Co-brand credit works, so why Credit Card as a Service?

Cobrand cards have been around for a while now. They have largely worked well for retailers and others looking to offer a branded card experience coupled with specific rewards for the company partnering in the cobrand with a financial institution (FI). An alternative has been introduced on the back of the banking as a service (BaaS) model called credit card as a service (CaaS). So what’s the benefit of partnering with a BaaS provider to offer credit cards versus a cobrand relationship?

First, let's examine the basic setup of a co-brand:

• Typical revenue share construct for financials
• Branded credit card and website for card application/access
• Website, card, customer service, and marketing are shared between the company and the FI, so they are competing for real estate
• The FI controls the general card customer experience
• A credit card website is a linked web page within the company’s own site and takes the customer to a new/different site for applying, managing their card, and repayment
• The rewards page and redemption are often separate and not fully integrated into the company’s website

Now let’s look at what’s possible with a CaaS setup:

• Significantly more options for financial constructs with a BaaS provider, including share of interchange, sharing of asset holdings, and interest income share creating a more diversified revenue stream than cobrand offerings
• Oversight from the FI for application, onboarding, and customer service with the experience controlled and set up by the company rather than the FI
• Full integration with the company’s website, mobile application, and other channels (including on-site/customer service) with no redirection or change in experience for application, onboarding, card management, and repayment
• More access to and flexible use of customer data, including transaction data for CRM usage by the company
• Fully integrated rewards experience with potential for instant reward redemption and instant offers through the company’s software or card acceptance provider
• Instant point of sale (POS) or in transaction application and approval for new credit card and incentives

Above are just a few of the possibilities brought to light with a CaaS offering. Retailers and others have the potential to create a unique and best-in-class user experience while increasing sales and revenue. By controlling the user experience and integrating credit cards within the overall brand experience, the relationship is deepened, the experience is more seamless, and the seed is planted to offer other financial services products in the future.