at application time can result in a better outcome for both the consumer and the brand issuing the card.

Say "yes" with debit

Simply put, co-branded debit cards are an alternative option that do not require a credit check. Funded directly from bank accounts, paychecks, or other cards, there’s no credit burden on the consumer. Plus, debit cards are accepted as easily as credit cards on major networks. With open-loop cards, consumers can use co-branded debit cards at any merchant, earning rewards or cashback with every swipe. Consumers get a card from the brand they want, even if they have a short or spotty credit history.

From the brand point of view, you’ve already spent the money to acquire the customer, so offering a debit option to credit card applicants serves as cost recovery, or to minimize CAC. As the Banking & Payments Group points out, active users of a brand’s credit card tend to be better customers (to the brand) — they shop more frequently, have higher average ticket sizes, and are less likely to cancel. But banks don't care about who are your best customers, only if they meet the bank's acceptance criteria.

a customer’s value to the brand often has little correlation to their credit score… One of the worst possible outcomes for a brand is to entice its high-value customers to apply for the brand’s credit card, only for those customers to be rejected. As it is often incumbent on the brand to invest in marketing to attract applicants, in the case of declines, the brand receives nothing in return for its efforts.” — Banking & Payments Group

Acquire the credit wary

There’s another, often overlooked customer contingent: Those who don’t want a credit card, and may never apply. According to EY, debit cards are the most popular payment type for Gen Z consumers with 69 percent reporting daily or weekly use. By offering a debit option, the same promotional efforts have a new, untapped audience, lowering your cost of acquisition, as it’s spread over a larger pool of accepted applicants.

Own the CX for all of your customers

You can say yes to more customers, even when the bank says no. When you own the experience throughout the card application process, your customers know they're going to receive consistent and branded treatment as a loyal customer. There's no handoff to a third-party bank site or other surprising, and possibly jarring, friction. 

Give your customers another way to carry your card in their (virtual) wallet. And you boost revenue, create a cohesive brand experience, and keep customers loyal. Promotional dollars go further by adding the debit option they want. More loyalty, lower CAC. 


For more, see the Guide to Co-branded Cards: Debit vs. Credit.

Written by Alviere