Beginning in 2020, a wave of credit cards offering non-traditional rewards and perks started hitting the market. Rather than focusing on traditional miles, points or cash back, the young financial technology companies behind these cards started leaning in to unique rewards — from crypto and wine to fitness and environmental benefits — to offer a more personalized experience.Beginning in 2020, a wave of credit cards offering non-traditional rewards and perks started hitting the market.
Huge costs make it ‘hard to stand out in the noise’ Fintechs use one of two approaches to take a new credit card from idea to market: Start from scratch, or partner with a company that has an established back-end financial system. “It’s tough to compete with the Chases of the world,” Goldman says. “For startups, the cost of capital is two or three times higher than established issuers. It’s hard to stand out in the noise.”Even if you defray costs, timing also matters The other option for startup card companies is to partner with a credit-card-as-a-service, or CCaaS, provider. These companies have the financial and back-end systems already set up.
But Goldman ran into poor timing with the Grand Reserve card, which partnered with hundreds of wineries across the country and was released in 2020, at a time when many of those partners had closed their doors to the public due to the COVID-19 pandemic. The card itself was shuttered about 18 months after launching.
“Even the richest of rewards programs can’t compete with megabank card marketing budgets when it comes to breaking out and generating widespread awareness,” Reid said. He believes M1’s growing cardholder base is already attuned to the M1 ecosystem, so using that ecosystem to bolster awareness also helps generate new cardholders.