CharityVillage® Research: Affinity Cards: If you weren't among the first into the field, you'll need a special hook

Resources & Library

Path: Main Street : Resources & Library : Research Articles : Feature Article

Affinity Cards: If you weren't among the first into the field, you'll need a special hook
By Pat Porth
September 24, 1999; Canadian FundRaiser
They may be the greatest thing since the proverbial sliced bread, or they may be an outmoded fundraising technique, overtaken by the prevailing "me first" attitudes of today's society, and therefore too boring to warrant responses to reporters' questions. "They" are affinity cards for non-profit organizations, and if you can get anyone to talk about them, s/he will have an opinion, but it will probably not gibe with that of the last person you talked to, whether on the financial institution or the charity side.
Mothers Against Drunk Driving, for example, has been very happy with its affinity card experience. A MasterCard issued by MBNA, the card was designed by the agency so that it also acts as a marketing tool, says MADD's Andy Murie. The agency's loyal donor support group takes full advantage of the opportunity to contribute to a cause in which they believe "while doing something they do every day anyway".
The system is a "good deal for consumers", Murie says. MBNA offers good rates and "services the banks have chosen not to offer". Because MBNA's primary business is in credit cards, he says, "they concentrate harder on making them attractive" by offering things like out-of-country medical coverage and "great rates" to transfer out of existing cards. While not prepared to discuss specifics of the contract, he says that of course MADD gets a percentage of every transaction using its card, which is directed to the local chapter where the transaction took place.

It only works if they use it
Murie makes the point made by many spokespeople on both sides of the affinity card issue - "the card only generates funds for charity if it becomes the donor's principal card and is used to make a sizeable number of purchases. It's important to have a card a donor will use." Exactly, says Rick Galop of the Heart and Stroke Foundation, one agency which has "been there, done that" and walked away. The MasterCard, issued about eight years ago, "really didn't work; it was marginal", he says. "Everyone's in the market, making it really difficult to get an edge. We couldn't even get our volunteers to use it, never mind the general public."
Cards which offer their users direct personal benefits, rather than the more amorphous satisfaction of contributing to a distant charity, however beloved, are winning in the marketplace, Galop believes. His view is supported by Steve Phillips of Toronto-Dominion Bank, which is heavily into VISA affinity cards - but not much with nonprofits, although it was one of the earliest to offer the alternative, with York University and the University of Toronto both long-term users.
More typical of the bank's successful offerings, Phillips says, are the GM card which gives users points toward a discount on a General Motors vehicle, and the recently-introduced Harley-Davidson card, which gives holders a weekly chance on a motorbike for every dollar charged to it. TD has also issued the new Wal-Mart Visa, which doesn't directly reward loyalty as do the GM and Harley-Davidson or the nonprofit cards, but which has no fee and an interest rate of 14.48% vs 17.5% for the basic Green Visa, and 28.8% for many department stores.

Charitable contribution incentive no longer enough
"We're responding to what our customers want in moving towards the personal gratification type of card," Phillips says. "The challenge is to offer a card customers will choose to use all the time, and it's tough to compete with one that passes a value directly to them." The "old basic" credit card with the nonprofit's name and logo on its face just is not competitive, he believes, unless the agency can find some tremendously creative way not only to market it strongly to its loyalty base, but also to provide personal gratification in addition to the charitable contribution as an incentive.
Countering this view is Peter Frank of MBNA Canada. This Delaware-based bank has only been in Canada for a year and already has more than 70 affinity cards of both the commercial and not- for-profit type, including MADD, Ducks Unlimited (perhaps the largest program in Canada), the University of Manitoba, and all the CFL and NHL teams. In fact, one of the latest new MBNA-affiliated cards was put on offer by the Canadian Association of Retired Persons, and is promoted to members as having no annual fee, a low introductory annual interest rate on cash advance cheques and balance transfers, and a high credit line. As the invitation letter from CARP says: "We'll come out ahead, because MBNA Canada will make a donation to CARP for every card issued. Then, every time you use your card for a purchase, the bank will make another contribution - all at no additional cost to you.
The bank set up its first affinity partnership) in 1983 with Georgetown University in Washington, and hasn't looked back, says Frank. It now enjoys relationships with 4,500 organizations, 342 of them signed in the past nine months, for a total of eight million new customers (worldwide).
>From the bank's point of view, Frank says, this is good business because it's reliable. People who use affinity cards tend to be loyal, supportive of good causes - and honest payers of their bills. "Our loan loss rate is much lower than the industry average, and our use-of-cards is much higher," he says. The spin-off of a piece of the action to the sponsoring organization is balanced by the advantages of having a partner market the card to a loyal and responsive market.

Cards with personal benefits more popular
Nevertheless, the Canadian Cancer Society has not had any better luck with its affinity card than the Heart and Stroke Foundation. "It's not flooding in lots of revenue," says the CCS' Lee Angus succinctly. The society has not promoted the card heavily, and has not found its use particularly attractive to its supporters. Like Galop and Phillips, Angus feels the cards where "I can get the points, such as Air Miles, where I can benefit myself" have crowded cause-related cards off the market.
The Bank of Montreal, however, probably the first to market affinity cards in Canada, still firmly believes in them. It boasts of about 250 affinity partnerships in educational, charitable, professional, and cause-related fields. BofM may have solved the most obvious challenges, in that it now offers consumers a variety of personal benefits as well as the opportunity to contribute to a cause of their choice. "In total, six product variations are available for organization members to choose from," points out the B of M's Cindy Rynka, "including a no-fee standard product, low rate option, a choice of two loyalty programs (Air Miles and FirstHome Dollars), and Gold MasterCard with optional out-of- Canada medical insurance." In addition, Rynka says, BofM "provides its affinity partners with a highly competitive compensation schedule, allowing them to build on their revenue streams."
Also - in theory - marketing Visa affinity cards in Canada is Banc One International. Canadian FundRaiser, however, was unable to get a response to several voice-mail messages to the bank's identified spokesperson.
For further information: Andy Murie, MADD Canada, (905) 813-6233; Rick Galop, Heart and Stroke Foundation, (416) 489-7100; Steve Phillips, Toronto-Dominion Bank, (416) 982-6761; Peter Frank, MBNA, 1 800 441-7048, X 21353; Lee Angus, Canadian Cancer Society, (416) 961-7223; Cindy Rynka, Bank of Montreal, (416) 232-8724; John Russell, Banc One Corp., (614) 248-5989.