Research Outline

Factors Affecting U.S. ARPU for Co-branded Credit Card Programs


To identify 2-3 factors that affect the average revenue per user (ARPU) of co-branded credit card programs in the U.S.

Early Findings

  • "Average revenue per user (ARPU) measures the amount of money that a company can expect to generate from an individual customer, and is determined by the total revenue of the business and its total number of users."
  • Some of the factors that may influence the level revenues and customer numbers include:

Factors Affecting Sales and Customer Numbers in Co-branded Credit Card Programs

  • Attractiveness of the co-branded credit card program to users
    • Both the card issuer and the retail partner need to make the co-branded credit card attractive to users. The card should have "the right mix of hard benefits (rewards, points and discounts) and soft benefits (such as concierge service or special events access) to attract users who will drive sales for the retail partner, while generating revenue and income for the card issuer. "
    • Studies show that while rewards are important to co-branded credit card users, they also look for other fundamental attributes, with 100% fraud protection and great customer service rating higher.
  • Misaligned goals between credit card companies/issuers and retail partners
    • According to industry experts, the co-branded credit card program should be viewed as a tool to enhance marketing and loyalty efforts for the retail partner, in order to drive cardholders back to a retailer's websites and retail locations. The financial contribution from credit card companies/issuers are mainly intended to support a cardholder reward programs that will be competitive in the market.
    • Other secondary benefits of the co-branded credit card program to the retail partner from the credit card issuer include bonuses paid by the credit card companies for each sign up, no credit card fee when the co-branded card is used, and a portion of interest or late fees paid by users.
    • Therefore, if a retailer's primary objective for a co-branded program is to generate revenue directly from the credit card issuer, their objectives may not be in-sync.
  • Lack of strong reward opportunities for users
    • When card holders do not see the value of patronage to a brand, they use their co-branded card less. This could be caused by low purchase frequency of the product offered by the retailer, or the benefits for using the card being very small.
    • In such instances, retail partners can design their co-branded credit card programs to extend loyalty programs in order to have customers/card users earn points for shopping with the issuing brand as well as anywhere else they take their card. When card users see the value of using the card even outside of the issuing brand, they have an incentive to return customers and invite other consumers to the retailer, and thus they cumulatively grow the retailer's revenues.
    • A good example of this is the Costco Anywhere Visa Credit Card.

Summary of Findings

In this hour of research, we provided insights on factors that affect sales levels and customer numbers, and thus the ARPU in co-branded credit card programs