What Banks Won’t Tell You About Private Label Credit Programs

For finance and marketing executives at large direct mail companies, understanding the dynamics of private label credit programs is crucial. When partnering with banks for these programs, it’s essential to recognize that the bank often reaps more benefits than your company does. By establishing your own private label credit program, you can retain interest revenue and control valuable customer data.

Companies that offer a private label credit program are ahead of the game, providing customers with the opportunity to buy now and pay later. Not only will you gain more revenue, but customers are also likely to buy more products because you’ve just removed a barrier to purchase for them. 

Studies have shown that revenue streams spike up quickly once a company launches a credit offering. Take Macy’s for example: between 2021 and 2022, sales from their credit program jumped from 35% to 49%. 

While buy now, pay later options are coming on the scene, data shows that more traditional private label credit cards are still more prevalent by far and still growing. US private label credit card transaction value reached about $258 billion in 2023—almost four times the size of buy now pay later (BPNL) transaction value. 

If your multi-title catalog company has not yet launched a private label credit program, the prevalence of these programs in the industry means you should seriously consider your options in order to stay competitive. However, the best private label credit advantages are offensive strategies, not defensive strategies.

The Hidden Costs of Bank-Managed Credit Programs

• Interest Revenue: Who Really Benefits? When banks manage your private label credit cards, they collect and retain the interest revenue—not your company. This arrangement means a significant portion of the potential income bypasses your business, going straight to the bank’s coffers.
• Data Ownership: A Missed Opportunity Banks also control the data generated by private label credit programs. This data is a goldmine for understanding customer behavior and preferences. When banks own this data, your company misses out on crucial insights that could drive marketing strategies and business decisions. With your own private label credit program, you mitigate the risks of banks siphoning your data for their benefit and the benefit of other companies, including your competitors.

The Advantages of Owning Your Private Label Credit Program

• Retaining Interest Revenue By managing your own private label credit program, you capture the interest revenue, directly benefiting your bottom line. This revenue can be a substantial financial boost, providing funds that can be reinvested into your company for further growth.
• Controlling Your Data Owning your credit program means owning your data. This control allows you to leverage customer insights to tailor marketing strategies, improve product offerings, and enhance customer experiences. Importantly, it eliminates the risk of sensitive data being shared with or sold to competitors.
• Case Study: The Power of Data Ownership Consider a scenario where a direct mail company launches its private label credit program. By owning the customer data, the company identifies trends and preferences, enabling targeted marketing campaigns that significantly increase customer engagement and sales.
  
  While the company now needs to manage debt risk, they no longer are reliant on margin-eroding discounts and offers to acquire and retain customers. Instead, they have a proven payment method and credit revenue stream that’s proven to be more effective at driving profitable growth than the never-ending cycle of promotions and the high marketing costs that come with them.

Find A Partner Who Knows Direct-to-Consumer Credit for Catalog Companies

Launching a private label credit program, and working with a tool like ZAPFI Credit Program by IMS, uses data to drive higher AOV and order frequency. You now own that data. You don’t have to go through the bank to get it, or worry that the bank will siphon that data for their own use, like to sell to other companies, including your competitors. 

While companies get squeamish about the risks and costs of bad debt, those same companies are already spending millions in marketing costs now, using margin-eroding discounts and offers to woo buyers. With a private label credit program, you’re swapping marketing costs for profitable incremental revenue that’s more effective at acquiring and retaining the customers your business needs than marketing incentives.

ZAPFI is actually a unique option because we’re direct marketers ourselves who know how to operate in-house credit programs for catalog brands. We have more than 30 years’ direct-to-consumer credit experience with a proven track record of managing and driving profitable growth for our catalog clients. We help clients reap rewards without siphoning customer data as a bank would. We also know how to make your credit offering a huge success. 

You won’t be alone as you promote, manage and grow this new program. We’ve been at this for decades, and we’ll be with you every step of the way. 

With a private label credit program, customer acquisition improves. So does the higher average order and lifetime values. The client experiences we’ve seen with ZAPFI when clients roll out a credit offering prove this and the data clearly supports it. You’ve just found a way to remain competitive with others in the industry who have a private credit offering. Driving incremental profit is no longer a wish or a goal: it’s actually happening.

Empowering Your Business with Private Label Credit Programs

• The Bank’s Benefit vs. Your Benefit While banks may offer the convenience of managing your credit program, the trade-off is substantial. The benefits they gain—interest revenue and data control—should be fueling your company’s growth, not theirs.
• Taking Control for Greater Success Establishing your own private label credit program is a strategic move that empowers your company. It ensures that you retain the profits and insights that come from offering credit to your customers, turning what would be an external benefit into an internal asset.

Don’t let banks capitalize on your customers. Take control of your financial destiny by establishing a private label credit program. Contact us to explore how your company can benefit from this strategic shift, ensuring that you, not the bank, reap the rewards of your credit offering.

Book a Demo to learn more, or check out our case studies.