While many issuers are backing away from cobranded cards, Barclaycard US is making them a more important part of its business model.
The Barclays PLC unit also is trying to prove it can compete with larger issuers without a national branch network, which has become an increasingly important resource for big banks that can cross-sell their cards to existing customers.
"We have a different business model that doesn't rely on branch marketing or fighting it out in direct mail like a lot of other large issuers," said Scott Young, the Wilmington, Del., unit's general manager of partnerships. "First, we focus on cobranded card partnerships that provide us with closer marketing contact with the partner's customers and, second, we use integrated marketing and the Web very expertly."
According to data from the Federal Reserve Board and the Federal Deposit Insurance Corp. and compiled by PaymentsSource, Barclaycard last year ranked 12th among U.S. credit card issuers in managed card loans at $10.9 billion. That was up nearly 1% from 2008, during a year when many other large card issuers' portfolios shrunk. PaymentsSource is a unit of SourceMedia, which publishes American Banker.
One of the most immediate challenges for Barclaycard is resurrecting the National Football League's cobranded credit card program, which Bank of America Corp. discontinued in April after a 15-year run.
Barclaycard in June announced plans to take over the NFL credit card licensing contract for an undisclosed sum. It is planning to introduce in September a new cobranded NFL card program that will offer affinity cards for the NFL's 32 teams and will let cardholders earn rewards such as NFL products and tickets to games.
Bank of America is planning to convert its existing NFL cardholders to other B of A cards.
The five-month gap between the shuttering of B of A's program and the launch of Barclaycard's new NFL program could alienate some football fans, underscoring one of the risks of cobranded card programs, said Brian Riley, a research director at TowerGroup.
"Cobranded relationships can be tricky because the card's fate is tied to another retail concept or a brand. … The mix of benefits has to be just right so both sides are happy," Riley said. "When things aren't working, issuers can get burned."
Under the credit card industry's new pressures, keeping both parties happy in a cobranded credit card relationship is increasingly difficult, Riley said. For example, JPMorgan Chase & Co. earlier this year ended its cobranded Starbucks Duetto Visa card after seven years. And Target Corp. recently announced it will no longer issue its cobranded Target Visa card to new customers.
"The industry learned the hard way that just slapping brands and credit cards together doesn't always work," Riley said.
B of A declined to discuss why it parted ways with the NFL, and it continues to offer other sports-themed cards, including debit cards featuring the logos of four NFL teams — the Washington Redskins, the New England Patriots, the Carolina Panthers and the Dallas Cowboys. B of A also offers the Major League Baseball Extra Bases MasterCard credit card and the NASCAR Race Points Platinum Plus Visa credit card.
For Barclaycard, the NFL credit card deal provides an opportunity to reach new customers through different channels, Young said, including online promotions, at stadiums, direct mail, e-mail and telemarketing.
"We will still market credit cards at tables at events and through direct mail," Young said. Direct mail "is still just one channel for us, instead of the main channel as it was for the card industry for many years."
Cobranding is a good way to cope with the card industry's new limitations under the Credit Card Accountability, Responsibility and Disclosure Act, most of which went into effect earlier this year, Young said. Among other rules, the act restricts issuers' ability to change interest rates, which has put a damper on the low-interest promotional offers that have long been a marketing mainstay.
"With all the marketplace disruption, we see a pretty strong business case for cobranded cards, which provide ongoing benefits to the issuer and the customer. And that is why we continue to sign new deals with partners," he said.
Barclaycard recently announced three other cobranded cards, including this month's Wyndham Rewards Visa, which lets cardholders earn points towards Wyndham Hotels stays, the Travelocity American Express Card announced in May and the April relaunch of the Best Western Visa card.
Barclaycard last year unveiled four cobranded credit cards it created from scratch or took over from other issuers, with US Airways Group Inc., Spirit Airlines Inc., Priceline.com Inc. and Recycle Rewards Inc.'s RecycleBank.
Technology also is crucial to Barclaycard's strategy because it has no national branch network.
Barclaycard US was started a decade ago and got a foothold in the U.S. credit card industry with the 2003 purchase of Juniper Financial Corp.'s Juniper Bank.
Barclaycard's goal has been to conduct most of its marketing online, Young said.
"As more people move online for banking, we are focusing more of the marketing experience there. We'll acquire a customer through Web marketing, moving them through the application and approval process digitally, and continue to service them through e-mail and Web communications."
Barclaycard has mixed odds of succeeding by focusing heavily on cobranded cards, Riley said.
"On the one hand, Barclaycard is starting off with a fresh slate with some of these programs, including the NFL credit card. They can be very selective and get the best customers, leaving behind whatever didn't work for B of A," he said. "On the other hand, many of the cobranded partners Barclays has are second-tier travel companies, and none strikes me as a certain home run."
