As we have spoken about in my post on Ramp, credit cards and corporate spend is a hot space right now. One of the biggest factors that individuals consider when looking for credit cards is the rewards they offer.
Does credit card A offer 3X points on dining, does it give me airport lounge access, does it reward me with high cash back on brands I love? These are all questions people consider when looking for their next credit card. These rewards programs don’t just materialize, there are massive massive teams at companies like Amex, Chase, BofA and more whose sole purpose is to create them. These programs include sign-up bonuses and cash-back or point rewards. Another massive draw of these cards is the partnerships the card companies assemble, offering special deals on retail brands like Lululemon, Theory, Ted Baker, etc. (the list goes on and on) to present cardholders with. Typical deals can be cash-back offers on purchases like the ones below on my personal Chase Freedom Unlimited.
Building a legitimate, lucrative rewards program is actually quite a time-consuming and difficult process, as indicated by the large teams dedicated to this process. Teams have to find partners interested in promoting their brand, integrate with them in a compliant and proper way, match card transaction data to the brand and specific locations, negotiate rates, manage settlements, and more. As a result, smaller card companies and fintech companies have substantial difficulty creating rewards programs for their cardholders.
Kard is opening the door to customizable rewards programs for the card issuers of the future.
How are they doing this? Kard presents issuers with a database of merchant partnerships that they can choose from which can then be offered to their respective cardmembers. Issuers can integrate with any merchant brand and tailor their rewards programs directly to their customer base (of cardmembers). Instead of these smaller fintech companies having to manage the relationships with each merchant, Kard does it for them, abstracting away the time and complexity barriers. What’s more, this saves time, money, employees, and more, allowing card issuers to focus on building a great card experience. Customers on the issuer side can be any entity from traditional banks to neobanks to banking-as-a-service fintech companies.
On April 28, 2022, Kard raised $23MM in a Series A led by Tiger Global. Fin Capital, s12f, and existing investor Underscore VC also participated. Kard is a rewards-as-a-service API that connects modern card issuers to brands that their cardholders love.
Though, I don’t like the sound of “rewards-as-a-service”. I like “rewards marketplace” better, connecting credit card issuers and brands with one another. Kard is a two-sided marketplace for card-spend-rewards. Merchant partners make up the supply side and card issuers make up the demand. And they are connected thru Kard’s powerful API.
Kard is extremely powerful for brands.
Kard facilitates the capturing of incremental market share, acquiring of new customers, and increase in transaction size and frequency. Kard’s collection of issuers has credit card customers that are young, diverse, and more likely to be familiar with online shopping than the cardmembers of years past. With personalized bank branding and offers that appeal to consumers, these brands can compel true customer loyalty and larger purchases than would be made otherwise. By driving lucrative offers to potentially millions of these cardmembers, customer acquisition is vastly augmented which improves return on ad spend.
Card issuers in turn get a revenue share with the brands they partner with and get to present the offers to their cardmembers in the manner they choose. Rewards no longer have to feel vanilla, and issuers have complete control over their programs, creating something unique for their users.
As of the raise, Kard powers rewards for more than 10 million cardholders, processing more than 50 million transactions per month, nearly a ten-fold increase in the last six months alone. Issuers have seen an increase in total customer spend by as much as 37% after implementing Kard’s rewards program.
Kard is a cool B2B-focused product that is likely very sticky within its customers.
On the issuer side, it’s a lot easier to integrate with a marketplace that has willing and able brands who are interested in partnering. Once you start using Kard to get access to brand partnerships, it’s unlikely you would want to stop or try to build out a partnerships team from scratch. There’s a ton of operational efficiency from this white-glove service. From the brand side, Kard is a great way to open yourself up to new customers who are incentivized to spend, with lower marketing costs associated with acquiring them.
In terms of the risks facing Kard itself, a part of their top line is indexed to total customer spend on partners’ products. This is because they take a cut of spend on the partners’ products, a re-occurring, transactional revenue source. As a result, when people spend less and discretionary purchases on consumer products fall, Kard will feel the hurt.
I couldn’t find much on the business model as it relates to the issuer side of the marketplace, but the issuers likely pay a recurring subscription with a few levers (number of total credit card customers, fee per transaction, etc.). The risk Kard faces with this contingent is if there are a large enough number of issuers that are unwilling to build out the rewards themselves and the pricing is lucrative over the long term to justify access to Kard’s partner database.
This weekend I got to go to the grand opening of Avra in Rockefeller Center.
Also made my second trip to Kyu NYC with some buddies for a birthday. The menu is pretty large (indecisive people beware) but literally everything on the menu is amazing. The brisket, short ribs, lamb saddle, fried chicken, and Japanese sweet potato are the current favorites.
Also managed to chef up a pretty substantial meal for friends. Will be traveling the next few weeks but will still be shooting out the newsletter so expect some nice pics :)
GW