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The Flywheel Effect: How Credit Cards Can Grow Your Business in More Ways Than one


A World of Opportunity

Credit cards are a key component of the US payments ecosystem and a popular method of payment for both consumers and businesses. Over the past several years, card use has ebbed and flowed, dropping at the onset of the pandemic and rising again by late 2021. JPMorgan Chase experienced 19.8% growth over the two years ending in Q3 2021, and Wells Fargo’s credit card point-of-sale volume increased 29.9% over the same period.

Historically, card issuers have earned the bulk of their revenue from revolving interest; however, modern credit cards open up a world of opportunity for driving profit around the core business. This article discusses the many ways in which credit cards contribute to growing a business.  

Understanding the Flywheel Effect of Credit Cards 

The flywheel effect, an idea originally popularized by entrepreneur and author Jim Collins, is the cycle of momentum a business may experience that creates a self-propelling wheel of growth. The obvious draw of credit cards is that businesses can use the benefits and rewards of credit cards to acquire customers while also driving loyalty and increasing sales for core products. Here are several ways in which credit cards build a flywheel for businesses: 

Customer Acquisition: Businesses can supercharge customer acquisition with sign-up bonuses and attractive rewards programs. This creates a base of loyal credit card users who are already invested in the brand and may be more likely to engage with their core product.

Brand Loyalty: Personalized rewards and benefits that automatically  redeem (whether exclusive offers or bespoke rewards driven by digital signals) drive brand loyalty and customer retention. Cards create a positive feedback loop where loyal cardholders are rewarded, which drives engagement with the brand and sales. 

Cross-Selling and Upselling: Rewards tied to core products and services compel cardholders to engage with the brand in new ways beyond just using the credit card.

It’s easy to see how these elements build off of each other to spur business growth. Take a travel company, for example, that offers bonus points that can be used toward travel purchases when a customer signs up for a credit card. Not only do these rewards drive acquisition and loyalty, but the cardholder is likely to make more purchases through the travel company to redeem her points.  The company can also turn unused inventory into rewards or drive more business to a new partner or use “refer a friend” programs to aid with new customer acquisition.


Beyond Loyalty: The Core Product Growth Opportunity

Customer acquisition and loyalty are top of mind for many businesses considering branded credit cards. While bonuses, incentives, discounts, and other rewards go a long way in attracting people to the business and keeping them engaged, credit cards also serve as a unique tool for cross-selling and upselling core products and services. 

Many businesses also assume the primary purpose of cards is to generate profit from interest. While this is not untrue — store cards often have steep interest rates that far exceed the average credit card interest rate — modern credit cards offer a richer proposition: increased profits from core products, the sale of which are driven by credit cards. 

Brands that offer rewards and benefits tied to core products can encourage cardholders to engage with the brand in new and profitable ways. A hotel brand may offer free room upgrades and exclusive access to resort amenities, prompting people to try new things and even book more expensive rooms. 

Marketplaces for consumer goods may offer credit cards that offer cashback for purchases made within the marketplace. While these cards may generate revenue via interchange fees and interest, they incentivize customers to shop more frequently with sellers on the marketplace, redirecting attention back to the core product.

Credit cards can be a powerful tool for businesses looking to acquire new customers, retain existing customers, and drive growth. Targeted rewards and benefits can not only open the door to new customers but improve their engagement with the brand and, ultimately, drive more revenue. 

When evaluating the economics of credit cards, it’s important to look beyond net credit margin as a driver of business growth. Businesses can use the flywheel effect of credit cards to transform and grow the core business – and brands that harness this will create a self-reinforcing cycle of growth that builds momentum over time. 

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