The pandemic accelerated changes at many companies, and this is especially true of Alliance Data Systems, a private-label card issuer that relied heavily on many retailers that had to cut back during lockdown.
Even before the pandemic struck, the company had plenty of challenges heading into 2020 — it had cycled through
Alliance Data's solution to these issues was a mix of talent and technology. Ralph Andretta, who became CEO in February 2020, hired a new team and tasked them with adopting technology that would put Alliance Data at the forefront of many trends in digital payments, such as buy now/pay later lending. Alliance Data subsidiary Comenity Bank also launched its first self-branded credit card, giving consumers an option that didn't tie them to specific retailers.
To provide installment loans as an option for its retail clients, the Columbus, Ohio-based issuer bought the fintech lender
Alliance Data also recently lightened its debt load by completing the
“Rewards programs are a big part of our credit operations, but LoyaltyOne operated in different sectors and it wasn’t a fit anymore with the company as we embarked on a technology transformation,” Andretta said in a recent interview.
Alliance Data also found a creative way to cope with the demise of some major retail card losses, including longtime customer Pier 1.
In the fall of 2020, Alliance Data migrated the chain’s credit card customers to the new Comenity Mastercard, the issuer's first branded general-purpose card. The Comenity card now has 1 million customers.
“For any retailers like Pier 1 that didn’t make it, we looked at customers that had a credit card balance and on a targeted basis we sent them a new Comenity card that offers rewards for cross-category shopping like travel, gas and groceries,” said Valerie Greer, Alliance Data's executive vice president and chief commercial officer.
Besides losing Pier 1, which went out of business in 2020, Alliance Data also lost transaction volume from Forever 21 and several other retailers that went through bankruptcy and shut down many stores. Earlier this year
Greer, who arrived at Alliance Data 18 months ago, was essential to the company’s transformation, according to Andretta.
One of Andretta's goals, as a longtime credit card industry executive who had most recently spent several years as head of U.S. cards for Citi, was to stabilize executive turnover and build a new culture.
A few months after his arrival at Alliance Data, Andretta hired Greer, who had just spent nine years at Citi, where she was managing director of cobrands. She had previously worked for several years at JPMorgan Chase, overseeing card services and partnerships. Earlier in her career she spent more than 17 years at HSBC, rising to senior vice president of business development.
Greer’s mandate was to execute Andretta’s vision for modernizing Alliance Data, she said.
Alliance Data "was a legacy player in need of becoming modern, but we’ve given it a new, scalable technology platform that’s configurable with APIs, underpinning a full product suite that’s very robust and flexible,” Greer said, referring to application programming interfaces.
The platform overhaul now supports direct integrations with thousands of brick-and-mortar stores as well as digital connections for buy now/pay later loans, she said.
“With Bread, customers can apply for loans directly through the merchant online, so they aren’t redirected to a third party requiring the download of a separate BNPL app," Greer said. "Customers aren’t disintermediated. They stay within the merchant’s own ecosystem, while we’re offering them a broader range of lending options including installment loans.”
Merchants also now have access to all of Alliance Data's consumer financing options through a software development kit, creating opportunities to customize their marketing from person to person, according to Greer.
“The merchant can manage their product mix to optimize profitability, giving a person a BNPL option or a different credit option based on data and analytics that will be stickier for the merchant and have higher lifetime value,” Greer said.
Alliance Data also struck a deal with Fiserv in late 2020 that enabled the issuer to extend credit services to 40,000 merchants using Fiserv’s Clover platform.
“With Fiserv, we’ll be integrated into Clover, part of their dashboard, in a one-to-many scenario that will further expand our reach,” Greer said.
In early 2022, Alliance Data plans to launch virtual cards to extend its credit services to many of these new platforms, enabling consumers to access Comenity credit from smartphones and other devices. The company has not disclosed which virtual card provider it will work with.
As one of the first banks to buy an installment lender (via Bread), Alliance Data is at the forefront of the buy now/pay later market's own evolution. This year, Block (formerly Square) agreed to buy the Australian buy now/pay later lender Afterpay for $29 billion, and other BNPL giants like
Alliance Data and Comenity "already have a long track record with compliant products, and by integrating our existing oversight, compliance and regulatory adherence to Bread and other fintechs, we believe we’ll be in a unique position as competition in the BNPL area begins to heat up,” Greer said.
Alliance Data this year renewed credit-issuing agreements with longtime partner Victoria’s Secret, as well as Signet Jewelers. This month Alliance Data signed a new multiyear agreement with the National Football League to launch the NFL Extra Points credit card. Alliance Data also plans to absorb the NFL’s existing credit card portfolio this spring.
Investors are still eager to see results, as Alliance Data's stock value has declined over the past five years.
Alliance Data's revenue rose 5% to $1 billion for the quarter ended Sept. 30, 2021, from a year earlier, while net income rose 68% to $224 million quarter over quarter, the company said.
"We believe the risks and opportunities are balanced in [Alliance Data], as the private-label credit card book re-grows while credit normalizes," analysts at the investment banking firm Jefferies said Tuesday in a note to investors.
