Co-branded rewards programs like Amex’s longtime Delta partnership are a major factor in consumers’ credit card decisions. According to a GigaPoints/Ipsos survey, more than half of Americans say earning points makes them want to use their credit card more often. In a separate space survey (by Finder), nearly a third of respondents said they used a credit card solely to collect rewards points.
But creating these programs can be challenging from a brand perspective. If write-offs (meaning debts unlikely to be collected) increase, programs – especially if they operate on tight margins – can become financially strained. Questions also typically arise as to whether programs should be run jointly (for example, by issuer and brand) and how profit-sharing arrangements should be structured.
To address some of the challenges of co-branding credit cards, Dan Duncan, co-founder of credit card issuers Mercury Financial, launched Concerto, a startup that develops credit card programs for brands using “advanced data analytics.” While acknowledging that credit card issuance and loyalty programs are certainly nothing new, Duncan says Concerto’s approach is unique in that it applies technologies such as machine learning to measure and anticipate risks.
Concerto announced today that it has raised $21.2 million in a funding round led by Matrix Partners with participation from PayPal Ventures and GoldenTree Asset Management. GoldenTree also said it would form a joint venture with Concerto to fund a minimum of $2 billion in credit cards. receivables.
“Credit cards represent one of the best customer acquisition and satisfaction tools available to brands, but while they overcome the hurdles often imposed by banks, designing and executing a card program effective requires a lot of time, resources and expertise,” Duncan told TechCrunch via email. “For this reason, cards remain one of the greatest untapped opportunities… The Concerto platform disrupts all of that to give businesses the tools and credit they need, as well as the power to create and deploy highly personalized and remarkably innovative loyalty programs easily.
To take a step back, co-branded credit cards — which should not be confused with private label cards — are sponsored by several actors: a brand, such as a merchant, and a bank or card network, such as Visa. , Discover, or Mastercard. A brand must partner with a financial institution to issue a co-branded card, which oFten ends up being the institution that already processes credit or debit card payments on behalf of the brand.
Consumers generally like co-branded cards. Nearly 53% of all cardholders in the United States had a card in 2014 associated with a hotel, airline or other type of merchant or group, up from 46.4% in 2010, according to the national survey to Simmons consumers. Data. But Duncan says programs can be a headache for brands.
“Some businesses don’t have access to the financial tools or credit that big business enjoys — tools that would help them be more competitive in a modern economy,” Duncan said. “[L]bank loyalty and co-branding programs have not been optimized for the partner. Big banks routinely put their needs ahead of those of their partners through narrow credit acceptance. This, in turn, prevents many businesses from being able to leverage credit to help finance business growth, tying them up unnecessarily.
Duncan’s first venture after leaving Citicorp and Chase, where he was responsible for risk management for the credit card industry, was Austin Logistics, a firm that developed analytics software for financial institutions. Decades later, he launched CreditShop (later renamed Mercury Financial), which provides loans and credit cards to customers with traditionally lower credit scores.
With Concerto, Duncan aims to fend off banks he believes are reluctant to promote a partner brand above their own. “The industry as a whole simply hasn’t innovated to effectively serve business or consumer needs through cards,” Duncan said. “The technology now exists to do this in a very smart way, if you have the motivation to apply it strategically.”
For this, Concerto does not replace a brand’s relationship with a bank or card network. But the company is working with these institutions to create credit approval templates using “several million” credit bureau and application data points. (The search has watch that these types of models are susceptible to bias, especially against minorities with less data in their credit histories, but Concerto did not respond to a question about what steps it could have taken to mitigate bias.) Beyond that, Concerto makes liberal use of APIs, allowing the “card experience” and rewards features to exist inside branded apps and websites.
There’s obviously demand — Concerto says it’s actively signing co-branded credit card partners in “a whole range of industries,” initially Major League Baseball (MLB) baseball teams. Duncan says the Texas Rangers, Los Angeles Angels, Baltimore Orioles and Cincinnati Reds will soon launch Mastercard-issued cards and programs with access to “exclusive experiences and memorabilia” and “contests and periodic surprises. Very optimistic, he sees Concerto on a racing pace to add 500,000 customers by the end of 2022.
“Our initial baseball team partners set the foundation for future programs. The baseball team programs have allowed us to develop and deploy forward-thinking app experiences. baseball can go from seeing a QR code on the jumbotron to a card in their digital wallet to use at the concession stand in seconds,” Duncan said. “There’s been tremendous interest in what we’re doing so far. now, and we want to take full advantage of it. Our funding allows us to accelerate accordingly.
Concerto’s competitors, Kard and Cardless, have adopted similar clients acquisitions successful model. Cardless – which handles program creation and card underwriting for brands, as well as lending, issuance and customer service – has launched programs with a number of sports organizations, including the Cleveland Cavaliers, the British football team Manchester United and the Miami Marlins.
Concerto is behind Cardless is total capital raised ($21.2m vs. $50m). But Duncan says the goal is to “really scale” and get additional partners quickly.
“We also have several new features, partnerships, and programs underway, some of which will be disclosed in the coming weeks,” Duncan added. “Companies want to incentivize and reward people to get out there and do more – and people are ready. After enduring the pandemic for so long, we want to help people enjoy a host of new experiences.