How is Credit Card Revenue Split Up to Bank, Network, & Brand Partner?

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JRG1392
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How is Credit Card Revenue Split Up to Bank, Network, & Brand Partner?

Postby JRG1392 » Thu Jul 11, 2013 10:49 pm

So I've been wondering lately, how are credit card revenues split up? Let's take for example the Marriot Rewards Premier Visa Signature card that's issued by Chase. As far as I can see, there are three different players involved - Chase as the lending bank, Visa as the network, and Marriot as the branding and rewards program.

According to my understanding, there are two different ways to make money off of credit cards, swipe fees, the % of purchase charged to the merchant, and interest fees charged to user for carrying balance.

The question is how is that revenue broken down into the three parties? The obvious answer for me appears to be that the network takes all the swipe fees and the bank takes all the interest fees - but that doesn't seem realistic. What then entices a bank to lend to someone that they know is going to pay off the balance in full each month - and then the branding partner also ends up with nothing? I'm sure the actual answer is it's negotiated but I'm curious if anybody has any insight? Thanks!
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Robrus1
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Postby Robrus1 » Fri Jul 12, 2013 1:27 pm

The swipe fees are received by both the network and the lender. The branding partner is helping create customer loyalty for themselves, which would be their incentive in my eyes. It could also simply be part of a bigger deal between companies, with the deal designed to be mutually beneficial to both
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DavidNY
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Postby DavidNY » Fri Jul 12, 2013 5:02 pm

JRG1392 wrote:the branding partner also ends up with nothing?


The branding partner gets their brand in your pocket hoping you will use that brand more often.

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djrez4
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Postby djrez4 » Fri Jul 12, 2013 6:17 pm

Don't forget annual fees.

Affiliates that put their names on the card get money from the issuing bank buying blocks of points. The issuing bank and the network split swipe fees. The bank keeps the annual fee.

There are some posts on FT about how issuers purchase points from the affiliates. If you google Citi's relationship with American, especially as related to the merger with US and the bankruptcy, you'll find some interesting articles. American owes Citi big time.
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