Goodbye, Grand Reserve

On a personal note, we notified cardholders on Monday that the Grand Reserve World Mastercard program is closing soon. What is the Grand Reserve World Mastercard, you say? Well, that is precisely the problem. Grand Reserve is (was) the challenger credit card that my team and I launched in 2020 through my last startup, Vertical Finance.

Startups are hard, and product failures teach many lessons. I’m sure I’ll be mining the experience for more lessons (and perhaps a new but separate series of posts) on all the things that went wrong here. CardsFTW is about how wonderful cards and the related reward programs can be: I’ll try to share relevant lessons here for the community to enjoy.

By way of background, the idea for Vertical Finance was much bigger than Grand Reserve. While working as Chief Product Officer at Bankrate Credit Cards (then owner of bankrate.com, creditcards.com, thepointsguy.com, among others; now a part of Red Ventures), I was continually frustrated at the lack of new products from the banks. Bankrate earned revenue by marketing new cards to consumers (generating almost $400 million annually). Consumers, however, acquire new cards infrequently, typically less than once every two years or so. As a result, it takes a compelling offer to drive further adoption.

Sometimes we would see a unique and genuinely compelling launch. The Chase Sapphire Reserve was one such launch. With a then market-leading (and breaking) signup bonus of 100,000 points worth potentially $1,500, in exchange for a $450 annual fee (with a $300 travel credit) and a spending minimum, consumers could mint more than $1,000 just by switching. Chase invested heavily in the launch (to the tune of $300 million, per financial statements), and we sold so many cards at Bankrate that our quarterly results were noticeably affected.

However, most of the time, we saw few innovations and a parade of me-too products. Every bank had a general travel card, a cashback card, and a low interest or balance transfer card. Some banks focused on secured cards. Every major airline or hotel had a co-brand, and so did most major retailers (although those were sold in retail, not through Bankrate).

I theorized that consumers were hungry for new products and innovation. A few challengers had started, mainly in the new-to-credit or alternative underwriting space like Deserve, Petal, and Jasper (fka CreditStacks). We saw the brief rise and fall of Final Card; a card focused on security. (Although Final closed shortly after launching, the team went on to be instrumental in creating the Apple Card with Goldman Sachs.)

Not seeing innovation from the traditional issuers, I decided to try to build something myself. The premise for Vertical Finance was that consumers have passions outside of travel. We defined passions as a hobby or subject area where consumers spent their free time and discretionary income. Like travel, they would have an outsize affinity and aspiration for new experiences and goods. Passions like golf, wine, scuba diving, hiking, beauty, and more made our list of more than 50 possible vertical entry points.

We focused on passions without a single, winning national retailer and with a solid in-person experiential component. Instead, these verticals would have many local merchants consumers trust to make unique products and experiences beyond basic purchasing needs. We would build a network of these merchants who technically competed but did not mind some friendly cooperation. We would enable our consumers to shop across them to earn and redeem points. In addition, we envisioned these merchants becoming a cornerstone of our acquisition strategy. We would empower each merchant with the power of data and marketing a major retailer gets with a traditional co-brand card, but without the requisite size to get the attention of the likes of Chase or Synchrony.

We selected wine for many reasons, including its high-spending demographic, the importance of winery experiences, and the relationships we could build in the space. We successfully build a network of more than 450 wine merchants across more than 20 states in less than 12 months. We found a great issuing partner in Deserve (which had pivoted from a direct-to-consumer issuer to a platform along the same time).

Then, we found ourselves making a go/no-go decision in May 2020. It’s hard to imagine what we were thinking about launching then, but if we look back, we can recall a time when we thought the country would recover and re-open from the pandemic by mid-to-late summer. Wanting to take advantage of the fall harvest, we launched in August 2020.

The pandemic had other plans, and within 60 days, most of our partners were closed to visitors and scrambling to save their businesses—no time for our project.

Another day, I might get into all the possible missteps, but not today. For now, I’ll focus on the positives. My small team of five built a modern rewards platform with real-time AI-driven classification and blockchain-based rewards ledgering. We built a fantastic network, a fine catalog, and high satisfaction among our (too small) cardholder base. We built a card and will have operated it for almost 18 months by the time the program closes. It was a sound card with good economics, but we didn’t achieve escape velocity.

Looking at a pivot in early 2021 led us to discussions with Meg and the team at Apto Payments, whom I had been following for years through their launch of the Shift Card for bitcoin payments in 2014 through their pivot to infrastructure. The Vertical team is working hard to ensure Apto is the best card issuing platform. We are eager to focus our efforts on enabling the next set of entrepreneurs to build new card experiences.

Grand Reserve wasn’t the first challenger card to sputter out, and it won’t be the last. From everything I know, we will see a challenger card achieve great heights in credit, as companies like Chime and Current have on the debit side.

Cheers to innovation. Cheers to Grand Reserve!

Instacart Announces a Card

Grocery delivery leader Instacart has been working on a card program since late 2020. The company announced last week they will partner with Chase and Mastercard to launch the first Instacart co-branded card later this year. There weren’t too many details, but we can assume the card will be digital-first and include accelerated earnings at Instacart. I just hope it will be called the Instacard.

Chase already offers some Instacart benefits to Chase cardholders in terms of reduced fees or offers on membership. The new card will be a World Elite Mastercard, the highest level of consumer credit offering from Mastercard. As a premium offer, we can expect to see a robust list of benefits. A clever offering would include a rebate on Instacart Premium with the card (just for having it, or with some minimum spend). More tails to come.

BJ’s Wholesale Moves Its Portfolio

Chalk up another win for Capital One, which is acquiring the BJ’s Wholesale Club credit card portfolio from ADS/Comenity Bank. Not only is Comenity losing the portfolio, but BJ’s is suing ADS over the speed of transferring the cardholder data. The Wall Street Journal reports that the portfolio includes more than one million cards.

Capital One recently acquired the Williams-Sonoma card portfolio from ADS. I am a William-Sonoma cardholder and found that transition was smooth as a cardholder. I have also appreciated Capital One’s digital interfaces, and rewards integration with Williams-Sonoma is much improved over the ADS offering.

Capital One also won the Walmart account from Synchrony. In each case, retailers are moving their portfolios from long-time issuing bank partners to Capital One, which has moved aggressively in the co-brand space. We can expect to see more issuer migrations in the coming year.

Artful American Express Cards

At a time when people use their physical cards less and less, it is fascinating to watch the continued investment in card design. From startups touting how heavy their metal card is to major banks releasing limited editions, there is something special about a special piece of plastic (or metal).

American Express announced a new art design card last week, Art X Platinum. Two cards are available: Kehinde Wiley and Julie Mehretu. As seen above, both designs are fun and liven up that traditional card. The cards are not limited time and can be requested by new and existing cardholders. Do they make the Platinum Card a better deal? No. Is the Platinum Card a good deal at all? Probably not anymore. Are these cards fun? Yes. Good work, American Express.

CardsFTW

Thanks for reading CardsFTW, a weekly-ish newsletter about all things debit and credit. CardsFTW is written and curated by Matthew Goldman, Chief Product Officer at Apto Payments. If you’re looking for insights into everyday payments beyond deal blogs, please subscribe for free at cardsftw.substack.com. If you enjoyed this, please share it with a friend! Follow me on Twitter @magoldman.