Co-Branded and Affinity Credit Cards in the U.S., 4th Edition

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Co-Branded and Affinity Credit Cards in the U.S., 4th Edition
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Packaged Facts consumer survey results show that the percentage of consumers using co-branded/affinity credit cards has fallen from 55% to 43% from 2009 to 2013. But while hundreds of smaller and less profitable co-brand programs have been eliminated, more than 120 significant co-brand credit card partnerships remain. In the U.S., they now compete against formidable own-branded credit card platforms catering to a wider audience, as well as a resurgent private label card segment. Targeting the affluent is now the name of the game, but the supply of U.S. affluent households is not limitless, and opportunities exist to target an increasingly healthy middle class, experimenting further with rewards incentives and soft card benefits.

To help industry participants navigate the evolving market for co-branded/affinity cards, this study analyzes co-branded/affinity credit card program features and benefits and retail card strategies and growth trends among bank and non-bank issuers.

Coverage of trends and opportunities includes:

• Assessment of the leading co-branded credit cards from card partners--Ritz Carlton, Hilton, Wyndham, Best Western, Carlson, Norwegian Cruise Line, Princess Cruises, Sony, Best Buy, BJ's Wholesale Club, Costco, Dillard's, Walmart, Macy's and Amazon--to gauge differentiation and related features and benefits among co-branded hotel, cruise, and retail credit cards.
• Trending of branded credit card and co-branded credit card usage over time by card association and demographic, and current co-brand/affinity card usage by 11 card types.
• Via proprietary consumer research, analysis of the degree of importance co-branded credit card users give to features and benefits when signing up for a co-branded credit card. The section assesses the importance cardholders assign to card features & benefits by grouping responses into seven categories: interest rate, spend limits & fees; rewards; discounts; special perks; travel benefits; and protection/management.
• Market sizing for U.S. general purpose credit cards and co-branded credit cards, as well as a market driver analysis including credit loan volume, delinquency, loans outstanding trending.
• Trends & opportunities in the co-brand and affinity credit card space, including affluent consumers, the middle class, private label conversion, rewards trends, reaching younger consumers, and cross selling.
• The co-branding strategies of American Express, MasterCard and Visa, as well as the co-brand/affinity card strategies of Bank of America, Barclays, Capital One, Citibank, GE Capital Retail Bank, JPMorgan Chase and U.S. Bank.

CHAPTER 1: EXECUTIVE SUMMARY
Report Scope

Market size and market drivers

Trends & opportunities
Card association co-branded strategies

American Express
MasterCard
Visa


Co-branded and affinity credit card issuer strategies

JPMorgan Chase
Bank of America
U.S. Bank
Citibank
Capital One
Barclays

Co-branded credit card analysis

Hotel cards: assessing affluent, middle-to-higher income and middle class card offerings
Cruise card comparison
Retailer card analysis


Co-branded and affinity credit card consumer usage trends

Branded and co-branded credit card usage and usage trending
HH income trends
Affiliation/rewards growth
By card association: overview
By card association: demographic

Features & benefits influencing co-branded/affinity credit card choice
CHAPTER 2: MARKET SIZE AND FORECAST
General purpose credit card market size

Table 2-1: U.S. General Purpose Card Purchase Volume, 2007–2012

Co-branded credit card market size
Number of co-branded credit card programs

It's not whether a co-branded credit card has rewards, it's what kind


Partnership industry segments

Retail cards most prevalent, followed by airline and hotel cards
Table 2-2: U.S. Co-branded Credit Card Programs, by Issuer & Card Type: 2013
Visa has 50% relationship share
Table 2-3: U.S. Co-branded Credit Card Programs, by Issuer & Network/Association: 2013


Co-branded airline credit cards

Can MasterCard keep US Airways—and steal share, too?
Table 2-4: U.S. Airline Co-branded Credit Card Programs, by Airline, Network/Association,Rewards & Issuer: 2013


Co-branded hotel credit cards

Going higher, but can they go lower, too?
Table 2-5: U.S. Hotel Co-branded Credit Cards, by Hotel, Network/Association, Rewards & Issuer: 2013

Market drivers
Improving debt picture

Graph 2-1: Consumer Debt Balance and Its Composition: 2006-2012


Credit card debt declining; accounts stabilizing

Graph 2-2: Credit Card Accounts, Credit Card Debt & Credit Card Debt per Account: 2006-2012


Delinquency rates on the mend

Graph 2-3: Q1 Credit Card Delinquency Rates: 30+, 30, 60, 90 & 120+ days late, and Severely Derogatory:2007-2013

Government data show increase in credit card loans outstanding

Table 2-6: Consumer Credit Card Loans Outstanding, Depository Institutions and Credit Unions: 2010-2012 .
Loan volume and loans outstanding among top five issuers
Table 2-7: Credit Card Loan Volume & Loans Outstanding: Top Five Issuers: 2010-2012

CHAPTER 3: TRENDS & OPPORTUNITIES
Pay with points—with an airline co-branded card?

A cure for own-branded travel cards?


Targeting cardholders

Targeted incentives to boost use
Merchant directed rewards
Listen to the customer, and send offer accordingly
Rewards differentiation is imperative
Customer satisfaction is improving
Give me cash
Entertainment exclusives

Coexisting or competing against own-brand innovation?

Bank of America rewards broader banking relationship
Cross sell opportunity
Wells Fargo Home Rebate Card
Cross sell opportunity


Bank of America works to improve cardholder credit and build relationships

Cross sell opportunity

Another way to assess bank loyalty and card cross sell

Who's your primary bank?
Table 3-1: Consumers' Primary Bank, by Usage Penetration: 2013
Cards issued by primary bank
Table 3-2: Consumers' Primary Bank, by Usage Penetration: 2013


Co-brand conversion at expense of private label

Improving economic picture may translate to increased comfort with co-branded risk
Private label issuers converting cardholders to co-brand

How many affluent cardholders can there be left?

Recession results in higher share of affluent consumers?
Graph 3-3: Branded Credit Card Usage by Card Association: Change in Usage Share by HH Income:
2008-2013
But when is there too much of a good thing?


Casting a wider net

Why not extend co-branded rewards to middle class?


Courting youth
Why not prepaid co-branding?

Chase Liquid
American Express Bluebird
Prepaid co-branded success story: Air New Zealand


Government is watching

Capital One Bank fined for deceptive credit-card marketing practices
Discover Bank fined for deceptive telemarketing
Customer service leader American Express not immune
Chase assuages military partners

CHAPTER 4: CARD ASSOCIATION CO-BRANDED STRATEGIES
Visa has highest share of partnerships

Reliance on Chase and U.S. Bank
MasterCard relationships spread across more issuers
Table 4-1: U.S. Co-branded Credit Card Programs, by Network/Association, Issuer Share: 2013

American Express
Value proposition
Special services and programs abound
Rewards cards and loyalty programs are the name of the game

Membership Rewards Program
Enhancements
Rewards: an increasingly expensive proposition
Pay with Points helps soften the blow


American Express holds up against affluent & small biz competition

Doing well, thank you very much
OPEN for competition: Strong growth, strong spend
Own-brand introduction brings in new affluent customers
Co-branded card portfolio provides more card options
Niche co-branded initiatives contribute to growing affluent cardholder base
Continued growth expected
Airlines still part of the foundation
To the tune of an estimated $55 billion in U.S. cardholder spending
Table 4-2: American Express U.S. & Worldwide Card Billed Business & Airline Card Billed Business:2011-2012
Table 4-3: American Express Consumer & Small Business Own-Brand & Co-branded Credit Card Programs:2013
Significant third-party co-branded relationships
Table 4-4: American Express U.S. Third-Party Co-Branded Credit Card Programs: 2013

Shift to everyday spending continues
U.S. Card Services contributions to card growth

Charge cards remain very important


Global Network & Merchant Services segment important to co-branding

Growing card base
U.S. GNS presence


Performance summary

Table 4-5: American Express Worldwide & U.S. Card Member Receivables, Bill Business & Cards in Force:2010-2012

MasterCard

Sales volume performance summary


Co-branding and premier rewards
Co-brand: challenges and opportunities

Co-branded under pursued, but that's changing
Recent traction and building momentum
Visa
Tiered consumer credit platform
Market share leader
Ratcheting up pursuit of affluent
Credit union and community bank push

CHAPTER 5: CO-BRANDED AND AFFINITY CREDIT CARD ISSUER STRATEGIES
Summary analysis

Table 5-1: U.S. Co-branded Credit Card Programs, by Type, Issuer Share: 2013


JP Morgan Chase
Value proposition

Using the recession to create a healthier portfolio
Chasing American Express
Rewards and engagement


Own-branded initiatives

Ultimate Rewards, Blueprint, Sapphire, and Ink frame strategy
Targeting affluent

Co-brand: Keep stronger hands and eliminate weaker ones

Table 5-2: JPMorgan Chase Consumer Own-Brand, Co-branded & Affinity Credit Card Programs/Cards:2013
Table 5-3: JPMorgan Chase Business Own-Brand & Co-branded Credit Card Programs: 2013


Co-branded card introductions and initiatives

AARP credit card launch comes with rational rewards pitch
Airline moves: transitioning AirTran credit card portfolio
Military moves: eliminating rewards expiration; broadening redemption; pushing cash back
Hotel moves: enhancing travel benefits and incenting elite status motivation

Bank of America
Own-brand strategy: casting a broader net with upside potential

Rewards for all but a handful of cards
Travel rewards moves
Cross-selling potential
BankAmeriDeals stimulates customer engagement


Co-branded and affinity a strong suit
Credit card portfolio growth trends

Lower loans outstanding balanced by higher purchase volume and accounts
Improving delinquencies
Card program divestitures
Table 5-4: Bank of America Consumer Own-Brand and Co-branded Credit Card Programs: 2013
Table 5-5: Bank of America Business Own-Brand, Co-branded & Affinity Credit Card Programs: 2013
Table 5-6: Bank of America Consumer Affinity Professional Organization, Sports & Cause
Credit Card Programs: 2013
Table 5-7: Bank of America Affinity University/Alumni Association Credit Card Programs: 2013

U.S. Bank

Credit card performance summary


Own-branded credit card trends

FlexPerks
Targeting a broad audience


Co-branded strength

Weighted toward airline and retail
Table 5-8: U.S. Bank Consumer & Business Own-Brand & Co-branded Credit Card Programs/Cards: 2013


Recent co-branded moves

Focus on apps

Citibank

Ripe for cross selling
Private label revitalization helps co-branded cards
Tapping American Express for affluent cache


Competitive positioning

Portfolio streamlining


Own-brand credit card development

ThankYou program
Simplicity Card
Private Pass reboot
Citi Price Rewind

Co-branded moves

Citi Hilton HHonors Reserve Visa Signature
Best Buy co-branded and private label
American Airlines: $40 billion in cardholder spend?
Table 5-9: Citibank Consumer & Business Own-Brand & Co-branded Credit Card Programs: 2013


Volume, loans outstanding and account growth trends

Table 5-10: Citibank Citi-Branded and Citi Retail Services Credit Card Loan Volume,Loans Outstanding & Accounts: 2008-2012

Capital One
Own-brand credit card trends
Co-branded credit card trends

HSBC deal adds co-branded and private label power
Best Buy comes and goes
GM and AFL-CIO co-branded accounts stick around
Table 5-11: Capital One Consumer & Business Own-Brand & Co-branded Credit Card Programs: 2013


Staying on the revolver sidelines
Declining loans outstanding persist into 2013 but loan volume increases
Barclays
Co-branded credit card growth and trends

Buying, then building the portfolio
US Airways, L.L. Bean and Frontier Airlines are largest accounts
But US Airways account at risk
Table 5-12: Barclays U.S. Co-Branded Accounts, by Account Number & Total Receivables: 2012

Co-branded card portfolio

Table 5-13: Barclay's Consumer & Business Own-Brand & Co-branded Credit Card Programs: 2013

CHAPTER 6: CO-BRANDED CREDIT CARD ANALYSIS
Summary analysis

Hotel cards: assessing affluent, middle-to-higher income and middle class card offerings
Cruise card comparison
Retailer card analysis

Ritz-Carlton Rewards Credit Card

Table 6-1: Ritz-Carlton Rewards Credit Card Incentives, Rewards and Other Features, 2013


Citi Hilton HHonors Visa Signature Card

Table 6-2: Citi Hilton HHonors Visa Signature Card Incentives, Rewards and Other Features, 2013


Hilton HHonors & Hilton HHonors Surpass

Table 6-3: Citi Hilton HHonors& Hilton HHonorsSurpass Incentives, Rewards and Other Features, 2013

Wyndham Rewards Visa Card

Table 6-4: Wyndham Rewards Visa Card Incentives, Rewards and Other Features, 2013


Best Western Rewards MasterCard

Table 6-5: Best Western Rewards World MasterCard Incentives, Rewards and Other Features, 2013


Club Carlson Rewards Visa Signature Card

Table 6-6: Club Carlson Rewards Visa Signature Card Incentives, Rewards and Other Features, 2013

Club Carlson Premier Rewards Visa Signature Card

Table 6-7: Club Carlson Premier Rewards Visa Signature Card Incentives, Rewards and Other Features,2013


Norwegian Cruise Line Credit Card

Table 6-8: Norwegian Cruise Line Credit Card Incentives, Rewards and Other Features, 2013


Princess Cruises Rewards Visa Card

Table 6-9: Princess Cruises Rewards Visa Card Incentives, Rewards and Other Features, 2013

Sony Card

Table 6-10: Sony Card Incentives, Rewards and Other Features, 2013


Best Buy Reward Zone Credit Card

Table 6-11: Best Buy Reward Zone Credit Card Incentives, Rewards and Other Features, 2013

BJ's Visa

Table 6-12: BJ's Visa Incentives, Rewards and Other Features, 2013


Costco TrueEarnings

Table 6-13: TrueEarnings Card from Costco Incentives, Rewards and Other Features, 2013


Dillard's American Express

Table 6-14: Dillard's American Express Incentives, Rewards and Other Features, 2013

Walmart Discover Card

Table 6-15: Walmart Discover Card Incentives, Rewards and Other Features, 2013


Macy's American Express/ Macy's Preferred American Express

Table 6-16: Macy's American Express & Macy's Preferred American Express Incentives, Rewards and Other Features, 2013


Sears MasterCard

Table 6-17: Sears Card Incentives, Rewards and Other Features, 2013

Gap Visa

Table 6-18: Gap Visa Card Incentives, Rewards and Other Features, 2013


Amazon.com Rewards Visa Signature Card

Table 6-19: Amazon.com Rewards Visa Signature Card Incentives, Rewards and Other Features, 2013

CHAPTER 7: CO-BRANDED AND AFFINITY CREDIT CARD CONSUMER USAGE TRENDS
Summary analysis

Branded and co-branded credit card usage and usage trending
HH income trends
Affiliation/rewards growth
By card association: overview
By card association: demographic


Credit card usage trends: 2008-2013

After dropping during recession, credit card use begins to pick up
Branded credit card usage rebound lags
Graph 7-1: Credit Card, Branded Credit Card & Store Card Usage Penetration: 2008-2013


Branded credit card usage trends: 2008 to 2013
Usage penetration down 12%

MasterCard usage penetration declines the steepest
Graph 7-2: Branded Card Usage Penetration, by Card Association: 2008-2013
Table 7-1: Branded Card Usage Penetration, by Card Association: 2008-2013


Credit card usage trends by HH income: 2008 to 2013

Overall credit card usage trends
Table 7-2: Credit Card Usage Penetration, by HH Income: 2008-2013
Branded credit card usage trends
Table 7-3: Branded Credit Card Usage Penetration, by HH Income: 2008-2013


Branded credit card usage trends, by card association

Table 7-4: American Express-Branded Credit Card Usage Penetration, by HH Income: 2008-2013
Table 7-5: Discover-Branded Credit Card Usage Penetration, by HH Income: 2008-2013
Table 7-6: MasterCard-Branded Credit Card Usage Penetration, by HH Income: 2008-2013
Table 7-7: Visa-Branded Credit Card Usage Penetration, by HH Income: 2008-2013

2013 card association branded credit card usage share by HH income

American Express still draws its high-income share
Graph 7-3: Branded Credit Card Usage by Card Association: Share by HH Income: 2013
Table 7-8: Branded Credit Card Usage by Card Association: Change in Usage Share by HH Income:2008-2013


Affiliation/rewards credit card usage trends: 2011 to 2013
Explanation

Branded credit card usage penetration trending
Table 7-9: Branded Credit Card & Affiliation/Rewards Credit Card Usage, by Affiliation/Reward Type:2011-2013

American Express affiliation/rewards credit card usage trending

Table 7-10: American Express Credit Card & Affiliation/Rewards Credit Card Usage, by Affiliation/Reward Type: 2011-2013


Discover affiliation/rewards credit card usage trending

Table 7-11: Discover Credit Card & Affiliation/Rewards Credit Card Usage, by Affiliation/Reward Type:2011-2013


MasterCard affiliation/rewards credit card usage trending

Hotel/airline/organization card share on the rise?
Table 7-12: MasterCard Credit Card & Affiliation/Rewards Credit Card Usage, by Affiliation/Reward Type:2011-2013


Visa affiliation/rewards credit card usage trending

Rewards and affiliation usage share gains across the board
Table 7-13: Visa Credit Card & Affiliation/Rewards Credit Card Usage, by Affiliation/Reward Type:2011-2013

Affiliation/rewards credit card usage and usage share, by demographic

Younger consumers underrepresented
Table 7-14: Branded Credit Card & Affiliation/Rewards Credit Card Usage Penetration,by Affiliation/Reward Type: Age, 2013
Older adults dominate airline usage share; youth gravitates to organization-based cards
Graph 7-4: Branded Credit Card & Affiliation/Rewards Credit Card Usage Share,by Affiliation/Reward Type: Age, 2013
Affluent dominate co-brand
Table 7-15: Credit Card, Branded Credit Card & Airline, Hotel, Organization, Cash Back & Points
Credit Card Usage Penetration by HH Income: 2013
$150K+ household income consumers comprise 30% of airline credit card holders
Graph 7-5: Credit Card, Branded Credit Card & Airline, Hotel, Organization, Cash Back & Points
Credit Card Usage Share by HH Income: 2013


Proprietary survey analysis

Introduction and context
5 in 10 branded credit card users have co-brand/affinity card; standard cards more prevalent
Graph 7-6: Branded Credit, Standard Branded & Co-Brand/Affinity Credit Card Usage Penetration,by Card Association: 2013
Graph 7-7: Indexed Branded Credit, Standard Branded & Co-Brand/Affinity Credit Card Usage Penetration,by Card Association: 2013
Graph 7-8: Indexed Branded Credit, Standard Branded & Co-Brand/Affinity Credit Card Usage Penetration, by Card Association: 2013

American Express has highest ratio of co-brand/affinity card users to standard card users

Graph 7-9: Indexed Branded Credit, Standard Branded & Co-Brand/Affinity Credit Card Usage
Penetration Ratio, by Card Association: 2013
Proprietary survey results affirm co-brand/affinity demographic skew
Table 7-16: Any Branded, Standard Branded & Co-Branded Credit Card Usage Penetration,by Demographic: 2013


American Express and Discover

Table 7-17: American Express & Discover Any Branded, Standard Branded & Co-Branded Credit Card
Usage Penetration, by Demographic: 2013: 2013
MasterCard and Visa
Table 7-18: MasterCard & Visa Any Branded, Standard Branded & Co-Branded Credit Card Usage Penetration, by Demographic: 2013: 2013

11 co-brand/affinity card types: usage & usage in past 30 days
Co-branded penetration four times higher than affinity

Retail cards most prevalent
Affinity-based card types play minor but important role
Graph 7-10: Co-Branded and Affinity Credit Card Usage & Usage in Past 30 Days, by 11 Card Types: 2013
Retail and airline cards promise stronger engagement?
Affinity cards have lower engagement?
Table 7-19: Co-Branded and Affinity Credit Card Usage Ratio, by 11 Card Types: 2013


Co-branded cards attract higher incomes; affinity cards attract more males

Graph 7-11: Co-Branded vs. Affinity Credit Card Usage Share, by Gender, Age and HH Income 2013

CHAPTER 8: FEATURES & BENEFITS INFLUENCING CO-BRAND/AFFINITY CREDIT CARD CHOICE
Summary analysis
Important & most important co-brand/affinity card signup influencers

Introduction


Interest rate, spend limits & fees

No annual fee and low interest rate weighed by many
Interest rate teasers and balance transfer options less relevant
Graph 8-1: Important & Very Important Co-Branded and Affinity Credit Card Choice Motivators:Interest Rate, Spend Limits & Fees, w/Subcategories, 2013


Interest rate, spend limit & fees: demographic analysis

Table 8-1: Important Co-Branded and Affinity Credit Card Choice Motivators: Interest Rate, Spend Limit & Fees w/ Sub-Categories, by Demographic, 2013

Rewards, extra points and discounts

Extra incentive more widely considered than rewards
Cash back still popular, rewards flexibility not as widely considered as expected
Graph 8-2: Important & Very Important Co-Branded and Affinity Credit Card Choice Motivators: Rewards,Extra Points & Discounts, w/Subcategories, 2013


Extra points: demographic analysis

Table 8-2: Important Co-Branded and Affinity Credit Card Choice Motivators: Extra Points & Extra Points Types, by Demographic, 2013


Rewards: demographic analysis

Table 8-3: Important Co-Branded and Affinity Credit Card Choice Motivators: Rewards & Rewards Types,by Demographic, 2013


Discounts: demographic analysis

Table 8-4: Important Co-Branded and Affinity Credit Card Choice Motivators: Discounts & Discount Types,by Demographic, 2013

Special perks, travel benefits & protection/management

Graph 8-3: Important & Very Important Co-Branded and Affinity Credit Card Choice Motivators:Special Perks, Travel Benefits & Protection/Management, w/Subcategories, 2013


Travel benefits: demographic analysis

Table 8-5: Important Co-Branded and Affinity Credit Card Choice Motivators: Travel Benefits & Travel Benefits Types, by Demographic, 2013


Special perks: demographic analysis

Table 8-6: Important Co-Branded and Affinity Credit Card Choice Motivators: Special Perks & Special Perks Types, by Demographic, 2013

CHAPTER 9: CO-BRANDING AROUND THE WORLD
American Express

2012 signings
Global airline co-branded reach
Card growth


Citibank
JPMorgan Chase

Visa partnership gives Chase global coverage

MasterCard
APPENDIX
Methodology

Methodology and Sources


Consumer survey methodology

Packaged Facts' definition versus Simmons


Report table interpretation
Terms and definitions

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Credit_Card Industry: Co-Branded and Affinity Credit Cards in the U.S., 4th Edition

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