Choosing the Right Co-Branded Card Program

by
Adam Rust

Have you considered the value of a co-branded card for your business?

If you need a way to send money to pay freelancers, to distribute commissions, or implement a rewards incentive program, then a co-branded service could be the answer to your needs.

Co-branded cards are marketed and managed by program managers (“PMs”). Usually, a PM is distinct from a bank. The PM acts an intermediary between the customer and the bank and provides all of the necessary tools for implementing a co-branded card service.

A few things to understand:

·         At the root of it all, a co-branded card program is designed to let people accept funds. A good plan will enable your cardholders to do so through a variety of different payment mechanisms. Of those, it is essential that it will take loads by Automated Clearing House (“ACH”)  transfers.

·         A co-branded could be useful in situations where the paying entity – be it an employer, an association, or another type of organization - cannot facilitate the payment of wages, commissions, or rewards by direct deposit.

·         With a co-branded debit card, an organization can pay shorter-term contractors without having to cut a check or pay cash. If you have concluded that setting up direct deposit to pay a recipient only once or twice is not the right choice, then co-branded products could be an excellent alternative.  

·         The co-branding service should you help you to keep track of your disbursements throughout the year – enabling you to streamline record keeping for your taxes.

·         The co-branding service should be PCI-compliant.

·         Some companies – often ones engaged in marketing - make use of commissions to compensate partner resellers. Some organizations use the cards as gifts for business clients or loyal workers.

·         Co-branded cards can help organizations strengthen their relationship with their workers.

The people whom you choose to give cards to will notice that they bear the logo of your company. However, that is only the beginning, because co-branding services may come with many additional features. For example, a company may be able to arrange to have a customized phone line which could be set up to take questions from account holders.

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Some other functions and services that could be a part of a PM’s co-branding portfolio:

·         A branded app

·         A unique email address.

·         SMS messaging

·         A unique web page portal. The portal would have secure socket layer protections in place. It would allow account holders to log on to see information about their account.

Make sure that your organization has PCI-compliant software in place to facilitate disbursements. To meet the standards of Payment Card Industry Data Security Standards (“PCI”), companies must accept, store, and transmit information in a secure environment. The primary card networks (VISA, MC, AMEX, Discover, and JCB) helped to create the standards for the system.

Co-branded or custom co-branded?

Program managers will apply the same fees and features to all of their cards, regardless of which business they are serving. Thus, if a PM’s product charges the account holder to withdraw funds at an ATM, then such a charge will be applied to all accounts. If a PM has an inactivity fee, then the rules will be the same across all co-branded relationships.

The exception to this rule is when the business negotiates for “custom co-branding.” Not all PMs will offer such an option, but regardless, any that do will impose additional fees on the company. That reflects the extra work that has to take place to do customization. The PM will have to write unique programming instructions to operationalize your organizations custom requirements. Furthermore, it necessitates that the PM gains the approval of its bank partner. Some changes are going to be off the table, regardless, because banks still have to follow the rules set out by their regulators.

How Much Does it Cost?

Program managers will charge seek to charge a business for several of the services that must occur before a program can be rolled out. It is entirely fair that they do so because the program manager will do a lot of work upfront.

It is hard to say how much you might pay. The ultimate cost will probably be a function of the initial set-up costs charged by your provider and also the marginal cost for each card you distribute.

For the provider, setting up a program triggers a lot of work. They have to vet any new company with their card issuer. They have to test any new APIs. Both the card issuer and the client will want to review layouts of the card image. Printing and fulfillment of new cards are not free, nor is the training they must provide to get the client organization up to speed on the process of using the co-branded card program.

Co-branding services differ from provider to provider. Your organization should determine which one can deliver the best fit for your organization’s needs.

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