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Partner Advisors’ Sean Collins Weighs In On Rogers Communications’ Co-branded Credit Card Program

A Perspective on Rogers Communications Launching a Co-branded Credit Card Program

By: Jim Tierney

Launching a co-branded credit card program may not be a big deal in the U.S., but in Canada it’s a bit different especially when a non-bank – Toronto-based telecommunications company Rogers Communications – is involved, according to Sean Collins, Managing Member of Wellesley, MA-based Partner Advisors.

Rogers Communications recently cleared the final regulatory hurdle on its path to entering the financial services business and plans to start offering credit card services in conjunction with its new loyalty program – Rogers First Rewards — next year.

Rogers Communications had been seeking a bank license since September 2011 and the Office of the Superintendent of Financial Institutions has granted authorization to “commence and carry on business.” Rogers officials have said a subsidiary will begin offering credit card services with a pilot program for select customers first, and general commercial availability will occur sometime in 2014.

Collins told Loyalty 360 that Canada has had co-branding for some time.

“I think the nuance here is that a non-bank has applied for and will receive permission to actually issue,” he said. “That is something the states have really backed off of.”

Collins cited Walmart’s failed bid to enter the financial services market.

“Basically, Walmart wanted to do banking and had secured a type of banking charter that looked as though they might actually do banking as a Walmart entity,” Collins explained. “There was a hue and cry around that from the banking community as you might imagine, and there was a great deal of pressure applied in Washington to prevent that from happening. There is some concern among regulators that non-bank banks might skew the system, and of course the branch bank down the street is loathe to compete with the likes of Walmart for bread and butter banking.”

What’s interesting, Collins added, is that with the financial crash and subsequent bank regulations applied in the U.S., “bread and butter banking (like checking accounts and debit cards) became a whole lot less attractive and banks could lose money on certain retail accounts – meaning that Walmart may have dodged a bullet.”

Collins discussed co-branded credit card programs in Canada compared to the U.S.

“Canada has a much smaller population than the U.S., and a different payments mix which leads to fewer programs,” he said. “Canadian consumers tend to carry fewer credit cards than their American counterparts. It isn’t so much of a case of longer, but a different marketplace requiring a holistically different strategy.  Generally, the (Canadian) market is less hypercompetitive than the U.S. due to both the consumer differences as well as a different approach to regulations for banks and the payment networks (i.e. VISA, MasterCard, etc.).

Canadian consumers tend to be very interested in large “hub” rewards programs, like Air Miles, that attract a large base of consumers, Collins said.

“They are multi-merchant programs that also tie in manufacturers,” he said. “Those programs have been very successful in Canada but less so in the U.S. In fact, AirMiles came and left in the U.S.  One successful example here in the U.S. would be a program like UPromise, but that is in relative penetration terms a far smaller program that Canadian hub rewards programs.

Collins said what is happening now in Canada is an “ante-upping” of rewards value.

“There are several co-brand programs that are underwhelming from a value perspective and that is changing rapidly,” he explained. “The entrance of far more aggressive issuers from across the border is having a big influence.”

Collins said what Rogers is doing in Canada regarding starting a bank is “much more frowned upon” by regulators in the U.S.

“While it isn’t a slam dunk in Canada and will take a while to get fully approved, it is an area in which Canada is more progressive than the U.S.,” Collins said. “It would be very hard for, say, Verizon here in the U.S. to get approved for a captive bank. There are advantages to such a structure, but more risk.  It comes down to the type of banking and lending behavior that Rogers creates in its marketing and product line. Positive selection for both credit score and usage is important in the lending area and I am sure Rogers is focused on creating a product line that optimizes that.”

Collins said successful co-brand programs require four key factors, no matter where they are launched:

A positively credit selected customer, which is driven primarily by a great value proposition that is truly breakthrough and unique

A co-brand partner that weaves the program into the entire customer experience and underlying rewards program, and treats the product like one of its core offerings — not just a ride-along. That usually means performance measurement, executive leadership and accountability, and incentives to the front line.

An issuer and payment network intimately focused on the partner’s broader corporate objectives, not just the silo of the credit card portfolio

Financial alignment between all parties – meaning the end customer, the partner, and the issuer – to equitably share the program benefits.  This means a value proposition and deal structure that is in alignment with this goal. Much easier said than done.

Collins believes that what Rogers is pursuing to use the co-branded credit card program to enhance its customer loyalty program is a “great use” and most successful programs follow the same path.

“Some of the similar efforts in the U.S. have been less successful in this sector than, say, travel-based loyalty programs, so it will be interesting to see how Rogers makes this an “aha” moment for its customers,” Collins said. “But generally, if there is a successful and widely participated loyalty program, that suggests good prospects for a cobrand card in general.  However, the “must haves” above have to be there.”


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