Trends: Private Label Credit Card Loyalty Programs
Private-label credit card loyalty programs are becoming more common today. Many brands are trying to target millennials to attract them to the card. There are several innovative and issuer trends to the loyalty programs, the most prominent of which is a need for security amongst issuers and card holders. Other trends include long-term loyalty benefits, perks in zero fraud liability, innovative card designs, and an increase in brand specific cards (Uber and Amazon). These trends are set to continue into 2018 as issuers ramp up their offers and perks to attract new customers.
Some innovative trends that private label co-branded cards are focusing on are:
1) Merging of card features with branded mobile apps
2) Tiered rewards payouts
3) Free bonus perks
Some issuer trends the private label co-branded cards are focusing on are:
1) Customized rewards programs (targeting of millennial)
2) Affluent consumer demographics
Some of these include the PayPal co-branded card, The Uber card which is co-branded with Visa, Hilton/American Express cards, and the Starbucks card which is co-branded with Chase.
PayPal has partnered with Synchrony Financial to offer a credit card with a 2% cash back offer. The PayPal cashback MasterCard is now available to consumers. Some features PayPal is offering different from other cards are no limits on annual cash back amounts, no minimums on redemption amounts, no restrictions on where and how rewards can be spent, and the rewards have no expiration. It also includes the zero liability protection for fraud and an additional layer of security of PayPal purchases.
Uber and Visa have recently partnered to offer an Uber co-branded private label card. In addition, an asset of the Uber cards is no annual fee. The Uber perks card includes the following:
1) 1000 points which can be redeemed for Uber ride credit.
2) Streaming credit
3) Cellphone insurance
4) Event access
Another reward feature of the card is the 4-3-2-1 purchase rewards payout. Depending on the type of purchase it will fall into one of the categories and offer cash back rewards based on the 4%, 3%, 2% or 1%.
HIGH PAYING CUSTOMERS
American Express and Synchrony Financial have discussed what they call the credit card feedback loop. Merchants typically accept the American Express card because they want to attract the high-paying customers. The revenues from the high-paying customers allow American Express to afford to do better incentives. This loop includes more affluent customers accepted at more merchants with higher discount fees that pay for better rewards. Some trends that American Express are seeing are merchants having issues with discount rates, competition to increase rewards, technology with payment processing, and actual issuing of credit cards today.
POINTS VERSUS FREE NIGHTS/COMPANION TICKETS
Currently, only about one-third of Millennial carry a co-branded travel card. This is only half of the amount of credit card users who are 35 and older. Issuers are plotting marketing trends to attract to this group and they have been making lucrative bonus offers to attract them. Offering reward incentives for hotel points and airline miles is a big attraction. The Hilton Honors Card from American Express offers Hilton bonus points of 80,000 to sign up and Marriott has a similar program with its card from Chase that has a 100,000 incentive of bonus points. While these incentives are big bonuses, some issuers realize the tangible benefits of offer companion tickets and free hotel stays instead of bonus points. This is an innovative concept that many of the issuers are not focusing on and may attract more customers.
PORTFOLIO OF CHOICES
Hilton Honors is partnering with American Express to offer a four-card portfolio of choices to its customers and business partners. These include the Hilton Honors American Express card, Hilton Honors American Express Ascend card, Hilton Honors business card, and Hilton Honors Aspire card. Each of these cards has bonus points awarded based on spending. In addition, the cards offer elite status, no foreign transaction fees, and each card accumulates points at a different rate for stays ranging from 3 times to 12 times as many points. The Aspire card also accumulates free nights and statement credits based on usage. The business card offers free priority lounge pass coupons and the Aspire card offers unlimited lounge passes. Hilton is trying to attract customers at all levels with this portfolio attempt.
PRICELESS CITIES PROGRAM
Ulta and MasterCard have partnered up with a priceless cities program. Ulta is known for passing back benefits to its customers and partnering with MasterCard to give users special benefits and unique experiences. The priceless cities is a MasterCard perk and have offers and events like dining, sports, travel, arts, culture, shopping and entertainment. Some perks include discounts to the events and some include free events. At Ulta, customers always come first and it plans to continue this with its MasterCard offering. The "Ultamate" reward offering will include in-store, online and mobile channel support.
A survey done by Best Western regarding travelers and points shows that of those surveyed 53% closely manage their points and 86% use their points to book hotel stays. When looking at the negative features the top 3 are expiring points, blackout dates, and difficulty getting to higher levels of achievement.
2018 is well-positioned to be the year of the co-branded card. Forbes identified 5 trends that it felt were going to be key for 2018. The goal of the card issuer is to offer cards with better benefits so consumers will add the card to their collection. Some trends include:
1) More brands are launching their own card. Services like Amazon and Uber will be offering private label cards. Amazon will launch the Amazon Rewards Visa Signature. Starbucks and Uber will also be offering its own Visa. Businesses are looking at customer loyalty from a branded card and have decided that with enough perks people are more likely to sign up for the card.
2) Premium cards will feature deluxe benefits. Some perks include airport lounge access, air miles, high rewards, and travel credits. American Express is launching a partnership with SoulCyle and it's expected that others will partner up to offer first-class upgrades, spa treatments, and specialty events.
3) Issuers are looking for long-term capturing of consumer loyalty. Instead of providing initial bonuses, issuers are looking at rewards to cover long-term goals in the hopes of consumers wanting to use the companies other financial features for loans or mortgages. Capital One is offering rewards to its customers for using multiple products. Another focus of issuers is an enhanced customer service focus. Discover recently launched an in-app messaging system for communication between consumers and agents. One of the features of the system is to see all customer messaging details, so agents can get caught up to speed without asking the customer all the same questions over again. The apparent goal of cardholders is ease of use.
4) The size and shape of cards are changing. In example, innovative metal cards are heating up in the market. Those with a $15,000 credit line can get gem-encrusted cards from Rosan Diamonds and its variety of partners. The new Uber card is bright and wild with colored polka dots on a black background. As card issuers attempt to stand out, different colors, shapes, and sizes are going to come into play.
5) Security is of utmost import to both issuers and cardholders and this area will be ramped up. Discover is launching alerts to cardholders whose social security numbers show up in the new dark web. Capital One already offers a zero liability fraud policy and are now offering "Second Look", which is an account monitoring system.
The final thought on 2018 trends is for those who keep their balances paid off monthly being offered the most lucrative benefits.
In summary, we have looked at some major private label co-branded cards that are being issued at looked at current incentives and future incentives. While points are good incentives and are being used, a new tactic may be to just offer up companion tickets and free nights. Metal cards have been around but appear to be gaining exposure along with a push for different sizes, shapes, and colors. Deluxe benefits and unique partnerships are what cardholders are looking for.