March 9, 2017 | Written by: Chris Shaw
Share this post:
If you are like my family, you are frequent visitors to Target. We have one of the super-sized stores right near the house and we are constantly running in to get something. One thing you have probably noticed if you are a Target shopper is that every time you checkout you are asked if you’d like to pay with the ‘Red Card’ or sign up for a ‘Red Card’ if you do not already have one. But why do retailers want you to use their branded credit cards? Read on.
In the case of Target, the Red Card it is a private-label payment instrument that it offers through an arrangement with MasterCard, although you won’t see the MasterCard logo on most of the Target cards. The card can be issued as a credit card or as a debit card tied to your bank account.
Of course, Target is not the only retailer who offers private label payment cards, there are many including Kohl’s, Home Depot and Macy’s. But why offer branded payment options at all? Two reasons, primarily.
First, it brings additional customer engagement. Merchants recognize that the more you are tied to their brand, the more likely you are to be a brand advocate. And that loyalty can pay off in a big way for merchants. GE Capital Retail Finance’s Retailer-branded Credit Program Study stated that retailer-branded credit programs create more frequent store visits, increased from 1.4 per month to 1.7 per month adding almost four extra trips per year. “The higher traffic continues through normal retail and seasonal cycles, and translates into a 29% overall boost in store visits,” the study revealed.
Second is the significant savings available for those retailers when it comes time to pay the credit card processing fees. When a consumer pays with their American Express card, merchants are often charged up to 3.5% of the entire transaction. When that same consumer pays with the merchant branded card those processing fees could be .5% depending upon card type, etc. This represents a significant impact to the bottom line for merchants. As far back as 2012 Macy’s earned nearly $900 million from their partner Citi, who was managing their branded cards.
So how can merchants increase the usage of their branded payment instruments which bring higher loyalty and reduced processing fees? Well, as more and more consumers are focused on their mobile devices in the store, the addition of a branded mobile checkout solution makes a lot of sense for many merchants. The ability to offer a consolidated view of payment options, loyalty and rewards with in-store checkout capability is picking up speed with large merchants who recognize the benefits. And that is exactly what IBM Pay was designed to do – to help merchants bring mobile checkout to market fast and easy with no additional capital investment required at the point of sale.
Take a quick look at our new online ROI calculator and see how adding IBM Pay to your existing mobile app can help you increase the use of your branded cards and significantly impact your bottom line!