Forget Free Flights, This Card Could Make You an NBA Benchwarmer

(Bloomberg) -- A startup is hoping to bring the same co-brand card enthusiasm that consumers have for hotel points and airline miles to the world of pro sports, starting with the Cleveland Cavaliers.

Instead of flights and resort stays, perks could include basketballs autographed by the team or the chance to be an “honorary benchwarmer” as players warm up before a game, according to Nic Barlage, president of business operations for Cleveland’s National Basketball Association franchise.

Behind the scenes, the Cavaliers card will be managed by Cardless, a startup founded last year by a pair of Stanford University graduates, Michael Spelfogel and Scott Kazmierowicz. For now, interested fans can sign up for a wait list. Initial access will be given to season tickets holders for the team, which started in the NBA in 1970 and won its first championship in 2016.

“We were thinking about this as: How do we take this and make it more than just a logo on a credit card?” Barlage said in an interview.

Many of the world’s biggest sports teams have long had affinity debit cards that feature their mascot, and organizations such as the National Football League and Major League Baseball have introduced their own credit cards. But few have sought to mimic the success that large hotel chains and airlines have enjoyed with their co-brand card partnerships.

The new card’s rewards include three points per dollar spent on groceries as well as eat-in and take-out dining, and five points per dollar on season-ticket passes. It has no annual fee, and points are worth 1 cent each. That means, for example, that 10,000 points could be redeemed for a $100 Cavs gift card.

Spelfogel said he got the idea for Cardless after spending a year as a data scientist at Lyft Inc. as the ride-sharing app was trying to get its own co-brand credit card off the ground. The company had already selected a bank partner -- Synchrony Financial -- and spent months trying to cobble together the card program before it ultimately decided to shutter the effort.

“These are complicated products to bring to market,” Spelfogel said. Brands in the past have relied on much more low-tech efforts, he said, such as loyalty punch cards that offered freebies in exchange for a certain number of purchases. “That simplicity is something we can help bring back.”

So Spelfogel, who has a collection of more than 200 credit cards, recruited Kazmierowicz, who left the investment-banking firm Allen & Co. to co-found Cardless. The two spent their first year surveying retailers and brands across the country about what they might want in a co-brand partner.

“There’s a ton of startups in payments and lending and checking accounts and investment accounts,” Kazmierowicz said. “This is the last vertical in banking that hasn’t really been disrupted.”

There’s a dizzying number of co-brand cards in the U.S., and banks and payment networks often wage cutthroat battles to land partnerships with some of the biggest ones tied to airlines and hotels. Spending on such cards has soared recently and now amounts to almost $1 trillion a year.

But only a handful are tied to retailers founded in the past 20 years. They include Citigroup Inc.’s card with Wayfair Inc. and Barclays Plc’s partnership with Uber Technologies Inc. That’s because it often takes years for new card programs to become profitable for their banking partners.

Still, after more than 300 calls with retailers and brands in their first year, Spelfogel and Kazmierowicz settled on courting sports teams as their initial partners, which led them to the deal with the Cavaliers. The two also raised $10 million from venture capital groups along the way.

“When you go into a pitch meeting and put 220 credit cards on the table, it shows them that you’re serious,” Spelfogel said.

©2020 Bloomberg L.P.