Target Corp.’s move in April to discontinue its cobranded Visa card and put its efforts behind a new discount-based rewards program for its private-label card could change the landscape of cobranded cards, contends Ken Paterson, Mercatur Advisory Group principal analyst, in his report “Cobranded Consumer Cards 2010: Mature Products Ripe For Change.”

Target’s private-label card offers a 5% discount on all purchases when used at a Target store (see story).

Target Corp.’s move in April to discontinue its cobranded Visa card and put its efforts behind a new discount-based rewards program for its private-label card could change the landscape of cobranded cards, contends Ken Paterson, Mercatur Advisory Group principal analyst, in his report “Cobranded Consumer Cards 2010: Mature Products Ripe For Change.”

Target’s private-label card offers a 5% discount on all purchases when used at a Target store (see story). 

Mercator suggests that will drive a lift in sales and frequency of spend.

“The big takeaway is that cobranded products are ripe for change, and in particular with [companies] like Target we see the move away from cobranded cards toward private label,” says Paterson. “This discount-based approach is one that potentially has some resonance for bigger retailers that have more control over the economics and ultimately have a lift in sales.”

Several factors will make Target’s endeavor successful and likely influence other market players, including new revolving outstandings and interest income, reduced overall costs associated with interchange and other network-related expenses, and faster approval of new card accounts, Mercator’s report suggests.

 “Target’s results could prove pivotal to other retailers considering a shift in strategy to an ‘old’ credit-issuing approach,” writes Paterson.

 Mercator suggests that will drive a lift in sales and frequency of spend.

“The big takeaway is that cobranded products are ripe for change, and in particular with [companies] like Target we see the move away from cobranded cards toward private label,” says Paterson. “This discount-based approach is one that potentially has some resonance for bigger retailers that have more control over the economics and ultimately have a lift in sales.”

Several factors will make Target’s endeavor successful and likely influence other market players, including new revolving outstandings and interest income, reduced overall costs associated with interchange and other network-related expenses, and faster approval of new card accounts, Mercator’s report suggests.

“Target’s results could prove pivotal to other retailers considering a shift in strategy to an ‘old’ credit-issuing approach,” writes Paterson.

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