Co-branded credit cards, partnerships between banks and brands offering rewards to customers, account for a significant portion of issuer portfolios in the U.S., despite the risks involved. These cards aim to boost customer loyalty and spending, with banks, brands, and card networks all benefiting from the arrangement. However, some partnerships, like Wells Fargo’s deal with Bilt and Goldman Sachs with Apple, have led to financial losses, highlighting the challenges and risks banks face in these agreements. Despite these issues, the industry is expected to continue growing, driven by the appeal of capturing high-spending consumers and the benefits to brand loyalty.
- Co-branded credit cards represent 62% of the portfolios of the largest issuers in the U.S.
- These partnerships are designed to benefit banks, brands, and card networks by increasing customer loyalty and spending.
- Banks like Wells Fargo and Goldman Sachs have faced financial losses from their co-branded partnerships with Bilt and Apple, respectively.
- Wells Fargo is losing $10 million monthly from its partnership with Bilt, a fintech startup, and does not plan to renew the contract without more favorable terms.
- Goldman Sachs, having partnered with Apple, faced losses due to the unique terms of their agreement, such as not charging late fees or selling customer data.
- The co-branded credit card market is still expected to grow, outpacing the overall credit card industry, as brands and issuers seek to benefit from the high spending of loyal customers.
- In 2022, banks paid merchants an average of $279 for every open account, with partnerships like Delta and Amex generating significant revenue.
- Over a third of general purpose credit cards in the U.S. were co-branded in 2021, totaling 173 million accounts, primarily in travel and retail.
- Despite potential financial risks, these partnerships offer brands and banks significant benefits in terms of additional revenue streams and customer acquisition.
- Challenges in co-branded credit card partnerships include managing the costs and risks associated with high approval rates and the unique demands of brand partners.
The Wall Street Journal is an American business and economic-focused international daily newspaper based in New York City. The Journal is published six days a week by Dow Jones & Company, a division of News Corp.
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