By Jessica Duncan, Senior Director of Insights
This time last year we reported that over 40 credit cards launched in 2021. As predicted the competition in the payment space remained strong in 2022. Also occurring this time last year was the announcement that Ally Financial planned to acquire credit card company Fair Square Financial and reenter the card business. It had been nearly two years since Ally’s credit card partnership with TD Bank ended in 2019 and Ally cut its losses with their underperforming card portfolio. If we fast forward to Q4 2022, Competiscan observed 30 credit card launches this year with three of those coming from Ally: Ally Platinum Mastercard, Ally Unlimited Cash Back Mastercard, and Ally Everyday Cash Back Mastercard.
The Product Design Path
Competiscan reported in 2021 on two emerging card type trends: niche products and flexible, well-rounded rewards card.
Last year we saw niche products released for crypto, pet lovers, and student loan repayment. Then, in 2022 we gained a card for renters, Instacart, and even Buy Now, Pay Later (BNPL) cards.
As for general-use cards, those launched in 2021 were primarily aimed at offering maximum earning on everyday spend, think Citi Custom Cash and Bank of America Unlimited Cash Rewards. However, in 2022 issuers shifted attention to premium cards to ensure they offered a competitive product that would appeal to travelers’ new needs and expectations. Bank of America, Wells Fargo, and Capital One entered the premium travel card space in 2022 with cards like Capital One Venture X and the Wells Fargo Autograph Card.
While all of this was unfolding, Ally was watching and planning its approach for what products made sense in the current marketplace.
The Product Lineup
Ally rolled out a credit card lineup in November that includes three main products, which many consultants in the card industry believe is the right number given that the card mix properly satisfies most consumer interests. For example, Synchrony refreshed its product lineup in 2022 and offered three redesigned cards. Truist unveiled its newly branded cards and rolled out five products, including a secured and premium card option to bookend the three primary card offerings.
Two of Ally’s credit cards are no annual fee products: one designed for cash back earning, Ally Unlimited Cash Back Mastercard, and one as a no-rewards credit-building product, Ally Platinum Mastercard. It was cited by American Banker that the average FICO score for Ally’s auto finance borrowers is 683, and the average for Fair Square customers is 657 (Fair Square’s existing products are the Ollo cards which are targeted to the sub-prime audience). It makes sense then that a credit-building product was included. Ally’s existing auto loan base will likely be a prime target audience to cross-sell the cards, and Fair Square brings a strong understanding of serving the credit-building market. Even without this stat, issuers cannot ignore the movement in credit-building cards. There are more options than ever before and with that comes the opportunity to build lifetime value with a customer as they begin or work their way up in their financial journey.
“A card that starts with you.” is the primary tagline used on Ally’s website to introduce the products. Then, each of the three products has its own headline.
Credit You Can Count On – The Ally Platinum Mastercard offers no surprise fees, free FICO Score access, and automatic credit line reviews after the first 5 payments are made on time.
2% cash back on all purchases. All the time – The Ally Unlimited Cash Back Mastercard offers a flat 2% cash back on all purchases with no limits or minimums to redeem. Ally also branded a nurses and educators version of this product which offers the same rewards structure but includes a specific logo, cited on Ally’s website “to honor all you do.”
3% cash back on everyday purchases. All the time – The third product, Ally Everyday Cash Back Mastercard earns 3% on gas, grocery, and drugstore purchases, with 1% cash back on everything else. This product will likely carry a fee ranging from $0 to $39 which is similar to how the Ollo Rewards card is currently positioned. The fee will be based on the individual’s application.
The Launch Plan
Competiscan commonly observes new products being introduced through email and social media. Social media is a channel that reaches a broad audience and videos and links can be easily incorporated to provide additional information. Particularly with cards, there is more frequent use of pre-launch email campaigns and waitlists to build a prospective pool of customers. This was not the approach taken by Ally, because currently Ally is following the same marketing strategies used by Fair Square, which is to offer the cards by mail invitation only.
The pre-approved campaign observed in November included a competitive introductory pricing offer. For the cash back card, the offer was a 0% APR on purchases and balance transfers for 15 months, and for Platinum, 0% APR on purchases and balance transfers for 12 months.
Something that was a deal-booster for the cash back card was the addition of no balance transfer fee for the first 60 days (standard fee afterward will be 4% or minimum of $5). This tactic could have been used to help drive applications ahead of the holiday shopping season. This tactic also interestingly tied into some of our thoughts on card trends and predictions for the year ahead.
The Year Ahead
Inflation, rising credit card debt, and lower purchasing power will undoubtedly impact consumers and credit card usage in 2023. While Competiscan anticipates card competition to remain strong, we could see some card marketing cool-down (think crypto rewards and nonrewards cards with hefty standard APRs due to the continually rising Prime Rate). We may also see issuers scale down the super-rich sign on bonuses, trim back on promotional pricing lengths, or no longer waive the balance transfer fee during the introductory period. Ally and Fair Square understand the risks and are likely prepared to adjust accordingly as 2023 unfolds.
For more information on marketing trends, Competiscan clients can view its archive of reports and insights at www.competiscan.com.
Not a client? Schedule a demo today.