It takes a lot to keep a Private Label Credit Card relationship going these days. Bank margins are under more pressure than ever, and retail partners face a changing environment. Do not forget the fragile economy, which pressures consumers and their purchasing habits. And remember the bustle about Amazon and Interchange in the UK? With last year’s rumors on a potential Chase/Amazon divorce, I sweated that for a while — last year the Chase Amazon Visa paid me back $686.71 in rewards, a personal favorite for a frugal rewards hound.
The Amazon and Interchange Buzz in the UK
Just within the past year, we’ve seen Walgreens enter embedded payments with a link to Synchrony, Alliance Data repositioning the business unit with a top, experienced executive from Citi who is reforming the business, American Express souping up its decades-long relationship with Delta Airlines, Barclaycard replacing Synchrony with the Gap PLCC and a new branded card, and Citi bringing the Exxon Mobile Smart Card+ at a time where gas prices are at a peak.
Recent Developments in the Embedded Payments Space
And, do not forget Capital One, who has a strong Private Label card business, which won the Walmart business from incumbent Synchrony, and now serves the top U.S. retailer.
Capital One’s Stronghold in the Private Label Card Business
Today’s news is about another Capital One win with Kohl’s. I never stepped into a Kohl’s until they linked up with Amazon as a return point, but now, every time I return something from Amazon, I get a coupon that I can’t resist using before leaving the store. The rest of America finds Kohl’s a great place to shop as evidenced from their 2021 reported revenue of $19.4 billion, up 21.8% over prior year.
Kohl’s Partnership with Capital One: A Win-Win
Capital One added new features in their latest PLCC renewal with Kohl’s, according to the press release.
The Importance of Co-Branded and Private Label Credit Cards
The contract extension with Kohl’s enables consumers to have expanded buying power and further solidifies an already strong partnership. Kohl’s high product standards and the company’s focus on customer service extends through its private label credit card program, Kohl’s Card, which offers cardholders access to exclusive offers, guaranteed savings, and online payment services. The two companies have also agreed to a co-branded card product piloted as early as 2023.
A recent article by Business Insider highlights the big deal, citing data from Kohl’s Investor Relations. The numbers are not a surprise, but they affirm the importance of a solid co-brand or PLCC relationship.
The Timing of the Capital One Deal with Kohl’s
Because private-label cards only let customers spend at one brand, they tend to offer attractive rewards and deals that encourage repeat purchases: Kohl’s holds cash promotional events throughout the year that let its cardholders earn an additional $10 for every $50 spent during a single transaction.
These perks drive spend: Last year, Kohl’s rewards members spent twice as much as non-members, and Kohl’s cardholders spent six times more, per Kohl’s 2022 investor day.
The timing of the Capital One deal is perfect. If you read the March 16 WSJ, you will see that a private equity firm is targeting Kohl’s, competing with Canada’s iconic Hudson’s Bay. If the deal goes to Hudson’s Bay, that might bring a downfield advantage to Capital One, who operates in that market since 1996. ATB currently issues the Hudson’s Bay Mastercard.
Another exciting day in the PLCC market.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
