Swiping Alliances: Co-Brand Credit Cards

'Strategic' or 'Vanity' Tool in India's Credit Card Industry?

In the dynamic and evolving Indian credit card space, co-branded credit cards are emerging as a strategic lever of customer acquisition, loyalty, brand positioning and signalling effect. While the total credit cards in force have crossed 111 million (as of May 2025) and a spends run rate of Rs 22 tn (basis May spends of 1.89tn), a significant share of new issuances in the last few years has come through co-branded partnerships, from airlines and fuel companies to e-commerce platforms, fast-food chains to fintechs.

So, what makes co-branded credit cards tick? What are the mechanics, commercials, and strategic motives (if any) behind them, and do these co-brands make or break fortunes for the card Issuers?

💳Why Co-Brand? A Strategic Alignment or tactical play?

At its core, a co-branded credit card is a joint offering between a Bank (issuer) and a merchant brand (co-brand partner), which can be either financial or non-financial. The goal? Could be manifold:

· Customer Acquisition: To tap into each other’s customer base,

· Customer Engagement & Loyalty: build stickiness, and increase FOP (frequency of purchase)

· Differentiated customer value proposition (CVP)

· Others: Strategic Banking relationship, Analyst / Investor expectations, Symbolism

In India, where card penetration is still low compared to global peers, co-branding is often projected as a shortcut to scale.

For Issuers, it’s a way to access a different base: affluent, high spending, loyal customer segments, CVP sharing, share of mind and wallet of a particular spend category of the partner brand.

Some use co-brands for “Premiumization” of base (driving premium penetration).

For Co-brand partners, such as Amazon, Flipkart, IndianOil, Tata Neu, Swiggy, and Indigo — it’s a way to monetize platform power by generating fee income through association fee, partnership payouts and augment its own loyalty initiatives. Credit card due to its eligibility criteria still remains a select base of high spending individuals second only to big cash users who have so much unaccounted money that they do not really care for points or discounts. Another emerging variable, though, still not fully exploited is getting an off-us view of the customer.

The Promise: consider Amazon team knowing the spend pattern of its co-brand cardholder in different categories, gives a lot of data backed insights to work on. Especially think big data and AI.

The Reality: apart from lip-service and fancy decks very little happens on the ground.

Reason: Inertia!

⚙️ Mechanics of a Co-Branded Card

A typical co-branded card involves three key stakeholders:

• Bank or Issuer – Issues the card, manages credit, underwriting, and compliance.

• Co-brand partner – Offers CVP support, brand power, and a loyal customer base or destination from where the Issuer can source customers.

• Network (Visa, Mastercard, RuPay) – Provides the rails, exclusive Network based proprietary offers like cross border offers, co- funding of value proposition and often association fees. Considering the Rupay threat big money is being pumped into co-brands to stave off Competition, now blunted by RBI regulations

• 3P or Group Company Merchant brands: similar to coalition loyalty. E.g. Flipkart co-brand has discounts from other merchant brands too

Cardholders are lured with tailored rewards (like 5% cashback on Amazon or extra fuel points at IndianOil stations), accelerated access to loyalty tiers like Marriott Bonvoy, co-branded loyalty programs, and sometimes exclusive tiered benefits.

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💸 Commercial Model: Who Pays Whom and Why

The commercial structure varies by deal, depends on the bargaining power and need of both the co-brand partners, but typically includes:

• Revenue sharing: Issuers share certain bps of spends (share of I/C), payout per card issued, milestone payout basis card (#) and spends (value).

• Association fee: This is a fee typically charged by the merchant partner and paid by desperate Issuers!

• Marketing commitments: Could be shared or exclusively funded by either of the partners, again arrangement depends on whose need is more.

• Other Commitments: Both Issuers and Brand partners have associated variables such as Banks may include Debit cards, salary accounts, Corporate Card etc, while Brand partners may want buy in/commitment from Issuers for high cash burn strategic programs throughout the year. (Product expenses and cashback expenses sit in different lines in the P&L, easier for all involved to keep it that way!) As naïve it may sound, no one bothers to take a relationship view, if one does, it results in more questions than answers! Trust me, between answering Investors and being logical, the former takes precedence! No one cares about logic 😊

In all, it is a very interesting situation, one where - game theory, nerves, anticipation, Industry networking and information plays a big role. What about Customer need, product strategy and similar such concepts? Well, they come much later down the prioritization order!

INSIGHT: One variable where the Issuer and co-brand partner have a contradictory approach!

Spends on co-brand partner vs spends elsewhere: Typically, Issuers assume a certain % of spends to be on co-brand partners (e.g. spends on Amazon for Amazon pay ICICI Bank Card). This is the optimum range where revenue exceeds CVP expenses, while co-brand partner is comfortable with CVP burn exceeding but more often than not the Issuer isn’t. This is the reason why you see clutter-breaking CVPs, being modified or caps being introduced etc post launch. (not restricted to co-brands remember Axis Bank card with 25% on restaurant spends, SBI Card cashback card and more)

Number of Cards: Again, on cards, co-brand partner would want to be the dominant contributor to the Issuer’s card base. For the Issuer, keeping overall co-brand card contribution between 20% to 25% is advisable, anything more is risky.

Necessary Requirements of a Co-brand partnership

· Brand (of course!)

· Loyalty base (preferable)

· Co-fund CVP

· Co-promotion

· Equity / Reputation

📈 Co-Brand as a Strategic Differentiator

There was a time in the distant past co-brands were not only considered but were strategic. This is the time when Citi was at its peak. Considering their strategy was Card as a point of market entry for customer acquisition (prior to Suvidha accounts), they were quite strong in co-brands with iconic ones like:

· Shopper-stop First Citizen,

· Indianoil,

· MTV,

· Jet and more.

Though, standalone profitability was questionable due to high maintenance co-brand partners, it still played out well for Citi due the fit with its overall Business strategy. HDFC Bank was fast emerging and didn’t believe in Co-brands at all. In fact, their then Group Head was a staunch disbeliever in co-brands and rightly so as HDFC Bank had a captive customer base to card. Post the said Group Head’s exit, HDFC took a U -turn and upped its co-brand game. In the current market HDFC is the most active co-brand card Issuer.

Despite number of cards increasing over the years none of the present-day co-brand have reached the status of above listed co-brands. Some of the promising ones are:

· Amazon pay ICICI

· BPCL SBI Card

· Air India SBI Card (earlier version)

So, what are the reasons that number of cards are more, number of co-brands launched are also increasing, still none are as iconic? The answer lies in the question itself! There is a rush to strike these co-brand partnerships, they are announced and launched (notice the uncanny timing of announcement & launch of these co-brands around the Investor/Analysts meet) with much fun-fare and then the energies are again focussed on the next launch. So, more focus on hunting and less on harvesting.

To summarise co-brands are not an integral part of the Business Strategy but an important part of “visibility strategy” to indicate to the Investors/Analysts, on launching diverse value propositions (this is hyper-personalization of products). The analysts also question on similar lines and somehow are comfortable. To my utter surprise & dismay, they don’t ask about:

· Scale the past co-brand launches have achieved or the plan

· Ability of sales and consumers to handle these many co-brands

With so much fragmentation (read hyper-personalization) the basic premise of co-brand to aggregate spends gets defeated! Who cares?!

The result is a crowded perceptual map of product that has many small circles (circles representing the # of cards and spend), after a while neither the PM nor the consumer cares for these…. but guess what? the Management and Analysts keep indulging each other! 😊

INSIGHT: it is easier for both Management and Analysts to explain and understand respectively co-brand launches! Try explaining Portfolio management / Harvesting, doesn’t work…too tedious, time consuming and not sexy at all….

⚖️ Regulatory Oversight: Guardrails in Place

The Reserve Bank of India (RBI) has taken note of the aggressive proliferation of co-branded cards. While RBI permits co-branding, it has imposed certain compliance checks:

• The bank must take full responsibility for KYC, risk, fraud, and customer redressal.

• The co-brand partner must not issue cards independently or pose as a bank.

• All card terms must be transparent, and co-branding must not blur liability boundaries.

The recent surge in digital-first card issuers and opaque partnerships (especially involving fintechs) has brought these issues under sharper scrutiny.

Most Important part of a co-brand? Agreement that is signed between the Issuers and co-brand partners!

🛍️ What’s in It for the Co-Brand Partner?

Monetizing the base (whether partners admit or not is a different thing) is the single most important factor. Others are:

1. Increased Customer Lifetime Value: Incentivized usage and rewards keep customers coming back.

2. Data Play: They gain insights into customer spending habits beyond their own ecosystem.

3. Revenue Share: A slice of interchange or annual fee adds a new revenue line.

4. Brand Stickiness: The brand stays in the customer’s wallet — and mind — through daily transactions.

5. For partners that have higher dependence on co-brand as payment mode, it helps to have more control on payment mechanism (it is well known in digital-commerce the returns are inversely proportion to the pre-paid instrument used) meaning customer paying by cash has more probability of returning goods compared to customer paying by card

🧭 Challenges & Future Outlook

Despite their appeal and strategic importance, co-branded cards face key challenges:

• Over-saturation: Too many cards can dilute value.

• Customer fatigue: Users may forget benefits or make poor choices in the face of too many options (problem of plenty)

• Non-Exclusivity: In the distant past, co-brands were exclusive, in current times exclusivity has made way for marketplace, where the partner brands auction their base to any Issuer/s who is/are willing to pay. The unfortunate trend started with Jet co-brand and blindly followed by others since then. (perhaps one of the reason why Cards Industry has not witnessed any iconic co-brands)

• Partner alignment: The goals of banks and brand partner may diverge mid-way. (RBL- Bajaj Finserv) this was an extremely risky play, served the Organisation well before the plug was pulled by the co-brand partner.

Counter-argument: when Management wants scale as on yesterday, then who is worried about strategy. Do listen to Investor calls now and the same investors enquiring the de-risking plan and monitoring the % of base that has been de-risked

• Regulatory tightening: More disclosure requirements and stringent regulations, may slow down innovation.

Looking ahead, what will co-brand 2.0 consist of:

• UPI-linked credit lines under co-branded identity.

• Embedded finance experiences inside brand apps.

• AI-based personalization of rewards/ CVP, not just static slabs.

📝 Final Word

In India's complex and growing credit ecosystem, co-branded credit cards are not just plastic (pun intended!) they’re powerful platforms for loyalty, data, and ecosystem integration. When done right, they deliver value to all — the bank, the brand partner, and most importantly, the customer.

But when driven by vanity tie-ups and loose execution, they can end up as mere logos on cards that sit unused in wallets. As India moves toward digital-first credit ecosystems, co-brands must evolve from analysts/investor/rewards gimmicks, to real relevance closely linked with overall Business strategy not only of Credit Cards but also of the Bank / Issuer.

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Self-Diagnostic Product Portfolio Tool

This tool will throw action items:

Low #cards & Low Spend / Card (SPC): Review, Potential: Y, then grow else sunset

Low #cards & High SPC: Grow issuance

High #Cards & Low SPC: Increase spends

High # Cards & High SPC: Protect and pamper with your life!

Circle represents Spends you may use any other relevant variable say ENR etc

Interesting anecdote: Aeons back, I was entrusted with Banking co-brands as an additional responsibility, in my josh of getting the new responsibility, I thought of having a holistic approach towards the new gig and drew up a similar matrix, only to be mildly admonished that I am doing what Products should do and Products is doing what I should be doing 😊

While at that time, I didn’t feel great but it left me with an interesting learning…

LEARNING: Knowing tools is important, knowing when to use which tool is PRICELESS!!