On November 28th, 2023, view of the Lacten Mobile logo at a branch in Tokyo, Japan.
Staff | Reuters
There are new players who will make waves in an industry dominated by major banks.
CNBC learned, Imprint, a five-year-old credit card startup, defeated the bank in the competitive bidding process for new co-branded cards from online shopping platform Rakuten.
The deal, which is scheduled to be announced Tuesday, is the latest indication that the Imprint is gaining traction in the co-branded credit card industry.
The New York-based startup also had just raised $70 million in additional capital, increasing its valuation value by 50% from the previous round to less than a year.
Credit card partnerships with retailers, airlines and hotels are some of the most enthusiastically contested transactions in finance. In many cases, brands go through an extensive bidding process and choose a card company, but companies compete for the right to issue cards to millions of loyal customers. The largest players in the industry include JPMorgan Chase, Capital One, Citigroup and Synchrony.
“We’re talking to Fortune 500 companies about their partners and how they choose us above Synchrony, Barclays and the US Bank,” Murphy said in an interview. “We still have a startup spirit, but we have to walk and talk like a big, important company.”
As a result, the company recently raised capital, bringing it to a total of $330 million. Most of it is listed on the company’s balance sheet, according to Murphy. These funds will help show potential partners that imprints have sustainability, he said.
Imprint also has a credit line of about $1.5 billion from banks, including Citigroup, Truist and Mizuho, which they use to lend to card customers, Murphy said. The startup is also behind cards from brands such as Eddie Bauer, Brooks Brothers and Turkish Airlines.
“The bank is in trouble.”
To provide credit cards, the imprint is usually one of two small banks, First Electronic Bank or First Bank and Trust partners. Imprints handle customer experiences including technology and credit decisions while using regulated bank credit card rails.
For Rakuten cards, the imprint relies on the American Express network, allowing users to obtain Amex purchase protection and other perks. We use First Electronic Bank to help issuance of cards.
“We are not a regulated bank, but we are building banks effectively,” Murphy said. “We have to do the same thing as banks. We are a capital market company. We are a compliance company. We are a risk, credit and fraud company. We are a technology company.”
In order to acquire toes in the marketplace of co-branded cards that can be used where credit cards are accepted, Imprint decided to focus on a customer’s seamless digital experience, Murphy said. This requires difficult technical integration to complete the transaction for established players who rely on third-party companies, including Fiserv.
“Banks are struggling because they don’t own the technology that credit cards are running,” Murphy said. “All credit cards in your wallet rely on two or three different third parties to promote technology, whether from Chase, Amex, City or Synchrony.”
Fees and rewards
The imprint also decided to stand out herself by making it easier for clients to pay off their loans, Murphy said. Card companies, including bread finance and sync, have far more revenue shares from deferred fees than imprints, he said.
“You shouldn’t have all of these late regression fees and you shouldn’t make it difficult to pay,” Murphy said. “The easier it is to pay, the more likely you are to use your card and the more likely you are to use your card, the better it is for everyone.”
Finally, Murphy said the company’s low customer acquisition costs allow it to fund more rewards to its customers.
For example, the new Rakuten card adds an additional 4% cashback to users, along with what customers earn through shopping on the online portal, plus what they earn $7,000 a year.
Users also earn 10% cashback while eating at partner restaurants in Lakten and 2% cashback at groceries and non-partner restaurants.
