Overview

A retail co-branded credit card is a type of credit card issued through a partnership between a retailer and a financial institution, such as a bank or credit card network (Visa, Mastercard, or RuPay). These cards combine the economic benefits of traditional credit cards with the unique benefits and loyalty rewards offered by retailers.

A retail co-branded credit card can be either of the following:

• Physical Card
• Virtual Card

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🌐 Retail Co-Branded Credit Cards Ecosystem

Below is the ecosystem of a retail co-branded credit card:

1. Partnership: The retailer collaborates with a financial institution to issue the card under the retailer’s branding.
2. Credit Underwriting: The issuer assesses a customer's creditworthiness before approving the card. The issuer performs risk evaluation based on factors such as credit scores, income, and spending patterns, while the retailer may assist in customer targeting and pre-screening.
3. Payment Network: These cards are typically part of a payment network (Visa, Mastercard, or RuPay), making them usable beyond the retailer’s stores.
4. Card Issuance and Payment Processing: The financial institution handles billing, payments, accounting, delinquency, transaction processing, statements, ACS, PG, and so on while the retailer promotes the card.
5. Rewards Program: Customers earn rewards for purchases, with higher benefits for spending at the retailer’s locations or website.

✅ Benefits

Retail co-branded credit cards offer Customers, retailers, and financial institutions unique benefits.

Customers

Below are a few examples illustrating how retail co-branded credit cards benefit customers across different scenarios:

Frequent Shopper Rewards

A customer frequently shops at a particular retailer, such as a grocery store or department store. Below is how using a retail co-branded credit card benefits this customer:

• Earn higher reward points or cashback for every dollar spent at the retailer.
• Exclusive access to promotions, early sales, and special events.
• Discounts or free shipping on online purchases.

Special Financing Options

A customer plans to make large purchases from the retailer, such as furniture or electronics. Below is how using a retail co-branded credit card benefits this customer:

• The co-branded card offers interest-free financing or low APR for a fixed period, making big-ticket items more affordable.
• Flexible installment plans to spread payments over time without incurring high interest costs.

Everyday Spending Benefits

A cardholder uses the co-branded card for daily purchases beyond the retailer’s ecosystem. Below is how using a retail co-branded credit card benefits this customer:

• Earn general rewards such as cashback and travel points for dining, travel, or utility payments.
• Additional benefits include fraud protection, purchase insurance, or concierge services.

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Retailers

Below are a few examples illustrating how retail co-branded credit cards benefit retailers across different scenarios:

Increased Brand Visibility

A retailer wants to extend its brand presence outside its stores. Below is how using a retail co-branded credit card benefits this retailer:

• The co-branded card displays the retailer’s branding, acting as a marketing tool every time the cardholder makes a purchase, enhancing the brand's visibility outside the store.

Holiday or Seasonal Promotions

Retailers aim to boost sales during holiday seasons or special events. Below is how using a retail co-branded credit card benefits this retailer.

• Offer additional rewards or exclusive discounts for purchases made with the co-branded card during promotional periods.
• Encourage card usage by doubling or tripling reward points on qualifying purchases.

More Revenue

A large enterprise retailer partners with a bank to issue a co-branded credit card that offers 5% cashback on all in-store and online purchases. Below is how using a retail co-branded credit card benefits this retailer.

• Cardholders shift more of their big purchases to the retailer to get more rewards.
• Average transaction value increases as customers are incentivized to spend more to earn higher cashback.
• The retailer also earns a share of interchange revenue from the issuing bank, boosting non-sales income.

Increased Customer Engagement

A fashion retailer launches a co-branded credit card offering exclusive early access to new collections and private sale events for cardholders. Below is how using a retail co-branded credit card benefits this retailer.

• Cardholders frequently visit the store or website to leverage these exclusives, increasing customer touchpoints.

Attract New Customers

A retailer wants to attract new customers or convert regular shoppers into loyal patrons. Below is how using a retail co-branded credit card benefits this retailer.

• Offer a signup bonus, such as bonus points, cashback, or free products, to new cardholders who spend a certain amount within the first few months.

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Financial Institutions

Below are a few examples illustrating how retail co-branded credit cards benefit financial institutions across different scenarios.

Low-Cost Acquisition

The financial institution wants to penetrate new demographics or geographic markets. Here is how using a retail co-branded credit card benefits this issuer.

• Partnering with a well-established retailer in a specific market helps the bank gain exposure to new customer segments.
• The co-branded card encourages customers to engage with the financial institution if they are not already.

Enhancing Customer Retention

The financial institution aims to retain customers by offering exclusive benefits tied to a retailer. Here is how using a retail co-branded credit card benefits this issuer.

• Co-branded cards with robust rewards programs keep customers engaged and loyal.
• Cardholders who frequently shop with the retailer are less likely to switch to another financial institution.

Cross-Selling Opportunities

The financial institution wants to promote other products and services to co-branded cardholders. Here is how using a retail co-branded credit card benefits this issuer.

• The financial institution can roll out benefits for cardholders with personalised offers for other banking products, such as loans, savings accounts, or investment services.
• The co-branded card acts as an entry point to a broader banking relationship.

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✨ Features

Below are some of the features of retail co-branded credit cards.

Contactless Payments

• Allows payments by simply tapping the card on enabled POS terminals for transactions below a fixed limit, eliminating the need for a PIN.
• Contactless transactions can be conducted via linked digital wallets, offering greater flexibility.
• Cardholders can customise limits for contactless payments via the bank’s mobile app or customer portal.

Tokenisation for Enhanced Security

• Card details are replaced with unique tokens for online and contactless transactions, ensuring data privacy.
• Facilitates smooth recurring payments using tokenised data.
• Tokenised credentials can be used across multiple platforms, including mobile wallets, e-commerce websites, and apps.
• Adheres to global standards such as PCI DSS, ensuring a high level of data protection.

Dynamic Interest Rates

• Variable interest rates depending on the cardholder’s spending patterns, repayment history, or promotional offers.
• Lower interest rates for purchases at partnered retailers or during promotional campaigns.
• Interest-free periods during which no interest is charged if the cardholder pays the total amount due by the due date.

Flexible EMIs

• Cardholders can convert high-value purchases into manageable monthly installments directly through the card issuer's platform or at the point of sale.
• Special discounts on EMI interest for cardholders during promotional periods.
• EMIs with variable tenures to suit different financial needs.
• Enables early settlement of EMIs without penalties, enhancing financial flexibility.

Customised Fee Structure

• Offering lower or waived annual fees for loyal customers or premium cardholders.
• Discounted foreign transaction fees to attract frequent travelers who are shopping internationally.
• Flexible EMI conversion fees for converting large purchases into EMIs at the partner retailer.

Loyalty Programs and Promotional Offers

• Seamless integration with the retailer’s existing loyalty program, allowing cardholders to earn and redeem points faster.
• Introductory incentives such as bonus rewards, no annual fees for the first year, or special financing options.

Customised Cards Design

• Custom card art, retailer logos, and unique finishes (e.g., matte, metallic) of a physical retail co-branded credit card enhance perceived value and pride of ownership.
• Digital card interfaces of virtual retail co-branded credit cards can reflect the retailer's visual identity inside the application or wallet, promoting brand recall with every transaction.

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💡 Advantages

Retail co-branded credit cards offer a range of advantages for customers, retailers, and financial institutions.