As credit card issuers retool their offerings to cope with new industry regulations and a more-cautious consumer mood following the recession, Barclaycard US hopes to succeed by bucking a few key trends.
The U.S.-based unit of United Kingdom-based Barclays PLC is in the midst of introducing a steady stream of new cobranded credit cards when certain other issuers are backing away from them.
Barclaycard also is attempting to prove it can compete with larger card-issuing rivals without a national branch network, which has become an increasingly important resource for large issuers in cross-selling cards to existing bank customers.
“We have a different business model that doesn’t rely on branch marketing or fighting it out in direct mail like a lot of other large issuers,” Scott Young, Barclaycard US general manager of partnerships, tells PaymentsSource. “First we focus on cobranded card partnerships that provide us with closer marketing contact with the partner’s customers and, second, we use integrated marketing and the Web very expertly.”
According to PaymentsSource data gathered from the Federal Reserve Board and the Federal Deposit Insurance Corp., Barclaycard last year ranked 12th among U.S. credit card issuers in managed card loans at $10.9 billion, an increase of nearly 1% from $10.8 billion in 2008 during a year many other large credit card issuers saw their portfolios shrink.
But one of the biggest immediate challenges facing Barclaycard is the task of resurrecting the National Football League’s cobranded credit card program, which Bank of America Corp. discontinued in April after a 15-year run, leaving NFL fans dangling.
The Charlotte, N.C.-based bank says it is converting its BofA NFL cardholders to other BofA-branded cards, a bank spokesperson tells PaymentsSource. Former BofA NFL cardholders have until Aug. 31 to redeem “NFL Extra Points” rewards earned under the old program, in which some 1 million customers reportedly participated.
Barclaycard in June announced plans to take over the NFL credit card licensing contract for an undisclosed sum. The issuer in September plans to unveil a new cobranded NFL card program, enabling cardholders to choose a logo from among the NFL’s 32 teams and the opportunity to earn points with purchases good for NFL-branded products, including NFL game tickets.
The NFL will contact former BofA NFL cardholders with information about the new card program, a Barclaycard spokesperson says. And Barclaycard will offer “bonus points” to former BofA NFL cardholders who make the switch, but former BofA NFL cardholders must reapply for a card, he says.
The five-month gap between the discontinuation of BofA’s NFL card program and the launch of Barclaycard’s new NFL program could spark some disillusionment among football fans, underscoring one of the risks of cobranded card programs, Brian Riley, a research director at TowerGroup, tells PaymentsSource.
“Cobranded relationships can be tricky because the card’s fate is tied to another retail concept or a brand. ... The mix of benefits has to be just right so both sides are happy,” Riley says. “When things aren’t working, issuers can get burned.”
Under the credit card industry’s new pressures, keeping both parties happy in a cobranded credit card relationship is increasingly difficult, Riley contends, noting JPMorgan Chase & Co. earlier this year ended its cobranded Starbucks Duetto Visa card after seven years (see story). And Target Corp. recently announced it will no longer issue its cobranded Target Visa card to new customers (see story).
“The industry learned the hard way that just slapping brands and credit cards together doesn’t always work,” Riley says.
BofA continues to market other sports-themed cards, including debit cards featuring the logos of four NFL teams–the Washington Redskins, the New England Patriots, the Carolina Panthers and the Dallas Cowboys. BofA also offers the Major League Baseball Extra Bases MasterCard credit card and the NASCAR Race Points Platinum Plus Visa credit card.
BofA declined to comment on why it parted ways with the NFL for credit cards.
For Barclaycard, the NFL credit card deal provides an opportunity to reach potential new customers through different channels, Young says. Those include marketing the NFL card through the Web, within stadiums at NFL games, and through inbound call-center communications, e-mail and direct mail.
“We will still market credit cards at tables at events and through direct mail,” Young says. Direct mail “is still just one channel for us, instead of the main channel as it was for the card industry for many years.”
Card cobranding is a good way to cope with the card industry’s new limitations under the Credit Card Accountability, Responsibility and Disclosure Act, most of which went into effect earlier this year, Young says. Among other rules, the act restricts issuers’ ability to change cardholders’ interest rates, which has put a damper on the short-term low-interest promotional offers that were rampant until last year.
“With all the marketplace disruption, we see a pretty strong business case for cobranded cards, which provide ongoing benefits to the issuer and the customer. And that is why we continue to sign new deals with partners,” he says.
Barclaycard in recent months announced three other cobranded cards, including the Wyndham Rewards Visa announced July 7 that enables cardholders to earn points toward free Wyndham Hotels stays. The card is available for no fee or with a $39 annual fee with higher points-earning capabilities.
Other new entries include the Choice Privileges Visa Signature card, launched July 1; the Travelocity American Express Card, which debuted in May (see story); and a relaunch of the Best Western Visa card, launched in April (see story).
Barclaycard last year unveiled four cobranded credit cards it created from scratch or took over from other issuers, including cards associated with US Airways Group Inc., Spirit Airlines Inc., Priceline.com Inc. and Recycle Rewards Inc.’s RecycleBank.
As direct mail becomes increasingly less effective, the opportunity to use cobranded card partners’ marketing channels gains value, Young says.
In each of its cobrand deals, Barclaycard aims to promote its cards on the partner’s website and within collateral marketing materials, including brochures, mailings and point-of-sale promotions, he says. Certain partnerships also provide card-marketing opportunities within venues, such as hotels, airline-ticket counters and passenger lounges, and retail and entertainment outlets.
“Wherever possible, we try to integrate card offers and marketing messages into existing communications to get better visibility and efficiency,” Young says.
A heavy reliance on technology also is key to Barclaycard’s strategy because it has no national branch network.
Barclaycard US came into existence a decade ago and got a foothold in the U.S. credit card industry with the 2003 purchase of Juniper Financial Corp.’s Juniper Bank, touted as a Web-based card issuer. The Wilmington, Del.-based company gradually expanded its credit card portfolio through acquisitions, including several affinity card programs including the Harvard University Alumni Association.
From the beginning, Barclaycard’s goal has been to conduct the majority of its card marketing and ongoing customer communications online, Young says.
“As more people move online for banking, we are focusing more of the marketing experience there. We’ll acquire a customer through Web marketing, moving them through the application and approval process digitally, and continue to service them through e-mail and Web communications.”
Barclaycard has mixed odds of succeeding by focusing heavily on cobranded cards, Riley says.
“On the one hand, Barclaycard is starting off with a fresh slate with some of these programs, including the NFL credit card. They can be very selective and get the best customers, leaving behind whatever didn’t work for BofA,” he says. “On the other hand, many of the cobranded partners Barclay has are second-tier travel companies, and none strikes me as a certain home run.”
To succeed, the company should pick its partners carefully and structure the deals so they have long-term potential, Riley says.
What do you think about this? Send us your feedback. Click Here.