Microsoft’s Xbox has teamed up with Mastercard and Barclays US to offer a new consumer credit card in the US. The card has no annual fee, and card owners can collect reward points for eligible purchases, i.e., at the Microsoft store or for food delivery. There are five different card designs available, and card owners can decide if they want to have their gamertag printed on the back of the card.
Sounds exciting? Yes, it is great to see a brand like Xbox entering the financial services space. However, it is sad to see that they decided on a co-brand. I have written about other companies and their co-brand cards before, such as Walmart’s partnership with CapitalOne or Delivery Hero with Abu Dhabi Commercial Bank. Co-brands are different from an embedded solution in various ways. But most of the differences are built on the fact that a co-branded card product is the result of an equal partnership between a brand (i.e., Xbox) and a financial institution (i.e., Barclays US).
As a user, you can typically experience at various points that a co-brand is a combination of these two worlds, and it is not one coherent great product experience. This can often be seen in the registration process (i.e., re-entering of already-known details; paper documentation), the way the financial product can be accessed (i.e., a separate app or website instead of seamless integration), or the style of communication (i.e., the washed-down language of a financial institution instead of brand language).
An embedded solution, on the other hand, is a product built and owned by the brand from beginning to end. The financial institution involved in such an offering has the role of a vendor but is not an equal partner. This gives various benefits, such as the brand being able to fully integrate the financial offering into their digital product experience. This means the brand can fully leverage data and provide an outstanding user experience. Additionally, the brand would own the communication and customer relationships. Yes, the brand would need to obey the rules provided by their regulated partner; however, a vendor-customer relationship is very different from an equal partner relationship.
I am sure Xbox has considered both options but decided on the co-brand. I could imagine that this option was considered less risky and, thus, a safer bet. However, co-branded solutions are often not at the level of digital experiences we are enjoying in 2023. A co-branded approach was perhaps a less risky approach in the past, but due to these limitations, it is likely not anymore. The gaming industry is very relevant for embedded finance, and I believe Xbox has a unique chance of building an outstanding embedded product offering. I hope they will realise this too, and a negative experience with their co-brand product is not reducing the chances for an embedded product.
