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When Should Merchants Explore Alternative Credit Card Program Opportunities?

Is your company’s credit card program relevant and competitive in the marketplace? When was the last time you checked to make sure your credit card agreement is fair and balanced, reflecting the latest terms, conditions and market economics? Do you have a strong understanding of what your program is worth? A lot can change over the life of a credit card agreement.

Let’s examine a few situations that might prompt a merchant organization to explore alternative credit card partnership opportunities in the market.

The merchant is unhappy with the current credit card issuer

Credit card alliances are long-term business partnerships typically spanning 5-7 years per agreement term. The preparation and launch of a new product is typically surrounded by significant excitement and energy.  Many partnerships thrive throughout their nitial and/or subsequent terms. Some do not.  Though a partnership may work well initially, the alliance can begin to flounder if not actively managed by both parties.  A merchant may become unhappy with their credit card issuer for a number of reasons:

The credit card market has changed significantly since the agreement was executed

Credit CardThe credit card market is impacted by a lot of factors such as the economy, legislation, competitive payment products, technology and more. All of these factors can, in turn, impact card program economics and card issuer strategies concerning merchant card programs. Just look at what happened during the past five years. As a result of the economic downturn and legislation, many card issuers refined their merchant program strategies; some greatly reduced the number of programs under their management, some renegotiated agreements, others exited the business and several issuers, that did not previously market merchant card programs, entered the space. Program contributions fluctuated significantly as well, dropping to an all-time low for a couple of years, and recently rebounding to pre-recession levels. 

The size and scope of the merchant program has grown significantly

The strategic and economic value of a card program to card issuers is dramatically impacted by the scope and performance of the program. Larger, stronger performing programs are more valuable to card issuers. If your company’s program has grown substantially since it was launched, it will likely be valued higher in the market and will command stronger support commitments. The financial commitments generated from a card program can be significant for merchants. We believe it is critical to conduct due diligence prior to locking in a renewal of your current long-term agreement.

The credit card issuer partner, may not be interested in renewing the agreement

As touched upon above, credit card issuer strategies concerning merchant programs are evolving. Though a merchant may desire to extend its agreement with the credit card issuer, the card issuer’s willingness to do so should not be taken for granted. In recent years, Advantage has worked with several clients who assumed their agreements were going to be renewed by their issuers, only to discover that the card issuer was not intending to renew the agreement. In these cases, the merchants often found themselves unprepared for the upcoming termination and they did not have enough time to fully explore options in the market, or to plan for the conversion and/or re-launch of their programs.

Key Considerations

Evaluating alternative solutions in the market requires careful planning. To be successful, you must budget enough time to fully explore all of your company’s options. Consider the following:

Our Recommendation

We recommend that merchants begin exploration a minimum of 18 to 24 months prior to termination date. This approach provides adequate time for merchants to:

Our Advantage

Advantage Consulting Group supports our clients by building and executing the optimal go-forward strategies for their credit card programs. We evaluate current alliance agreements and benchmark them against the market. We identify opportunities to enhance program terms and support our clients in securing agreements that are fair and balanced. Our support typically secures significant economic and non-economic contractual improvements for our clients.

We encourage you to browse our case studies to learn how we’ve helped our clients by providing renegotiation and restructuring support.

We welcome the opportunity to speak with you about your company’s needs. Please contact us today.

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