Appeal and usage patterns of co-branded credit cards

As published on www.financialexpress.com/money/ authored by Aishwarya Jaishankar, Co-founder & COO, Hyperface. Co-branded credit cards in India are becoming a powerful tool for fostering customer loyalty and driving consumption, mirroring successful strategies seen in global markets.

“The easiest and most powerful way to increase customer loyalty is really very simple. Make your customers happy.” — Kevin Stirtz​, Author, More Loyal Customers

Simplistic much? Nonetheless true. Indeed, in the loyalty game, brands and businesses have been working incessantly to pull out all the stops with the singular aim of not just satisfying customers but making them “happy.” One such tool of happiness that’s currently winning hearts across the globe is the co-branded credit card. Much like an expert chef combining ingredients to create a perfect delicacy, these co-branded pieces of plastic are bringing together brands you love, banks you trust, and products and rewards you cherish. Building on the adage that the customer is king, in this scenario, not only does the original king get some brilliant homage, but the banks and brands get imbued in royal hues — cementing customer alliances and building on their reputation. It’s a real trifecta for all involved!

Hence it is small wonder that in recent years, co-branded credit cards in India have also gained significant traction. As per the Hyperface-Redseer report titled “The Rise of Co-Branded Credit Cards: Redefining Customer Loyalty”, in FY24, co-branded credit cards account for 12-15% of total credit cards and are projected to capture over 25% of the market share by volume, growing at a CAGR of 35-40% from FY24-28. The trend mirrors the pattern observed in mature markets like the US, where co-branded cards have long been a staple among major retailers, from apparel giants to large hospitality and travel chains.

The Current Landscape of co-branded credit cards

Co-branded credit cards have been around for a while, but their popularity has surged recently. While one in every four credit cards used to be co-branded, the ratio has now increased to one in three. The last few quarters in particular have seen a surge in co-branded credit card launches in India, with several prominent brands across sectors like e-commerce, travel, lifestyle, dining and retail joining the fray.

E-commerce brands Amazon and Flipkart co-branded cards, in particular, have been a huge success story, providing significant benefits to both the brand as well as its clientele.

In more mature Western markets like the US, co-branded cards have emerged as the secret ingredient driving credit card growth. Every store worth its salt has been dishing out its own card, turning happy shoppers into loyal fans. With brands in India getting a taste of the secret sauce, a scrumptious future for brand-savvy consumers seems to be simmering.

Driving Factors

A delectable mix of factors is spicing things up for co-branded cards in India:

• The growth of co-branded credit cards in India reflects a broader trend towards a more brand-conscious economy. As more businesses launch their own co-branded cards, this trend is likely to continue, providing a boost to credit card adoption and customer loyalty in the market. This shift not only benefits brands and banks but also enhances the overall shopping experience for consumers.
• Customers are also quickly coming around to realize that co-branded credit cards go beyond plastic- they work as VIP passes to reward loyal customers with bespoke benefits, so they keep coming back for seconds or thirds, thereby driving up customer spending.
• From sign-up bonuses to premium lounge access, discounted hotel rooms, and cash rebates on a plethora of goods–the offers on using and redeeming points with rewards can be. When used wisely, the co-branded credit card can offer multiple benefits – potentially even saving consumers money.
• At the same time, for businesses, these cards serve as a cherry on top of their usual offerings, adding a financial layer to their customer engagement strategies. Most cards also offer a points program that encourages consumers to keep spending. Some stores have even started offering loyalty cards, which are very popular with shoppers.
• These plastic badges of loyalty have emerged as a tool for brands to differentiate themselves from competitors by offering unique and relevant incentives.
• A variety of flavors, comprising integrated rewards and discounts, make customer shopping experiences not just rewarding but also supremely convenient.
• In addition to retail and travel cards, some development organizations in more mature economies are also beginning to offer their own NGO co-branded credit cards that help the more philanthropic earn rewards, allowing them to donate to a cause they are passionate about.

Consumption Patterns

In recent years, India has seen a perceptible shift in consumption patterns, as premium brands see faster growth in comparison to budget brands. The shift is a clear indication of Indians moving towards more aspirational consumption. Co-branded credit cards in India play a crucial role in this dynamic, as they provide additional incentives for consumers to choose premium brands. Co-branded cards provide data insights to brands through bank partnerships so they can understand their customers better and fine-tune their offerings. They have begun to understand that delivering increased value to profitable customers turns them into loyal customers; and that loyal customers become even more profitable over time. These cards thereby extend the brand’s value proposition, as it creates repeat customers who also spread value by word of mouth.

For banks, co-branded credit cards have allowed for acquiring a new stream of customers and ensuring higher card usage and activation rates. They can also harness data insights to tailor benefits and rewards. Customer Retention also grows with brand-loyal customers as customers increase usage and spending to gain more rewards or accrue points for later redemption. In addition, they gain from partner marketing thereby expanding access and visibility.

In essence, co-branded credit cards are becoming a powerful tool for fostering customer loyalty and driving consumption, mirroring successful strategies seen in global markets. Given the successful symbiotic relationship that co-branded cards create, a lot of experts are predicting that the time when every major store will have a co-branded card is just around the corner.

While this may appear speculative at this stage, there is little doubt that India is on the brink of a credit card revolution. So, next time you consider applying for a new credit card, look into the co-branded options available. You might just find a card that opens up a world of exclusive benefits, making every swipe worth more than just the purchase.