Evaluating the Benefits of a Dual/Multi-Brand Credit Card Portfolio

Navigator Edition: June 2015
By: Myron Schwarcz and Ginna Rodriguez

Network duality (issuance of both Visa and MasterCard cards) has been in place in the United States since 1971.1 Today, close to half of the top 100 issuers have dual brand portfolios (see Figure 1), with 60% of the top 50 and almost a third of the second top 50 issuers supporting both brands. Although most issuers allocate only a small portion of their portfolio to a second brand, twelve issuers2 have a least 15% of their cards on the second brand. Issuers such as Capital One and Barclays get closer to a 50-50 split including their co-brand relationships. Since 2004 issuers have also had the option of offering American Express and Discover cards alongside Visa and MasterCard. Today, issuers like USAA, Wells Fargo, and First National Bank of Omaha are offering a multi-brand portfolio with three or four different brand options.

Figure 1: U.S. Credit Card Brand Landscape
(Top 100 Issuers)
Figure-1_-US-Credit-Card-Brand-LandscapeSource: The Nilson Report Issue 1058 and 1061, First Annapolis Consulting Research and Analysis.

A dual-brand or multi-brand portfolio can provide several benefits to issuers:

  • Ability to offer niche/segment-specific products: Duality provides issuers with greater access to a more diverse set of products or levels of service, increasing issuers’ flexibility to meet their cardholders’ needs. Choice helps issuers address gaps in their value proposition and take advantage of the offerings of the credit card brand networks. A diverse multi-brand approach enables issuers to target specific segments of their customer base. Well Fargo, for example, is using its partnership with American Express to engage its more affluent customers by providing a tiered bonus point scheme that provides more reward points to customers with higher tier checking or savings accounts or higher balance. Discover has a strong reputation in the marketplace for its cash back product as well as customer service excellence and loyal customer base.
  • Access to best practices: A multi-brand portfolio provides issuers with the opportunity to learn best practices from different card brand providers and work with different providers to drive innovation. Duality keeps issuers informed of the product options available in the market and helps them keep up with competitors in areas such as mobile payments, merchant-funded deals, etc.
  • Increased buyer power: Having relationships with multiple card brands can help issuers achieve better economics for their portfolios as their ability to switch volume from one provider to the other is enhanced, driving partners to compete for volume. Better economics come in the form of lower fees, or better marketing or other incentives that can be used to enhance the value proposition of the card products offered to customers.

It is important to note, however, that there are costs associated with a multi-brand portfolio. Credit brand agreements may have incentive structures tied to incremental volume, or fee structures tied to share commitments. Operational costs associated with a multi-brand portfolio include redundant staff for program management and back office servicing to process disputes and lost stolen reports. Additionally, separate product, strategy and brand meetings with partners may be required due to confidentiality and IP concerns. Each issuer should evaluate the potential benefits and costs of including additional brand options for their credit customers to ensure that that this strategy will advance their credit card portfolios.

1 Worthern Bank challenged Visa’s member exclusivity requirements in the 1971 case Worthern Bank v. National Bank Americard, Inc.
2 The Nilson Report 1058.

For more information, please contact Myron Schwarcz, Principal,
myron.schwarcz@firstannapolis.com, specializing in Strategic Sourcing; or Ginna Rodriguez, Consultant, ginna.rodriguez@firstannapolis.com, specializing in Debit and Prepaid.

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