'Content American Express's [AXP] deal with Loyalty Management UK, the company behind Nectar, will see the US company launch a co-branded credit card in September. The card will allow customers to 'double-dip' at Nectar-participating retailers, meaning that they will be able to receive two points for every GBP1 spent on the credit card and earn another two points per GBP1 by presenting their standard Nectar card. Barclaycard in contrast offered half as many points (that is 1 point for every GBP2 spent).
The value of payment card loyalty schemes is oft-debated, with detractors typically arguing that programs are expensive to run and little appreciated by cardholders meaning the returns of such investments are therefore questionable.
In this particular instance, the divergence between the two players comes down to differences in strategic aims and circumstances. Barclays has probably found itself caught up in a costly operation that was not servicing its large customer base as effectively as it would like. Set this against the wider context of likely forthcoming cuts in interchange fees, and its decision to offer a more targeted and less costly offering makes sense.
Yet if this has been Barclays' experience, questions must be asked over the benefit to Amex of participating. There are two key differences here: firstly, Amex is not, at present, under threat from cuts in interchange and therefore under pressure to be circumspect with costs. Second, it is seeking to build its small market share in the credit card market. However, with its reputation as an upmarket brand, it is unlikely to gain the requisite scale alone.
The alliance with Nectar will certainly place Amex in front of a mass-market audience, yet doubts must remain as to whether Nectar is a sufficiently strong brand to sustain its own credit card offering.
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