As per the data released by the Reserve Bank of India (RBI), credit card users’ spending in the Financial Year 2021-2022 amounted to INR 971,638 crore. Approximately INR 3,80,643 crores were spent through merchant POS (point of sale) machines. In the Financial Year 2020-2021, this figure stood at INR 6,30,414 crore.
These statistics indicate several paradigm shifts. Firstly, a growing number of consumers are adopting the usage of credit cards. Secondly, a sweeping number of consumers are shopping at online and mobile marketplaces, thus prioritizing convenience and access to more shopping options.
The increased usage of credit cards is increasingly nudging brands to consider getting in on the action, even if they are not traditionally brands that deliver financial services. This shift has given rise to the concept of co-branded credit cards.
This blog delves into how brands can benefit, grow customer loyalty, and accelerate growth by issuing co-branded credit cards.
Co-branded Credit Cards: An Overview
The traditional credit card is a partnership between a bank and a credit card company. On the other hand, a co-branded credit card, as the name suggests, is a joint venture between a bank, a credit card company, and a brand.
Co-branded credit cards aim to deliver specific value to the brand’s existing customers, as they are being leveraged to drive a particular outcome. For instance, an eCommerce marketplace may partner with a bank and a credit card company to incentivize customers to shop more on its platform. Additionally, it is being used to attract new customers and increase market share.
Today, many brands offering various services and products are issuing co-branded credit cards to retain customers and grow market share.
8 Ways to Leverage Co-branded Cards
Here is a snapshot of how brands can leverage co-branded cards to drive profitability, brand loyalty, and other benefits.
Serve a Niche Audience
A brand always differentiates itself by serving a specific audience. For instance, a full-service airline targeting corporate and leisure travelers may be looking to add value to its existing customers. They may increase retention by strengthening brand loyalty and attracting new audiences. Issuing a co-branded credit card is a definitive incentive to attract customers to prioritize travel with this airline.
Target a Specific Category
With the cost of living increasing continuously, consumers are looking for ways to reduce the cost of products and services in specific categories. The top categories where consumers seek to cut costs without cutting down on their experiences include travel, fuel, eCommerce, and retail shopping. Co-branded credit cards are a great way to incentivize customers through travel miles, fuel surcharge waivers, and discounted products.
Reward Customer Loyalty
Co-branded credit cards are reimagining traditional loyalty programs by becoming the focal point of this enhanced customer experience. The delivery of instant cashback/ rewards drives customers to spend more on the brand. Ensuring monthly reward points based on a customer’s increased spending is a definite step towards increasing customer stickiness.
Brands have access to a large amount of customer data, which can be leveraged to drive hyper-personalisation. For instance, customers of online marketplaces can receive contextual offers. They can also receive nudges to shop more at regular intervals, during festivals, and as part of specific promotions.
Strengthen Brand Trust
Co-branded credit cards instantly elevate brand recall in such a competitive and crowded marketplace, provided they deliver a superior customer experience. It builds higher brand recall, trust, and credibility for all three stakeholders – the brand, the bank, and the credit card platform. In the digital payments space, trust is a valuable currency, which nudges consumers to shop more using a specific payment vehicle, in this case, the co-branded credit card.
Non-Financial Brands Driving Credit Card Spending
Traditionally, banks and credit card payment companies were able to drive consumers to shop more. But now, companies that do not offer a financial service can also get in on the action and build more value for their customers. They have the ability to customize partnerships and bring innovation to the design of their loyalty programs.
Drive Usage in Tier 2/ Tier 3 Cities
Brands also leverage co-branded credit cards to attract customers from Tier 1 and Tier 2 cities, where credit card usage is comparatively less. This is an extremely important strategic step for brands because rural India has over 351 million active internet users in rural India compared to 341 million in urban India. Hence, to increase market share significantly, brands must invest in growing their presence in Tier 2 and Tier 3 cities and beyond. Co-branded virtual credit cards are a strategic vehicle in this journey.
Unique Welcome Offers
Co-branded credit cards can attract new users through unique welcome offers. This can include a waiver on annual fees, welcome bonus reward points or travel miles, and shopping vouchers, among other incentives. This is an important aspect of the onboarding process, which leaves a positive imprint on the customer’s experience.
Build an End-To-End Experience
Building a seamless customer experience is part and parcel of the co-branded credit card experience. While issuing a co-branded virtual credit card is a tried and tested idea, the strategy’s success lies in delivering an end-to-end elevated experience for the customer.
The customer journey begins right from when the card is marketed to them through a seamless onboarding process, usage on various platforms, to receiving miles, points, and rewards, and easy redemption of the points. A superior co-branded credit card shopping experience will not only inspire consumers to shop more but also to recommend the card to friends and family.
Introducing co-branded credit cards enables brands to drive several outcomes. It is an investment in triggering profitability, building consumer loyalty, attracting new and underserved audiences, and building a delightful consumer experience. It is also a vehicle organizations can leverage to showcase their unique core brand values. As more brands make co-branded credit cards a core part of their marketing strategy, they also need to keep innovating to maintain a competitive edge.
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