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09/04/2010 -
Though they have become more of a rarity recently, some retailers opt to maintain their own in-house credit card offerings, which both improves brand strength and makes it easier for stores to manage customer loyalty programs and behavioural tracking.Upscale department store Nordstrom has found this strategy so beneficial, it has recently announced that it will keep managing its own credit card processing program "despite challenges posed by rising late payments and defaults by consumers," Seattle's Puget Sound Business Journal reported.
Many department stores, the Journal reported, have sold their credit card portfolios to banks, in order to avoid being responsible for the risk posed by customer defaults. However, this also shifts much of the profit to banks.
Nordstrom's strategy is a smart one, said David Robertson, publisher of the credit card industry newsletter the Nilson Report.
"Most retailers lack control of their private label or in-store card business," he told the newspaper. "That's not a good position to be in when you're scrambling for sales."
However, managing a private label credit card brand can be a large undertaking. Merchants that are looking for similar customer loyalty and brand building benefits may instead choose to offer store-branded prepaid or rewards cards, to make the project more manageable and less risky.
