The US financial services sector is being dramatically reshaped as brands try to grab precious real estate in consumers’ wallets with ever-more enticing credit and debit cards. Apple led the way when it surprised the market with the launch of its titanium Apple Card and non-bank US brands were caught in the backwash. Today, we take a look at how the market is changing.
In terms of consumption patterns, for most US consumers, there is usually little loyalty shown towards the use of physical products.
Consumers may switch between Apple and Android phones multiple times in a lifetime. However, when it comes to financial institutions, the level of loyalty to particular financial institutions tends to be much higher.
In other words, by issuing credit cards, non-bank brands in the US have the potential to build up more “sticky” financial relationships, stemming from relevant and targeted embedded finance experiences that are offered.
Embedded finance is now an ambition of many brands. This is where the payment process and the chance to purchase complementary services are kept within the core product experience as an integral part of the customer journey.
Embedded finance experiences
When non-bank brands launch credit cards, it is a relatively easy ‘means-to-an-end’ for brands to bring about relevant embedded finance experiences to their customers.
If we look at what the Apple card offers, customers get to earn cash back on their purchases, with high cash back rates on purchases of Apple products. And the management of the card and payments are handled right inside the Apple Wallet. Conversely, a Marriott Bonvoy Chase branded credit card is managed inside the Chase app and experience. The only tie-in back to the core product is the aggregation of loyalty points and redemption. Imagine all of the engagement opportunities Marriott has forfeited to Chase by not leveraging the more modern embedded finance experience for their credit card program.
Credit cards can also be structured to enable a new rewards program, or to strengthen a current one - take how Shopify matches the way merchants spend on their platform. Cashback programs are a race to the bottom line to win over users. We are seeing a trend towards curated rewards that are more targeted, go further than cashback and are more meaningful for users. Whether it be miles for travellers, crypto for investors, in-game upgrades, or free play for the occasional gamer, or discounts on your next car loan - rewards that make cardholders a hero in their environment are going to be the winners. Couple these targeted rewards with an embedded experience and brands now have control over all products and services offerings, know more about their users, and can offer a holistic experience for their customers.
Being part of everyday life
Even though COVID-19 accelerated the adoption of contactless payments, the reality is that in the US, physical credit cards are still required at a substantial number of outlets. So when compared to regions such as Europe and Asia, competing for ‘card real estate’ in the consumer's wallet is still of significant importance.
Physical cards will still undoubtedly have an impact on branding. However, repeated brand exposure, and thus the building of brand loyalty, can now carry over to the actual management of the card.
With Credit Card as a Service (CCaaS) from Railsr, brands are empowered to embed their credit card management within their own app. Historically, this sat within the platform of the issuing financial institution. In this new world of embedded experiences, brands can now control the look and feel of the entire journey and drive activity back to their core experience rather than share with their issuing partner.
Lower cost of launching financial products and services
An additional paradigm shift is the cost of launching a credit card. Historically, launching financial products such as credit cards would have been far too resource intensive for non-bank brands. The barriers to entry kept this as an option for only a select few companies of a certain size.
With solutions like Railsr’s CCaaS, the opportunity to launch financial products and services is being democratised. Brands are now faced with significantly lower costs and time of development.
No credit card means eventually missing out
As more US big brands launch their own credit cards and rewards programmes, consumers will have increased expectations towards other brands providing relevant embedded finance experiences. This means that brands need to drive relationships, relevance and revenue with their customers urgently. This can be done by launching their own financial products and services (such as credit cards) with partners like Railsr.
Speak with our Railsr US expert team who will ensure that your requirements and needs are met. Our team helps fintechs, bank partners and brands create amazing moments that matter for US customers when using embedded finance experiences. See you at Money20/20 USA 2022, or visit our website to find out more.