Cobranding is so much the rage that it has spread to one of the leading banks in the private-label credit card business. Beneficial National Bank USA of Wilmington, Del., has come to view cobranding as a natural fit, said Ross N. Longfield, its president and chairman of the board. We're seeing that in certain situations cobranded cards, particularly those that are value-added, have great appeal with customers, he added. The bank announced its first such effort in mid-August, with BJ's Wholesale Club a $2.3 billion retailer in 12 eastern states in what was also a first for the wholesale club market. With $1.7 billion of receivables, making it the third-largest private label credit card bank in the United States, Beneficial National will be building on an already impressive retail industry track record. The bank announced plans to find a cobranding partner in May, expecting to draw upon its relationships with retailers such as BJ's, the Pergament housewares- discount chain, and Best Buy electronics stores. Given its base in home centers, electronics, and furniture and apparel retailing, the bank appears well placed to profit from the anticipated spread of cobranding from its earlier hotbeds in the automobile, telecommunications, and petroleum fields. But delays in signings might prove costly, given the level of competition for desirable retailing cobranders. Many banks and nonbanks have been establishing their strategies, said K. Shelley Porges of Porges/Hudson Marketing Inc. in San Francisco. Every day they wait makes it tougher for them to get involved, she said of Beneficial. While Beneficial issues some secured bank cards, it sold most of its bank card portfolio eight years ago and will use cobranding to reenter the field. Mr. Longfield, who has worked at Beneficial since 1960 when he was still attending Fairleigh Dickinson University in New Jersey, said cobranding initiatives will be an extension of the private-label programs that we do. But some observers believe Beneficial is in for a hard sell. One consultant who asked not to be named pointed out that Beneficial, because it lacks a general-purpose card portfolio, might find it hard to convince prospective cobranding partners that it could operate such a multifaceted program. Ms. Porges agreed, saying retailers may resist cobranding for a variety of reasons. Lots of retailers have chosen to retain their credit card processing, and they may have other reasons than just cost, said Ms. Porges. They may fear losing control of the card if it goes cobranded, or that their customers won't be approved for a cobranded card. Profit may be a factor, she added, but many store cards are not all that profitable to begin with. The consensus is, though, that Beneficial can make cobranding happen if it soothes retailers' concerns. They will need to be flexible in any number of ways, said Ms. Porges. One way is in how much real estate (design space) on the card they'd be willing to give. Also, their partners are not going to be put in a position where they have to turn down customers. Ultimately, their success in cobranding will depend on the partners they get, she concluded. Beyond cobranding, Beneficial faces a challenge that may be even greater: defending its core business, the processing of store cards. According to some industry observers, more and more retailers with store-brand cards are maintaining their programs in-house instead of using an outside company to finance their receivables. This option enables them to gain profits from interest income on the card loans while keeping close ties to their customers. Beneficial, not surprisingly, puts a different spin on this development. Actually, the trend has been the other way, said Mr. Longfield. He cited as an example Rhodes, a furniture retailer, which Mr. Longfield said had handled its own processing for 40 years before signing with Beneficial three years ago. Because we handle 47 different portfolios, we bring a certain amount of skills and expertise, said Mr. Longfield, who also heads the Beneficial Tax Masters unit. He emphasized that Beneficial's credit card business would never be endangered because it is not limited to processing. If all we were was a processor, we wouldn't have seen the growth we've enjoyed, said Mr. Longfield. We essentially are a credit department for retailers and to a large degree are responsible for their sales success. We do more than just manage their portfolio. One way in which Beneficial seeks to do this is through its Infoflash proprietary data base marketing program. It's the kind of program that an individual retailer could not or would not invest in or own, said Mr. Longfield. Let's say a customer buys a television but might be in the market for a VCR, he said. We can identify that customer and their needs to the retailer, which increases their sales. All of this will become moot if store cards gradually fade away a development long anticipated by many in the card industry. Beneficial, not surprisingly, dismisses this doomsday scenario. They've been saying that for years, and yet it doesn't happen, said Mr. Longfield. Consumers have a place in their wallet and mind for both. He cited a variety of reasons for consumers to hold onto their private- label cards. Perhaps they might want their bank card credit lines kept open for bigger-ticket purchases, he said. And value-added features such as special financing and discounts help keep consumers in the store-card fold. Promotional organizations like wholesale discount clubs might also work to maintain customer loyalty, he said. Say a customer at Sears is buying a $2,500 television. They don't want to tie up their MasterCard and Visa, said Mr. Longfield. By using the store card, customers can make monthly payments and get special deals, or make no payments for 90 days. Retailers don't care when they get paid. Ultimately, retailers want to keep and strengthen the store card they're using it as a strong marketing tool, and Beneficial only wants to reinforce it, he said. In handling complaints, for example, we have a 'just say yes' policy, said Mr. Longfield. If you call customer service after you were billed for a late charge and argue that you're sure you mailed it on time, we'll give you the benefit of the doubt. This makes them feel good about the retailer and has worked really well, he added. Some people take advantage, but most people are honest. When asked whether a customer is always right philosophy prevails at other banks, Mr. Longfield responded almost derisively: Try calling customer service somewhere else and see if you get that kind of response.

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