As US issuers bail out of the
co-branded cards sector, Barclaycard is finding itself a productive
niche in the North American market. The UK-based issuer, currently
the 12th-largest in the US by receivables, hopes the strategy will
help it break into the country’s top 10 issuers.
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Barclays’ US Barclaycard
subsidiary is making quite a splash in the cards market, using
co-branding to shoehorn its way into a crowded and troubled
marketplace.
In an era in which many US issuers
are fleeing the co-branding game, Barclaycard US has made alliances
a centrepiece of its strategy. Barclaycard US was created nearly a
decade ago and gained a beachhead in the US credit card industry
with the 2003 purchase of Juniper Financial Corp’s Juniper Bank. It
has retained Juniper’s online-first model, eschewing a
bricks-and-mortar network in favour of interactive marketing.
Without a national branch network
of its own to cross-sell from, Barclaycard snapped up an iconic, if
difficult, co-branded programme from Bank of America – the National
Football League’s (NFL) co-branded credit card programme. Bank of
America pulled the plug on the NFL cards in April after a 15-year
run.
In June, Barclaycard announced that
it was taking over the NFL credit card licensing contract for an
undisclosed sum. It is planning to introduce a new co-branded NFL
card programme in September that will offer affinity cards for the
NFL’s 32 teams and will let cardholders earn rewards such as NFL
products and tickets to games.
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Barclaycard views the NFL credit card
deal as an ideal channel to reach new customers through a variety
of marketing strategies, including online promotions, stadium
promotions, direct mail, e-mail and telemarketing.
“We feel like we have a real
opportunity in co-branding, because we have built a different
business model that is not so reliant on bricks-and-mortar branch
marketing or that requires huge amounts of direct mail like a lot
of other large issuers,” said Scott Young, the Wilmington,
Delaware, unit’s general manager of partnerships. “We are focused
on partnerships that get us closer to the customer, then we use the
web to really target that relationship. We will still market credit
cards at tables at events and through direct mail.”
Direct mail “is still just one
channel for us, instead of the main channel as it was for the card
industry for many years,” Young added.
Barclaycard has made a name for
itself in the crowded US market. In 2009, as most US portfolios
shrank fairly significantly, Barclaycard managed to grow, albeit
barely. According to data from the Federal Reserve Board and the
Federal Deposit Insurance, Barclaycard last year ranked 12th among
US credit card issuers in managed card loans at $10.9bn, a 1%
increase.
Barclaycard also recently unveiled
three other co-branded cards – the Wyndham Rewards Visa, which lets
cardholders earn points towards Wyndham Hotels stays, the
Travelocity American Express Card announced in May and the April
re-launch of the Best Western Visa card.
Last year, Barclaycard announced
four co-branded credit cards it originated or took over from other
issuers: US Airways, Spirit Airlines, Priceline.com and Recycle
Rewards RecycleBank. And it made quite a splash by stealing away
the internet retailer LL Bean, also from Bank of America.
Moving in the wrong
direction?
These co-branding deals come at a time
when other US issuers are moving away from co-branded deals.
JPMorgan Chase & Co earlier this year ended its co-branded
Starbucks Duetto Visa card after seven years, while Target Corp
recently announced it will no longer issue its co-branded Target
Visa card to new customers.
Co-branding also is an ideal way to
work within the strictures of the Credit Card Accountability,
Responsibility and Disclosure Act, most of which went into effect
earlier this year, Young said. Among other rules, the act restricts
issuers’ ability to change interest rates, which has forced issuers
to find new ways to market cards rather than rely upon the
low-interest promotional offers of yesteryear.
“With all the marketplace
disruption, we see a pretty strong business case for co-branded
cards, which provide ongoing benefits to the issuer and the
customer,” Young said. “For some of the biggest players out there,
they had the agreements with the retailers, but in a macroeconomic
slump, you have to protect the brand and the retail network. We
have no bricks-and-mortar network to protect, so we can be much
more flexible and opportunistic.”
The NFL deal is just such an
opportunity, Young said. Barclaycard’s goal has been to conduct
most of its marketing online, and the NFL offers a national fan
base that can be marketed almost exclusively online.
“We’ll still do some event-driven
marketing, but if you think about it, only a fraction of any team’s
fans make it to the stadium, so we will really drive a lot of
effort into the online piece,” he said. “We’ll acquire a customer
through web marketing, move them through the application and
approval process digitally and continue to service them through
e-mail and web communications.”
The issuer is also carving out
quite a sporting motif for itself. As well as the recently-signed
NFL deal, it has the title sponsorship of the English Premier
League, a naming-rights deal for Barclays Center, the New Jersey
Nets arena, and it sponsors a PGA tournament.
“It’s about loyalty,” Young said. “In the days when you had
zero-rate teasers and lots of aggressive marketing tactics, and
people were carrying a handful of cards around, that was not an
issue. Now the frequency of offers is going down, and the wallet
tightens, so loyalty is more important than ever.”
