Affinity credit card scheme
From Wikipedia, the free encyclopedia
An affinity credit card program allows an organization to offer its members and supporters--those who have an "affinity" for that organization--a credit card that promotes the organization's brand and imagery each time a cardholder uses the card. An affinity credit card program also pays the organization a bonus for each new account generated, plus a percentage of every transaction charged to the card. This payment is funded by the bank that issues the credit card.
Affinity credit cards are offered by many universities, alumni associations, sports teams, professional associations and others, and increasingly by small and mid-sized nonprofits and membership-based groups that rely on these programs for incremental revenue. MBNA pioneered the affinity credit card business in the early 1980s. Throughout the 1980s and 1990's, most other major financial institutions joined in. Today, affinity credit card programs are ubiquitous in the United States and throughout Europe. There are now affinity cards for fans of sports teams as far afield as New Zealand (ANZ) and for Mini Cooper[1] (BMW Financial Services) buffs in the U.S. In fact, the explosion in popularity of affinity credit cards helped generate the global expansion on the number and use of credit cards in general. In 2005, Bank of America acquired MBNA's portfolio of more than 5,000 affinity credit card relationships and today Bank of America is the world's largest issuer of affinity credit cards.
But the affinity credit card industry is changing. To recapture the costs of offering a group's affinity credit card, issuers often prefer working with large organizations that allow direct access to members. This provides the issuer with the group's implied endorsement and access to members for the purpose of cross-marketing credit cards and other financial products. If an affinity group does not have a sufficient number of members, or refuses access to its membership base, it is often difficult for that group to find a bank willing to issue the credit card. As the banking industry in the United States and elsewhere continues to consolidate, many of the larger issuers have begun retiring smaller, less profitable affinity credit card programs. For example, after acquiring MBNA's credit card protfolio, Bank of America began terminating many of the smaller, less profitable affinity card programs it inherited in the acquisition.
Other competitors have stepped in to fill the gap, offering innovative approaches to affinity credit marketing and opening the category to the millions of small nonprofits and membership groups that have typically been unable to find a willing issuer. These companies include CardPartner [2] and UMB Financial, who jointly offer Visa affinity credit card programs specifically for smaller nonprofits and membership groups. Companies like CardPartner and UMB Financial offer groups the normal bonus and monthly percentage, but do not assume any of a group's marketing expenses, nor do they require access to a group's membership lists. This approach has proven popular with a wide range of nonprofits and other groups.
