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Medium Profitability New Product Launch Partnership Evaluation

Explorer Bank

#Financial Services #Credit Cards
ProHub Comment

This case tests core credit card economics fundamentals—specifically breakeven analysis, revenue streams (merchant fees, customer fees, interest), and cost structures (processing, partner revenue share, benefits, credit losses). The key insight is that the $1,000 monthly breakeven threshold is achievable if customers use the card for broader travel purchases beyond just airline tickets, making the partnership viable despite high operating costs.

Estimated Time 15 minutes
Difficulty Medium
Source Columbia
50 / 100
Your client is the Explorer Bank, a major issuer of credit cards. The company issues credit cards either under its only brand (e.g., The Explorer Platinum) or with partners (e.g., Southeast Airlines Advantage). A new airline, Alpha Airlines, recently approached Explorer Bank with a partnership credit card proposal. How should Explorer Bank evaluate this proposal?

Clarifying Information

  1. For this type of arrangement, Explorer Bank as the issuer will issue the credit card and provide all support; Alpha Airlines as the partner generally provides only branding and promotions
  2. Explorer bank has previous experience issuing credit cards with airline partners and currently partners with 1 other regional airline
  3. All other minor revenue sources / costs not listed in the sample framework can be ignored for this case