Buy now/pay later provider Sunbit has its sights set on the co-branded credit card industry in an effort to create a distinct niche in a market where large lenders such as Affirm, Afterpay and Klarna have taken hold.
Los Angeles based-Sunbit offers pay-over-time products to retailers in the automotive repair, health care, dentistry and veterinary industries, among others. The company, which was founded in 2016, also has a credit card that it offers to customers who have previously used its pay-later service, which has been live for the last four years with about 150,000 cardholders representing $170 million in balances.
Now, the company is looking to diversify its business model with co-branded credit cards and build on its business-to-business-to-consumer customer acquisition strategy that it has leveraged for its own credit card offering, said Arad Levertov, co-founder and CEO of Sunbit.
"About a year ago, we started looking at which other markets hadn't been disrupted, and we looked at the co-branded card market," Levertov said. "This was an opportunity for us to disrupt this market, to bring the experience that we built with the retailer [to credit cards]."
Sunbit announced in July its first co-branded Visa credit card with discount retail chain Ollie's Bargain Outlet that it will roll out slowly through 2025, at a similar pace to its own Sunbit credit card, Levertov said. Visa provides the payments network; Sunbit provides the technology; and Ollie's provides its customers with rewards points that – hopefully – drive them back to the store. All three parties share in the interchange revenue.
Sunbit is targeting retailers with over 250 locations or brands with a membership program of more than 1 million members for co-branded cards, according to its website. Transportation Alliance Bank is its sponsor bank.
Offering traditional consumer credit products are part of fintechs' natural evolution, said Nathan Hilt, a managing director of global consulting firm Protiviti.
"A lot of newer players… start on the cutting edge with something brand new — new technology, new risk, new data — and then move into traditional financial services," Hilt said. "Offering a credit card is something that is lucrative to your bottom line, so it makes sense to have that as part of the portfolio."
Sunbit is hoping that its co-branded credit card will set it apart from competitors with larger transaction volumes and a wider merchant base. BNPL competition has been heating up from both incumbent providers, such as
Sunbit also has to compete with BNPL giants' own card offering, which makes it "a challenge," said Ben Danner, senior research analyst at Javelin Strategy and Research. Affirm and Klarna both offer cards to their customers.
"The pivot to co-brands makes sense to me," Danner said. "Co-brands are hot. They're in right now, for sure. And for good reason, in the sense that when you think of a private label card, it only works at that one retailer. These co-brand cards give you a little bit of benefit for that loyal customer at that retailer as well as everyday purchases, too."
In fact, co-brand credit cards make up 62% of consumer credit card products in the 12 largest issuers portfolios, according to Javelin research.
To be sure, the co-branded credit card space is competitive, too, said Aaron McPherson, principal at AFM Consulting.
"Usually with a co-brand, you know you're looking for some lift from the brand that you're cooperating with," McPherson said. "It's very, very competitive to issue cards these days, and so the co-brand partner has to be really significant."
Sunbit won't be able to compete with large co-brand issuers, such as Barclays, which has co-branded credit cards with multiple global airlines, but it could use its focus on specific niche industries to further build out its co-brand portfolio as it finds its sweet spot, McPherson said.
"This company is appealing to merchants who are too small to be attractive to the major co-brand issuers," McPherson said, "They're very focused on these narrow verticals. And within those verticals, there could be a merchant that's more prominent [and] that people do business with more often."
That's not to say middle-market retailers are an untapped market. Sunbit will also need to compete with fintechs, such as Cardless, who design the co-brand with a partner and develop a rewards program, Javelin's Danner said.
Sunbit's foray into the co-branded credit card market doesn't mean it's abandoning its BNPL offering, Levertov said. The company expanded a partnership in September with Stripe in a platform play to offer more retail service providers its BNPL product.
"The idea with Stripe is to get to additional verticals that Stripe is working with," he said. "Through what we call platform integration with Stripe, we're going to get to more platforms that support brick and mortar."
