Co-branded credit cards may be in for an uncertain future. While the rest of the payments world is spinning giddily amid a whirlwind of innovation, the co-branded credit card model remains stubbornly entrenched in a business model that’s barely changed for decades.
But the pandemic may yet force a revolutionary overhaul in the range of perks and experiences available, which may yet elevate co-brand cards to top-of-wallet again.
In the wake of the pandemic, co-branded credit card spending dropped significantly – but this highlights what’s been a long-standing trend.
As the Payment Yearbooks show, credit card issuance figures for 2019 and 2020 demonstrate continuing declines through bank consolidation, portfolio and underwriting restructuring.
Co-branded credit cards have always faced pressure to grab consumers’ attention with a widening array of loyalty programmes and special offers.
But at a time when economic realities lead to a tightening of perks, and consumers are becoming used to instantly tailored offers and discounts available through alternative digital payments, co-branded credit cards are in danger of being left behind.
And of course, the economic impact of the Covid-19 pandemic supressed credit card issuance across Europe. Co-branded travel cards in particular were unsurprisingly left bottom of wallet for most of 2020.
Other emerging challenges to the traditional co-brand card model come with the roll-out of instant payment schemes, Buy-Now-Pay-Later schemes, and account-to-account payments.
Immediate payments are going to create frictionless digital commerce and enable a financial world in which the entire payment process occurs seamlessly and immediately.
For the time being, co-branded cards continue to play a role in incentivising customers to spend, in partnership with retailers, supermarkets and car manufacturers (with airlines hoping for a recovery from 2022 onwards).
What remains to be seen is just how effective the traditional co-brand model will continue to be as a customer acquisition tool.
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