Through the strategy known as credit card cobranding, General Motors, General Electric, and AT&T have led an invasion into what was once exclusively banks' territory.

The new entrants were abetted by partnerships with banks that issue MasterCard or Visa cards on their behalf

While some bankers have been disturbed by the trend, warning that the industry is giving away one of its last bastions, other see the cobranding idea as neither new nor threatening.

2d Fiddle or Equal Billing?

Jerry Craft, president of Wachovia Corp.'s credit card unit, says standard bank cards are, in a sense, already cobranded because they have a bank's name alongside that of MasterCard or Visa.

Some card bankers have decided it is better to try to control their cobranding destiny by aligning themselves with popular nonbank companies.

In one approach, Household Bank, which is owned by a nonbank finance company, willingly played second fiddle on the General Motors MasterCard. Citibank has equal billing with Ford Motor Co. on their joint Visa card.

Either point of view seems to have validity. The bottom line, analysts say, is that like it or not, cobranding is having a major impact, will not go away, and banks must find ways to live with it.

Building Brand Loyalty

The annual attrition rate among credit cardholders is approaching 15%. Card-hopping is epidemic as consumers' search for the best deal overruns any sense of institutional loyalty.

"There is no such thing as a one-size-fits-all credit card," said Michael Auriemma, a card consultant with Auriemma Consulting, Garden City, N.Y., who sees cobranding as a way for card-issuing banks to build loyalty. "We will see a lot of segmentation as consumers continue to choose cards that offer something that is important to them."

To be sure not everyone agrees on whether cobranding is the inevitable future for banks. But one thing is certain, says Corey Stone, a consultant with Easton Consultants of Stamford, Conn.: "Cobranding takes the card to new places and the practical result is that it makes the bank card business even more competitive."

Mr. Stone also believes that cbbranding will change the way payments are made, particularly in the health care and supermarket businesses. As more alliances are forged, and as they sell advanced payment services to consumers, cards will displace personal checks and cash.

Wells Fargo Bank's California Advantage card is perceived as an ideal single-bank response to the controversial value-added approaches of the cobranded cards, such as General Motors' popular auto rebate program.

Wells Fargo's California Advantage card, which offers rebates toward the cost of Wells mortgage loans, proves that banks can compete in this sweepstakes without taking on a partner.

JERRY D. CRAFT

President

Wachovia Bank Card Services Inc.

Atlanta

The Visa and MasterCard marks, in our view, are already a form of cobranding, so we have focused primarily on distinguishing between the two.

When you go to an additional partner, one of them is going to be left out.

We want a relationship with our customers where we have more control at our level instead of sharing that with outside entities.

Cobranding is not new. It has been around since the initial stages of credit cards.

ROBERT M. BOUZA

President

Key Federal Bank

Owings Mills, Md.

I am anti-cobranding, even though we have offered a cobranded secured and unsecured credit card for the past four years.

I started offering an S&H green stamps card, because Key Federal wouldn't have to spend any money on direct advertising and marketing.

But cobranding creates temporary, limited profits, and banks are generally at the end of the leash in terms of getting profits. We have to split everything with the marketing partner.

ROBERT H. BURKE

Chairman

Bank of New York Delaware

Newark, Del.

We are currently looking for an appropriate partner, but we haven't found the right situation yet.

We feel that most of the cobranded products are failures. The danger of such an offering is pricing it right and giving the consumer real versus perceived value.

I do think cobranding will be very important in the future. It is the next step from affinity cards.

DIANNE STIGALL

Senior vice president

Union Planters National Bank

Memphis

We have a cobranded product with the Louis Rukeyser's Wall Street Club, because we saw the benefits it would offer to us by increasing our market share.

I would encourage bankers who are considering such a product to step to the forefront. Otherwise the nonbank companies are going to take over.

So much has been written about banks' not being innovative enough. We need to prove those conjectures wrong.

TIM BALLINGER

Senior vice president

Fifth Third Bank

Cincinnati

Fifth Third is offering a cobranded product with the Kroger supermarket company, because we see the credit card business getting very focused.

The trend in the industry has been toward cobranding of one form or another.

What we've done with our card is to build on a relationship that is already strong - that of Kroger and its customers.

Cobranding is a reality that won't go away, and I don't think banks can ignore it.

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