Private Label Credit Cards Heat Up as Walmart talks to Capital One

by Brian Riley 0

credit cards

When Mercator published the recent report on Private Label Credit Cards, we recognized that the US market is primed for growth in this sector.  Things have proven out with large deals flipping between top service providers including LL Bean moving from Barclays to Citi, Amex winning the Amazon business card, PayPal leveraging their relationship with Synchrony, and Comenity adding online retailer Appliances Connection.

We think life in the PLCC world will get even more exciting as general purpose card volumes level off through the rest of the year.

Capital One reduced their exposure in the PLCC business in 2013 when they sold their $7 billion Best Buy business to Citi, but they still have a few good brands, such as Kohls.

Today’s read talks about the mother of all retailers: Walmart.

  • Walmart is shopping for a better deal on its credit-card partnership that is currently with Synchrony Financial but may move — in whole or part — to Capital One as the retailer looks specifically to expand Walmart Pay, its budding mobile payments platform.

  • Sources tell Bloomberg’s Jennifer Surane, who broke the story yesterday, that the Bentonville, Ark.-based retailer has winnowed down the field for its huge business to bids from the two lenders. None of the parties involved had anything to say about the matter, however.

  • The Walmart card is the largest program in the U.S. up for renegotiation between this year and next year, according to analysts at Susquehanna Financial Group,” Surane writes.

Walmart generates $362.8 billion in sales, 9.3% of US retail sales (excluding automotive), so the potential change has significance.  Nothing says that the Walmart shift is final.  We will have to see if the press is playing into Walmart’s negotiating strategy or if this has real teeth.

If the deal shifts, the Costco/American Express-Citi shift will be an important standard to match.  Amex lost a significant chunk of their revolving business but reacted quickly and protected the revenue stream.

It will not be the end of the world, but it will be time to pull out “Plan B”  in Stamford.  You can certainly expect that Synchrony has a contingency plan in the works.

One thing for sure is that if Walmart does move from Synchrony to Capital One, then you can expect to see an upheaval in the PLCC business as Synchrony will undoubtedly rebuild their business.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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