Co-branded Cards in Europe and the US 2006

TABLE OF CONTENTS
INTRODUCTION 9
Who is the target reader? 9
Scope of the briefing 9
How to use this briefing 10
MARKET CONTEXT 11
Introduction 11
Co-branding was first introduced in the US in the 1980s 11
Co-branding brings together the strength of an issuer and merchant partner 11
Co-branded cards are issued in partnership between an issuer and merchant 11
These partnerships leverage the assets and resources of each player to create a strong value proposition, frequently including a loyalty offering 13
Co-branded card programs are formed through either straight partnerships, self issuance or the conversion of a private label portfolio 15
Co-branding offers significant benefits to both parties 17
Issuers benefit from higher spending levels, access to a customer base, lower acquisition costs, cross-selling opportunities and added value in a competitive market 18
The primary benefits for merchants are additional revenue and sales 20
The potential costs for both partners are considerable 22
TRENDS IN CO-BRANDING 24
Due to a combination of competition and the potential benefits, co-branding is growing in importance 24
Intense competition in many markets has forced issuers to look more closely at co-branding partnerships 24
The proportion of co-branded cards in the market place has grown 26
Co-branding is now prevalent in many merchant sectors, leading issuers to look beyond this “traditional” list 28
Relationships between card issuers and their partners have evolved 30
PRODUCT FOCUS 32
Club models 33
Basic Club models are the simplest form of loyalty program 33
Advanced Club Programs give cardholders a greater range of benefits 37
Points based models 41
Basic points based programs 42
Advanced points programs 45
Multi-retailer programs 51
FUTURE FOCUS 57
The market outlook varies by region 57
Co-branding will provide an opportunity for growth in slow growing markets 58
Co-branding will allow issuers to increase market share in growing markets 59
However, co-branding will not be the answer for all issuers and merchants 61
APPENDIX 64
Research methodology 65
Future Readings 66
Datamonitor’s custom research capabilities 67
Cards & Payments Team contact details 69
How to contact experts in your industry 70


LIST OF TABLES
Table 1: Presidents Choice points awarded by PC Financial Services, 2006 47
Table 2: President’s Choice, cinema redemptions, 2006 48
Table 3: Datamonitor’s forecast for pay later card numbers across five markets, 2005 - 2010 57
Table 4: The number of co-branded revolving cards in the UK, 2001-2005 64
Table 5: The proportion of co-branded revolving credit cards in the UK, 2001-2005 64
Table 6: The number of co-branded and private label payment cards in the UK, 2001-2005 64
Table 7: Current relevant Datamonitor publications, 2006 66
Table 8: Future relevant Datamonitor publications, 2007 67


LIST OF FIGURES
Figure 1: Defining card partnership models, 2006 12
Figure 2: Combining brand and expertise in a co-branding relationship, 2006 14
Figure 3: The average co-branded card has twice the average annual spend levels, USA 2004 20
Figure 4: Payment cards offering rewards have increased in popularity, USA, 2004-2005 25
Figure 5: The proportion of co-branded cards being issued has grown, USA, 2003 - 2005 26
Figure 6: The proportion of co-branded cards in the market place has more than doubled, UK, 2001 - 2005 27
Figure 7: In the UK, co-branded cards have tripled in number, whilst private label cards have declined, 2001 - 2005 28
Figure 8: The Travelocity credit card rewards consumers for staying loyal to the brand. 29
Figure 9: Datamonitor’s classification of co-branded card loyalty programs 32
Figure 10: The Jeep MasterCard, essential statistics, 2006 34
Figure 11: The Carrefour Carte Pass - essential statistics, 2006 36
Figure 12: The Porsche Card - essential statistics, 2006 38
Figure 13: The Champions League Card, essential statistics 2006 40
Figure 14: Toys “R” Us Visa card - essential statistics, 2006 42
Figure 15: Amazon.co.uk MasterCard - essential statistics, 2006 44
Figure 16: President’s Choice MasterCard, essential statistics, 2006 46
Figure 17: Tesco Clubcard credit card, essential statistics, 2006 49
Figure 18: Nectar Credit Card, essential statistics 2006 52
Figure 19: Nectar Card holder can redeem their points for a variety of goods online 54
Figure 20: The Web.de Barclaycard, Essential statistics, 2006 55
Figure 21: Datamonitor’s core consulting capabilities 68