PHOENIX -- Credit card cobranding may be hotter than ever, judging by the attendance at a Faulkner & Gray Inc. conference on the subject.

More than 500 people, twice what the sponsor expected, crowded into a Phoenix conference center last week to learn the secrets of success of credit card marketing ventures from the likes of General Motors Corp. and General Electric Co.

Speakers said the market has undergone a fundamental change due to partnerships with airlines, phone companies, car companies, and other nonbanks that allow issuers to pass rebates and other benefits to cardholders.

Consumer Loyalty

Those who compete for consumer loyalty on rate alone will lose market share and profit margins when rates change, while consumers will stick with cobranded cards, said Alex W. Hart, president of MasterCard International.

"Consumers are beginning to say, |if it only gives you credit, what good is it?'" added Stuart A. Feldstein, president of SMR Research Corp. of Budd Lake N.J.

Mr. Feldstein said that in less than a decade, cobranded programs have garnered 60 million accounts, or about 26% of the domestic credit card market. He said they could eventually rise to 50%.

The cards are proving unusually profitable, too -- Mr. Feldstein estimated that spending on the average GM MasterCard is about twice the industry average.

Visa's Enthusiasm

Underscoring the sudden enthusiasm for cobranding was a presentation by Francine Schall, executive vice president of member relations at Visa U.S.A., which had initially balked at the idea of licensing cards sponsored by outsiders to the banking industry.

Now Visa is clearly in the business, and Ms. Schall sought to set the record straight.

"We consider cobranding to be the wave of the future," she said.

In a pitch to potential cobranders, she added, "Your products are going to work better in the marketplace if they're branded Visa."

"I was shocked, I was appalled [at] misinformation that has been circulating in the marketplace," Ms. Schall said, referring to reports that Visa would not allow a bank's partner to put a proprietary account number on the same card.

She said Visa's rules merely require that all transactions on any second account number be reported as Visa volume.

"I think they're catching on," said Ronald N. Zebeck, managing director of the big GM program, said of Visa.

Nonbank Interest

Mr. Zebeck said GM, which offers Visa cards in Canada and Britain, is thinking of adding a Visa card in the U.S.

Among nonbankers interested in sponsoring a cobranded bank card was Craig E. Fiedler, director of special services of NordicTrack, the Chaska, Minn., maker of exercise equipment. Mr. Fiedler said the company regards offering a credit card as one way to "strengthen the relationship" with NordicTrack purchasers.

Mr. Zebeck was one of several speakers to sound a note of caution, saying, "Cobranding is not for everyone." He predicted that some in the room would fail in their cobranding ventures.

K. Shelly Porges, chief executive officer of Porges/Hudson Marketing Inc., San Francisco, predicted the costs of some of the rebate programs "will dampen some issuers' enthusiasm" for the ventures.

Several speakers warned that a growing privacy movement threatenes to stunt the growth of cobranding, which appeals to some companies because it could enable them to gather information about the spending habits of the cardholders.

"The information age, aS exciting as it is, is going to pose some new challenges," said Stephen Drees, senior vice president of Affinity Partners Inc., Newton, Mass.

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