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Payments are the enabler of all commerce, and in the U.S., credit cards are king. Their scale and adoption are massive: total payment volume on credit cards reached $4 trillion in 2018 across nearly 45 billion transactions, and 183 million Americans, or 78% of U.S. adults, have at least one credit card. In fact, an American adult has an average of 3.8 cards. And it’s not just volume, but revenue too: credit cards are the highest revenue sector of the U.S. payment industry, generating $163bn in revenue in 2018 and accounting for over a third of total payment revenue.
Within the credit card market, co-branded cards leverage a popular brand, like a retailer or airline, to reward their users with benefits for spending on that card, especially on the brand. We’re all familiar with earning miles towards a free flight or vacation and earning points to spend on a particular retailer. Spending on co-branded cards in 2018 reached nearly one quarter of total credit card volume, or a staggering, $1 trillion.
But when we look at today’s co-branded card market, we notice that something’s missing – well, quite a lot of things – most of the brands that define today’s consumer landscape don’t offer a card. Most of the co-branded cards out there today are offered by last-generation brands like department stores and brick-and-mortar retailers while cutting edge, digital-first brands like Tesla, Airbnb, Nike, and Equinox are conspicuously missing. Apple Card probably comes to mind as a success - and it is a runaway one at that, with an estimated 6 million cardholders just 2 years from launch. But up until now, only brands the size of Apple can make these programs work.
Why is this? A lack of modern fintech infrastructure. Brands have two options when it comes to picking a credit card partner: either a major bank like Chase, or an incumbent issuer like Synchrony. Both options involve working with huge organizations built on legacy technology, meaning the build and integration is heavy, expensive, and takes a long time. Most brands don’t have the scale of Apple or Amazon to demand a custom experience from these players; they want to stay nimble and move quickly. And most of all, today’s best brands are digital-first and put their customer above all else. They won’t jeopardize the user experience and customer relationship they’ve worked so hard to build with one of the incumbent providers – even more important when dealing with a customer’s finances.
With such high friction, why should a brand bother with a credit card in the first place? Simply put, a well-executed co-brand program drives affinity, retention, and revenue - and it all starts with great rewards. Rewards can be so much more than just points and cashback. They can unlock unique experiences that can tie a brand closer to their superfans. For instance, a cult clothing brand could offer cardholders early access to hot items before they drop to the public, or a sports team could offer cardholding superfans exclusive tickets and a points multiplier on game day. These rewards, combined with everyday purchases on the card, drive affinity for the brand. This affinity deepens the customer relationship and thus retention in the form of a longer lifetime value and higher spend. Given all this, shouldn’t launching a card be easier?
Today, it’s simpler than ever to launch and scale a tech-enabled brand, whether it be an ecommerce retailer or even a bank. Modern infrastructure means what used to take millions of dollars and years now takes thousands of dollars and days. For ecommerce, platforms like Shopify, Bolt, and Deliverr vastly reduce the barriers of starting an online store and provide Amazon-level checkout and fulfillment speed with ease. For financial services, an analogous set of infrastructure providers have emerged, like Stripe, Plaid, Finix, Truework, and many others. Meanwhile, the distribution possible with the internet means it’s easier than ever to reach your customers anywhere in the world. From there, you can unite people with a love of your product and shared values for your brand into a community.
Brands today are about engagement – not just about purchasing products and services, but about creating an ecosystem of touchpoints and a deep relationship with their customers that extends beyond the core offering. And nothing is as daily in our modern life as a card transaction.
Just look at the world of debit cards. Marqeta, which went public just last month and is valued at $14bn, has been a key infrastructure provider to modern brands and tech companies like DoorDash and Square - but only for debit. Curiously, just one tech-forward brand founded in the last two decades has successfully launched a co-branded credit card product.
Cardless is breathing new life into the credit card industry by offering a dramatically better experience to both consumers and brands. Their modern credit card issuing platform enables today’s brands to launch a credit card with customized rewards managed from a best-in-class consumer app. Cardless moves at the speed that digital companies demand: they can bring a brand live in just weeks, rather than the 9-12 months it takes an incumbent provider. And they offer the consumer the experience they deserve, with innovative rewards and no late, annual, or transaction fees. They are rebuilding one of the largest markets in digital payments, and we’re only in the early innings of what’s possible.
Co-founders Scott and Michael have been tenacious in signing and launching world-leading brands out the gate, starting with sports teams like Manchester United, the Cleveland Cavaliers, and the Miami Marlins. They are building an equally ambitious team to tackle the incredible opportunity in front of them. We are proud to partner with Cardless and lead their Series B.