Cardless Secures $30 Million to Innovate Co-Branded Credit Cards

In the U.S., more than 25% of residents utilize co-branded credit cards to receive discounts and perks from their favorite brands. However, the landscape of loyalty commerce isn't without its challenges. Major players like Uber, Starbucks, and Walmart have previously scaled back on similar initiatives due to disappointing returns. Now, entering the scene is Cardless, a startup harnessing the capabilities of embedded finance, aiming to revolutionize co-branded credit card programs.

Cardless has announced a funding round of $30 million, led by Activant Capital, with participation from Mischief (co-founded by Plaid’s Zach Perret), Industry Ventures, Thayer Ventures, Assurant, and Amex Ventures. While the startup has opted not to disclose its valuation, it previously raised $40 million in 2021 with a valuation of over $350 million.

Since its last funding announcement, Cardless has experienced significant growth, reporting a fivefold increase in revenue over the past year. Although specific figures remain undisclosed, the traction is indicative of its expanding market presence. Operating primarily in the U.S., the company serves both large and small brands, recently partnering with notable clients such as Qatar Airways and Alibaba, targeting small and medium businesses in the U.S. that utilize Alibaba’s services.

What sets Cardless apart is not merely creating co-branded credit cards; it's the efficiency of its platform. Brands can develop tailored card experiences and onboard users within weeks, allowing them to create rewards and analyze performance easily.

According to Michael Spelfogel, president and co-founder of Cardless, while the consumer-facing credit card industry is saturated, the brand perspective is primed for disruption. Currently, 11 banks have a stronghold over the co-branded credit card market, valued at $77 billion.

Cardless's platform incorporates features such as seamless card applications within existing apps, card management integrations, and dynamic dashboards for reward adjustments and marketing. Security and fraud detection are built-in, along with analytics for understanding user engagement.

Looking ahead, Cardless is exploring additional functionalities, including lending options that could pave the way for buy now, pay later services. With an increasing focus on small and medium businesses and potential adjustments in the U.S. administration's trade policies, there might be opportunities for incorporating tax calculation and financial management tools in future product developments.

While the majority of Cardless’s current business comes from new partners entering the credit card space, Spelfogel anticipates a shift where existing co-branded card issuers may consider transitioning to Cardless for a more efficient solution. The key challenge will be whether the market is ready to embrace a disruption of the status quo.