In today’s fiercely competitive marketplace, where every brand vies for a deeper connection with its audience, the strategic tools you choose can make or break your strategy. Whether it’s through personalized online experiences or high-impact offline interactions, the race to win consumer loyalty has never been more intense. However, one resource that brands can leverage is the co-branded credit card (CBCC).

While loyalty programs and exclusive memberships have been popular strategies, co-branded credit cards offer numerous opportunities for brands to engage with their customers. A well-executed CBCC can be a powerful symbol of brand affinity, fostering a sense of belonging and exclusivity among consumers. 

In this blog, we will talk about a recent partnership that we had with Hyperface, where we developed a comprehensive report on India’s co-branded credit card industry. Brands considering a move into this space will find this report to be an invaluable resource, outlining how CBCCs have transformed the industry with benefits, the opportunities that lie ahead, and maximizing customer value associated with them. Discover how Redseer can guide you through this journey and help you harness the potential of CBCCs to transform your consumer strategy and boost your business.

Beyond Transactions: The Power of CBCCs

As one of the fastest-growing economies, India is witnessing a surge in the number of aspirational consumers and their overall spending. Rising incomes and shifting consumer priorities are shooting up non-discretionary spending, making purchases increasingly aspirational rather than just essential. Amidst this dynamic landscape, credit cards are playing a pivotal role as enablers of financial inclusivity and consumer empowerment. These strategic alliances between financial institutions and brands allow companies to integrate themselves into their customers’ daily lives, offering personalized rewards

At its core, a co-branded credit card is a strategic partnership between a brand and a financial institution. The psychology behind this is simple: people love to feel special. A co-branded credit card, adorned with the logo of a beloved brand, becomes a badge of honor—a daily reminder of the consumer’s relationship with the brand. Unlike conventional credit cards, these partnerships create opportunities to integrate your brand seamlessly into your customers’ daily routines. By offering exclusive rewards and personalized experiences, co-branded cards enhance customer loyalty and engagement

The Rise of CBCCs

In FY24 alone, CBCCs accounted for 12-15% of all credit cards issued, with projections showing they could capture over 25% of the market share by volume by FY28. That’s a growth trajectory of 35-40% CAGR for FY 24-28, compared to a more modest 14-16% CAGR for traditional credit cards.

This isn’t just about more cards in circulation. The real impact is seen in transaction volumes and values. According to our study, CBCCs are expected to grow at a CAGR of 45-50% in transaction volume and 55-60% in value from FY24 to FY28. By FY28, CBCCs will likely account for 22-25% of transaction volume and 33-35% of transaction value.

Why Should Brands Consider a Co-Branded Credit Card?

The answer lies in the unique value proposition that CBCCs offer. Allowing brands to provide customized rewards that align with their customers’ lifestyles, fostering deeper connections and brand loyalty.

Imagine your brand offering a credit card that not only provides financial benefits but also exclusive perks tied to your products or services. Whether it’s cashback on purchases, VIP experiences, or personalized offers, co-branded credit cards give your customers a reason to choose your brand over competitors, time and time again.

Segmentation and Market Penetration

In FY24, eCommerce has the highest co-branded credit cards issued followed by Travel and Dining & Entertainment respectively. Below is the detailed breakup of the same:

Currently, there are around 70 different co-branded credit cards available, accounting for about 12-15% of the total credit cards in circulation. These cards have gained significant traction, particularly in the e-commerce sector, which dominates the space with 75-80% of all issued co-branded credit cards. The Amazon Pay ICICI Bank and Flipkart Axis Bank Credit Cards together account for around 9 million cards in FY24, becoming staples in the e-commerce experience with exclusive rewards. In travel, cards like the IndiGo HDFC Bank Credit Card offer frequent flyers valuable perks, making them a go-to for travel purchases. Let us now see the segmentation of these cards that would reveal key insights into their market penetration and success factors.

The success of co-branded programs is gauged by the attractiveness of offers, the quality of the product experience, and overall profitability. Striking a balance between high reward costs and delivering strong consumer value is essential.

Transition in Co-branded Credit Cards

The concept of open network alliances among co-branded credit card players, also known as coalition loyalty programs, represents an exciting prospect for the future of the financial landscape. These alliances enable multiple brands or sectors to benefit from a single cardholder’s spending, offering a broader range of rewards and incentives and enhancing customer engagement. CCaaS platforms are pivotal in this evolution, offering scalable and flexible infrastructure that supports seamless integration with real-time data exchange, hyper-personalization, and advanced communication channels.

Co-Branded Credit Cards Outperform Traditional Cards in Spend and Activation Rates

These cards are increasingly becoming the preferred choice for consumers, outperforming traditional credit cards in both spending and activation rates. Our study reveals that their average spending is approximately 1.2 times higher than traditional credit cards, underscoring the value consumers place on the tailored rewards and perks these cards offer. Also, CBCCs have a higher activation rate of 70% as compared to 50% for traditional cards. For brands, this represents a significant opportunity to leverage co-branded credit cards as a strategic tool to enhance customer relationships and maximize spending behavior.

Launching a Co-Branded Credit Card: The Process Flow

Launching a co-branded credit card involves strategic planning, strong partnerships, and technological innovation. This process flow highlights the key stages for a successful launch and sustained market presence, offering insights into both traditional and modern approaches.

1. Strategic Planning and Partner Selection
   • Define objectives and identify the target market while selecting strategic partners, including banks, network providers, and tech vendors.
2. Negotiating Partnership Terms
   • Agree on terms, and responsibilities, and establish financial and operational agreements.
3. Designing the Card Program
   • Develop features, benefits, and rewards while designing the aesthetics and user experience.
4. Legal and Regulatory Compliance
   • Ensure regulatory compliance, prepare documentation, and secure necessary approvals.
5. Technology and Infrastructure Setup
   • Traditional Approach: Build in-house technology and infrastructure.
   • CCaaS Approach: Partner with a CCaaS provider for technical and regulatory management or collaborate with one offering a pre-integrated tech stack for quicker setup.
6. Marketing and Promotion
   • Develop and execute a marketing strategy, promoting the card across various channels.
7. Launch and Rollout
   • Introduce the card to the market, monitor its performance, and address any issues.
8. Post-Launch Optimization
   • Analyse performance metrics and customer feedback to optimize for engagement and monetization.
9. Sustained Success
   • Innovate and enhance the card program while maintaining strong partnerships and regulatory compliance.

Supercharge Your Brand with Co-Branded Cards

Navigating the world of co-branded credit cards (CBCC) is complex and so is understanding your consumers and their behavior. We at RedSeer Strategy Consultants offer valuable strategic insights to enhance customer loyalty and drive growth and a stronger brand presence.

Our expertise in benchmarking competitors and understanding evolving consumer behavior helps brands develop effective strategies for maximizing customer loyalty sentiment and overall market position.

When a brand partners with banks or any other financial institution, they gain a holistic view of the market beyond its own customer base. This is where RedSeer comes in—by conducting in-depth analysis, comparing users in different cohorts, and developing strategies for expansion. 

Act Now! How Redseer Strategy Consulting Can Elevate Your Brand?

As this trend continues to grow, now is the time for brands to position themselves strategically. Redseer, with its proven expertise and navigating data-deficient space, is the ideal partner to help you navigate the complexities within the space. Our team will craft a detailed playbook for you to unlock your full potential and reshape your consumer engagement strategies.

Whether you’re a consumer brand, a financial institution, or a retail giant, it’s time to rethink your approach to customer loyalty. Ready to develop a holistic strategy that not only resonates with your customers but also sets you apart in a competitive marketplace? Enhancing your offerings, driving engagement, and building stronger relationships.

Reach out to our Strategy Partner Jasbir S Juneja today, and let’s craft a data-driven strategy that positions your brand at the forefront of consumer finance. Together, let’s unlock new possibilities and redefine loyalty in this dynamic market.