7 min read
By
Anand Sivadasan
Founder, Das Nexus
The modern card system is one of the great networks of the last century. It lets consumers pay millions of merchants with a card issued by a bank the merchant has never dealt with. Card networks created the standards, connectivity and trust; issuers extended credit and took risk; merchants gained access to enormous consumer purchasing power; and interchange made the economics work.
Over time, the system became much more than payments. Consumers came to love points, miles and cash back, and some of the world's largest merchants and brands discovered that a card could be a powerful acquisition and loyalty product: the co-branded credit card. Amazon, Costco and the major airlines have shown what happens when merchant distribution, loyalty economics and financial services come together. The best programs deepen loyalty, increase spend and create meaningful economics for both merchant and issuer.
Yet decades on, one thing has barely changed: the underlying economics are still relatively static, and the ability to turn them into strategic advantage remains concentrated among the largest merchants.
That creates an opportunity for commerce platforms to build something new. Not a replacement for the card networks, but a new financial network on top of them.
1. The co-brand is one of commerce's great financial products
The co-brand has endured because it solves a powerful equation. The merchant brings customers, brand and distribution; the issuer brings credit, capital and infrastructure; card economics help fund rewards; and consumers get something meaningfully better because of their relationship with the merchant. At scale, it becomes a flywheel:
Better rewards → more card adoption → more spend → stronger economics → greater loyalty
The most sophisticated programs embed the card in commerce itself. A customer encounters the card while shopping, receives immediate value and uses it to complete the purchase. Rewards bring them back, and the merchant gains a persistent financial relationship that extends beyond any single transaction. That is enormously valuable, and hard to replicate.
2. The card network is universal. The co-brand advantage isn't.
Millions of merchants accept cards; far fewer can build a great co-brand. A large merchant can bring millions of customers to an issuer, negotiate bespoke economics, distribute the card throughout its customer journey and build a proprietary rewards proposition. Most merchants cannot. They pay the cost of acceptance without the scale to turn financial services into an acquisition and loyalty engine, and even the largest merchants have long debated whether they get enough value for that cost.
That isn't a failure of the card networks. They succeeded in building a nearly universal payment network. The opportunity is to build on that foundation and spread more of the strategic upside of financial services across commerce.
What if thousands of merchants could access the economic power of a great co-brand without each having to build one?
3. Commerce platforms can create a co-brand network
Commerce platforms aggregate what individual merchants lack: scale. Increasingly, they aggregate much more than merchants, connecting the consumer, merchant, store, product, checkout and payment. A bank understands the financial relationship, and an individual merchant understands its own products and customers; a commerce platform can understand the commerce relationship across a whole network of merchants.
That changes what a co-brand can be. The traditional model is one major merchant, one financial relationship and one rewards proposition. The platform model can be thousands of merchants, one consumer financial relationship and a dynamic rewards network. Instead of every independent merchant creating its own program, the platform can aggregate them into a single network, aggregating not just their technology but their financial power.
That is the untapped financial network inside commerce platforms.
4. Reinvent the co-brand as a programmable network
A card that works across thousands of merchants isn't enough; general-purpose cards already do that. The real opportunity is to make the economics and the value proposition programmable.
Traditional rewards are static: spend $100, earn 1%, 2% or 3%. But $100 of spend doesn't have the same value to every merchant, or even to one merchant in every situation. One might pay $30 to acquire a valuable new customer; another might fund an incentive to reactivate someone who hasn't bought in six months, raise basket size, or push a particular product. The offer the consumer sees rarely reflects any of that.
This isn't a new idea. In 2019, I wrote about a future payment system in which merchant economics could become dynamic, potentially down to the individual product, and translate into better financing and rewards for consumers. Commerce platforms make a version of that much more practical.
A merchant could tell the platform what it wants to achieve (acquire, reactivate, increase order value, or drive a category) and the network could decide what to offer which consumer. For example:
What the consumer sees | Who funds it |
|---|---|
$25 back on your first purchase at this merchant | Merchant |
10% back here this week | Merchant and program |
Apply for the card at checkout and get $35 toward this purchase | Program |
The economics can draw on several pools: card economics, merchant funding, platform economics and the rewards currency. Instead of one static value proposition, the co-brand becomes programmable by merchant, consumer and moment, and every merchant on the platform can participate.
5. Merchant-funded rewards finally have a natural home
Merchant-funded rewards aren't new. Card-linked offers, affiliate networks and loyalty programs have all tried to connect merchant marketing budgets with consumer rewards, but none has become a seamless, scaled part of the payment experience. Commerce platforms have a structural advantage: they bring the merchant and the transaction much closer to the financial relationship.
AI can make the matching increasingly intelligent, weighing who the consumer is, what they're considering, what outcome the merchant wants and what it's worth, which incentive is likely to change behavior, and which pool of economics should fund it. Rewards stop being a fixed percentage returned on spend and become a way of matching merchant intent with consumer value. AI doesn't need to be the product; it can be the intelligence underneath, continually optimizing the offer across thousands of merchants and millions of consumers.
6. Build on the card networks, don't replace them
None of this requires dethroning the existing payment networks. They are the baseline, and they solved an extraordinarily hard problem: letting consumers, merchants and financial institutions transact reliably at enormous scale. A commerce financial network can sit on top of those rails and solve a different problem. The existing network answers whether this consumer can pay this merchant. The new layer answers what the best financial proposition is for this consumer and this merchant at this moment. The first needs ubiquitous payment infrastructure; the second needs merchant participation, commerce context, consumer relationships and intelligent decisions. They are complementary.
The next evolution of commerce doesn't need new payment rails. It needs a more intelligent economic layer on top of the rails we already have.
7. The financial opportunity is significant; the commerce opportunity may matter more
For a large commerce platform, the scale becomes interesting quickly. In an illustrative upside case for the U.S. alone:
Year 5 | Year 10 | |
|---|---|---|
Active card accounts | ~6M | ~15M |
Annual card spend | ~$28B | ~$80B |
Of which, spend across platform merchants | ~$8B | ~$24B |
Annual direct financial-services revenue | ~$1.3B |
That alone would be a meaningful financial-services business. But it misses perhaps the most important part of the thesis: the card can make commerce itself bigger.
In my experience with co-brand and merchant-funded loyalty programs, well-designed programs typically drive 25% to 40% incremental spend at the anchor merchant: spend that wouldn't have happened without the card. Applied to platform spend at maturity, that implies roughly $6 billion to $10 billion of incremental commerce a year.
That is the strategically interesting number. The opportunity isn't simply a billion-dollar financial-services business alongside commerce. It is a $1 billion-plus financial-services business that also generates billions of dollars of additional sales a year for the merchants in the network.
And the opportunity isn't limited to the U.S. The same mechanics (a persistent financial relationship, a programmable merchant-funded network, and a card as the anchor) apply wherever a platform has scale. Several international markets look like particularly large versions of the same opportunity, including the UK, Canada, Germany, Japan, Australia and Mexico.
A traditional co-brand optimizes the financial economics and loyalty of one large merchant. A commerce-platform co-brand can optimize financial-services economics, consumer loyalty, merchant growth and platform sales together. The financial product becomes an engine for the commerce business.
8. The co-brand is the anchor, not the end state
Once a commerce platform has a persistent consumer financial relationship, the network can extend well beyond the card:
Credit card: for everyday spend and rewards.
Installments: for financing individual purchases.
Merchant-funded offers: for acquisition, reactivation and loyalty.
Platform rewards: earned and redeemed across the merchant network.
Payment orchestration: choosing the right way to pay or finance each transaction.
The co-brand is a particularly powerful place to start because it connects three things that have rarely come together: a persistent consumer financial relationship, the economics of thousands of merchants, and the moment of commerce itself.
The untapped financial network
The first generation of card networks connected financial institutions and merchants at unprecedented scale. The co-brand added another layer, showing that when merchant economics and financial services are deliberately combined, a card can become a powerful engine for loyalty and commerce. But that advantage has largely belonged to companies with enormous scale.
Commerce platforms can change the equation. They can aggregate thousands of merchants into a shared co-brand network, let merchants contribute economics when a transaction is especially valuable, combine that with card rewards and platform value, and use AI to find the right proposition for each consumer, merchant and moment, all on top of the payment networks that already connect global commerce.
The next great co-brand may not belong to a single merchant. It may be a programmable financial network connecting thousands of merchants to millions of consumers.
If commerce platforms can build that network, the prize is bigger than card revenue: a financial system that makes the underlying commerce network more valuable for consumers, merchants and the platform itself.
Want to go deeper?
Das Nexus has built a detailed bottom-up model of the commerce-platform financial-services opportunity, covering card adoption, card spend, spend across platform merchants, direct financial-services economics and incremental sales. GET IN TOUCH → to walk through it.
About the model
Financial figures are illustrative outputs from a Das Nexus bottom-up model, not forecasts. Results depend on assumptions including card adoption, card spend, on-platform spend, incrementality, program economics, merchant participation and partner structure.