Who’s the most valuable customer for a business? A customer who’s loyal and who returns again and again. Companies with loyal customers tend to grow their revenues 2.5 times as quickly as their competitors.
Your company has several options for boosting customer loyalty and, with it, your revenues. One option is to introduce a private label card program. A branded card, also known as a white label card or store card, encourages people to shop with your business. Often, the cards offer incentives that encourage people to buy more, ensuring that they’ll continue to do business with your company over the years. Learn more about private label cards and how they benefit your business and your customers.
What Are Private Label Cards?
Private label cards can be prepaid or debit cards consumers can use at a particular store or family of stores. Because the cards work at a specific retailer, they won’t work at any other stores. Private label cards are examples of closed-loop cards, which can only be used at the merchant that issued the cards.
A financial institution, such as a bank, usually manages a private label card for a retailer. Some companies exist purely to provide businesses with access to white label cards. A retailer can also manage the private label card program on its own, setting up accounts for customers and using automated clearing house (ACH) transfers to load money onto the cards.
A white label debit card looks similar to a debit card offered by one of the major card processing companies, such as Visa or Mastercard. The card will have a 16-digit account number, an expiration date, and a place for the customer to sign the card on the back. The cards have embedded microchips and magnetic stripes, and some have radio-frequency identification (RFID) technology that allows a customer to tap the card at a card reader when making a purchase.
Private Label Cards vs. Co-Branded Cards
A co-branded card has some common features with a standard prepaid card and some features in common with a private label card. Like a private label card, a co-branded card will have the retailer’s or brand’s logo on it. When a customer uses the co-branded card to make a purchase, they can take advantage of the card benefits offered to people with a store card, such as special discounts or reward points.
Unlike a private label, closed-loop card, a co-branded card is usually an open-loop card. Along with being issued by a retailer or company, the card is also issued by one of the big card issuers. A consumer can use it at any business that accepts cards from that particular card issuer. A co-branded card can be ideal for customers who are particularly loyal to a brand and who want to get the most from the company’s private label card. Co-branded cards might also appeal to shoppers who occasionally frequent a business and wouldn’t be interested in getting a card that can only be used at one store or family of stores.
Three parties are usually involved in issuing co-branded cards — the retailer or business, the card issuer, and a payment network or bank.
How Do White Label Prepaid Card Programs Work?
White label debit card programs work similarly to major debit or prepaid cards. People need to apply for the cards and be approved before they can use one. When making a purchase, they present the private label card at the point of sale.
How Do Consumers Get a Private Label Card?
Usually, a consumer doesn’t need to complete an application or qualify to get a private label debit or prepaid card. Often, the process is as simple as buying the card. Depending on the company behind the card, there might be a fee to purchase it, or the card might be free. The card’s value is determined by how much a person loads onto it at the time of purchase. For example, they might buy a prepaid store card for $50. The initial balance on the card will be $50, as long as there isn’t an opening fee.
Depending on where the customer buys the card, it can be a physical debit card or a virtual card. If a person buys a virtual card, they get a number that they can use when shopping online. Consumers can buy a physical card in-store or order one online and have it shipped to their home.
Once a consumer has the card, they can decide to register it with the company. Registration usually means opening an account with the company, providing basic contact information such as name, address, email, and phone number. Usually, a consumer will need to link a savings or checking account to the card so they can reload it easily. In some cases, a customer might be able to refill their card in person by paying cash at the store.
What Is the Payment Process for a Private Label Card?
When a customer makes a purchase using a white label card, this is what happens:
- Customer presents their card: The customer pays using their branded card, either by swiping it, tapping it, inserting the chip, or providing the account number and expiration date.
- Merchant requests authorization: The merchant sends all the card details and payment details to the processor through its point of sale system.
- Payment processor requestions approval from a bank: The processor sends the details to the issuing bank.
- Bank issues approval or denial: The issuing bank can approve the request or deny it. Reasons for denial can include a mistyped card number, a card that’s been locked, or insufficient funds remaining on the card.
- Approval or denial travels back to the processor: The bank sends its approval or denial back to the processor, which then shares that information with the merchant.
- The sale is completed: If everything is approved, the sale is finished, and the customer can make their purchase. If the card is denied, the merchant can try again, or the customer can use a different form of payment.
The entire process usually only takes a few seconds to complete.
What Types of Companies Issue White Label Debit Cards?
Companies in many industries can benefit from private label debit cards. A few examples of industries that commonly offer private label or co-branded cards include:
- Airlines: Airlines often partner with card issuers to offer cards to frequent flyers. The cards let people pay for their plane tickets with ease and also allow them to collect rewards points that they can cash in for airline miles.
- Retailers: Retailers of all kinds, from clothing shops and furniture stores to hardware stores to entertainment shops, offer store-branded cards. When a shopper uses a store-branded card, they often get a discount at the retailer or earn points toward a future coupon.
- Restaurants: Restaurants, including sit-down restaurants, fast-casual establishments, and cafes, also offer private prepaid cards. In some cases, the cards are connected to a rewards program or give the customer a discount.
What Are the Benefits of Private Label Debit Cards?
Private label cards benefit the businesses that offer them and the consumers that use them. The cards are convenient and help increase revenues and sales.
Benefits for Businesses
One of the biggest benefits of offering private cards is that doing so can help your company retain customers. For example, a customer is in the market for a new pair of jeans. The last time they were at your store, they purchased a prepaid card to take advantage of a discount offer. As they shop for their next pair of jeans, they are more likely to return to your store to use their card and to get any discounts associated with the card.
Another benefit of white label cards is that offering them can let you see what your customers are buying. You have easy access to their purchase activity and spending habits and can tailor marketing materials to them. Having easy access to customer spending history also helps you see what products sell better than others.
Offering private label cards can make your company look more legitimate in the eyes of consumers. For example, a retailer that offers a card to clients is likely to appear more established and trustworthy than one that doesn’t have prepaid cards available.
Benefits for Customers
Customers also benefit when companies offer private label cards. Many customers purchase prepaid cards from their favorite retailers or merchants to take advantage of the discounts and rewards programs on offer. For example, points programs are popular with white label cards. Every time a customer makes a purchase, they earn some points, such as 1% of the purchase price. After they’ve earned a specific number of points, they can cash them in for a bonus. After earning 1,500 points, for example, a customer might get a $15 gift certificate. Or, 15,000 points might translate into 1,500 airline miles.
Private label cards can also help people who have struggled with responsible spending in the past. If a person has maxed out their credit cards or owes a lot on their other cards, they might use a prepaid card to develop budgeting skills. Someone with poor credit can also get access to a prepaid or debit card when they wouldn’t be able to get a credit card. Although a prepaid card won’t help someone build credit, it can help them improve their spending habits, allowing them to build a strong financial foundation.
Why Your Brand Should Consider Offering a Branded Card
In addition to increasing customer loyalty and improving customer retention, there are a few other reasons why your business might consider offering a branded card.
- Better customer data: When people open a debit or prepaid card with your company, you can get an insider’s view of their purchase history, helping you better understand their needs and wants. You can use the data to decide where to open new locations, determine which type of discounts or deals attract the most sales, and see which products are the most popular with certain demographics.
- Increased revenue streams: If you offer white-label cards, your company can share in a cut of the processing fees, which introduces an additional revenue stream for your business.
- Better consumer protection: Consumers who use a private-label debit card have certain protections. For example, if their card is stolen, they won’t be responsible for fraudulent charges made on it, above a certain amount, provided they report the loss or theft in a timely fashion. Your company might also decide to offer better protection, such as extended warranties, to customers who make purchases using your branded cards.
- Increased branding opportunities: You have freedom when it comes to the design of your private label card. You can splash your company’s logo across the card or make it more subtle. When a consumer uses the card, other shoppers are likely to see the branding, providing you with marketing opportunities. You can also advertise the card at cash registers or in your company’s marketing materials to encourage people to sign up for it. Introducing a new card also allows you to get press coverage, especially if the rewards program you offer is particularly attractive.
Work With Hydrogen to Develop a Private Label Card
If you want to increase customer loyalty and give people a reason to keep coming back to your business, a private label card can help. Your customers will benefit from rewards programs and discounts, while you’ll benefit from increased customer retention and higher-value customers.
Introducing a private label card program doesn’t have to be complicated. Hydrogen’s no-code platform makes fintech easy. To learn more, request access today.