Retail payment trends: Winning with credit card partnerships

What are the key levers that issuers and their retail partners can pull to reinvigorate existing partnership card programs?

The historic win-win proposition

Historically, private label and co-branded credit cards were a win-win proposition. Partnerships provided attractive margins for issuers, drove purchase volumes and increased loyalty for retailers. With an estimated retail spend of more than $350B,¹ partnership programs comprise approximately 10 percent of the overall credit card market.

While the overall market continues to grow at about 6 percent year-over-year, our analysis shows that many partnership card portfolios are stagnant.²

General-purpose card purchase volume (i.e., issuer-branded cards) has grown at an average of 6.7 percent from 2000 to 2016 ($1.1T to $3.1T). Private label credit cards, a key part of the broader partnership market, have seen average purchase growth of only 3.4 percent ($120B to $206B) over the same time frame.³

The main reasons for lagging performance of partnership programs are generally:

• Customers shifting purchase habits away from “traditional” retail toward mobile and online marketplaces
• A saturated market where most retail chains have loyalty programs—and where individual programs don’t stand out
• Aging issuer infrastructure that can lead to negative customer experiences

As retail has moved toward omnichannel, partnership programs need a refresh with an emphasis on creating a seamless, cross-channel payment experience using real-time underwriting, issuance, notifications, and support. Issuers should consider how to move beyond plastic and how their customers think about the moment of payment in the broader context of their shopping journeys.

The ability to improve profit in the retail partnership space lies in addressing four key levers:

• Reinforcing the retail ecosystem and omnichannel experience with a contextual value proposition
• Owning the physical and digital points of sale (POS) seamlessly
• Upgrading the channel strategy to include sophisticated performance marketing and influencers
• Developing best-in-class risk management that can be leveraged across multiple portfolios

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What’s next

While partnership portfolios often have many challenges, they can also be an attractive product for both issuers and retailers, and there are clear ways to create sustained, differentiated advantage. To start on this journey, issuers should first assess the four strategic levers and key enablers mentioned previously, jointly work on an action plan to swiftly close the gap with their competition, and ask themselves the following questions.

• When you assess the differences between your and the retailer’s value proposition, how is that contextualized across channels and ecosystem?
• How can you work with your partner to maximize customer engagement and drive recurring spend most effectively?
• What is the engagement that the retailer is using across its salesforce to drive the product to market at the point of sale?
• How efficient is the marketing funnel and is it driven-by automation?
• Is the underlying data infrastructure in place to enable the use of behavioral and retailer data?
• Based on the responses above, what solutions can be quickly prototyped and tested in the market to get real, actionable data?

The answers to these questions could determine who wins and who loses in the partnership market.

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End notes

¹ Research and Markets: Co-Branded and Affinity Cards in the U.S. 6th edition (2017)

² Deloitte Analysis of Partnership Market and Key Portfolios (2019)

³ Consumer Financial Protection Bureau: The Consumer Credit Card Market (2017)

⁴ The Future of Retail: 11 Predictions on the disruptive forces in retail (2017)

⁵ Micro loans at the point of sale are still a largely untapped opportunity, both on- and offline.

⁶ Analysis from Deloitte engagements shows this impact. For a media-driven example, please see: “Rough Road Ahead for Store Credit Cards,” The Wall Street Journal (2017): https://www.wsj.com/articles/heres-the-credit-card-thats-gathering-dust-in-your-wallet-1512050400

⁷ The Battle for Love and Loyalty: The Loyalty Report 2017. Bond and Visa

⁸ ComIQI: Sales Conversion Rate in Brick and Mortar Stores is 7x More than Online

⁹ Deloitte analysis of card customer conversion

¹⁰ The Future of Retail: 11 Predictions on the disruptive forces in retail (2017)

¹¹ Forrester: Customer Advocacy 2018: How Advocating for Customers Helps Financial Firms Drive Loyalty, 2018

¹² Deloitte analysis of retail partnerships (issuers only), 2018

¹³ Deloitte: 2019 Retail Outlook

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