The private label credit card issuer Alliance Data Systems found itself in a precarious position last year with its high level of exposure to the apparel industry, which saw the sharpest sales declines of all retail categories in the first phase of the pandemic.

But when retail partners Forever 21 and Pier 1 Imports filed for bankruptcy and longtime partner Victoria’s Secret closed down stores and began looking for a buyout, Alliance Data diversified its mix of merchant and loan offerings.

A key part of the turnaround is the acquisition of New York-based fintech Bread by Columbus, Ohio-based company that Alliance Data acquired for $ 450 million last year to rely solely on traditional revolving credit card lines for decades.

According to Bread President Derek Joyce, who joined Bread in 2020 from BNPL pioneer Klarna, Alliance Data’s existing retail customers can add Bread Buy / Pay Later loans via a white label approach to online and in-store sales. Joyce previously worked at American Express for nearly a decade.

“Alliance Data is unique among other private credit card issuers in that it already has deep point-of-sale integrations in many stores, so adding Bread’s state-of-the-art installment technology is relatively turnkey,” said Joyce.

Online sales have been the largest channel for BNPL purchases – operated by giants Klarna, Affirm and Afterpay who work as third party retailers – and currently around 40% of Alliance Data’s credit card sales come through the online site, Alliance Data recently reported .

Joyce predicts that the installment loan movement at the point of sale will accelerate faster.

“The in-store shopping experience is returning, and as the travel industry recovers, we will see brick and mortar retail becoming a major driver of BNPL credit,” said Joyce.

The Bread acquisition opened the door to another deal: In April, Alliance Data entered into a new strategic relationship with Fiserv to offer Fiserv point-of-sale credit options – including BNPL – to merchant acquirers of Fiserv.

Bread will deploy the BNPL technology through Fiserv’s dashboard and Alliance Data will issue and manage the loans, with merchant acquirers receiving an acquisition fee for each sale, Ralph Andretta, CEO of Alliance Data, told analysts earlier this year when he was the Discussed first quarter results.

Alliance Data’s contract with Fiserv is not exclusive. Other consumer lenders have referral relationships with Fiserv’s numerous merchants, but Bread will be the only BNPL or loans directly from the lender built into its platform, Andretta said.

Andretta, a longtime Citi Cards executive who joined Alliance Data in early 2020, will also serve as the company’s interim CFO before Perry Beberman takes on the role in July when he leaves Bank of America.

Bread loan options will go live at Fiserv dealerships this fall, and since then Alliance Data has added several new non-apparel partners, including Petco, furniture retailer APT2B and mattress maker Luxi. In total, Alliance Data has approximately 65 million consumers in its lending database, the company said.

Alliance Data recently reached an agreement with RBC similar to the Fiserv Pact, according to which RBC’s merchant acquirers would also have Bread’s financing options in addition to other options. RBC will issue and manage these loans, Alliance Data said.

“RBC has the largest dealer base in Canada, but they didn’t have the technology to offer installment loans directly to customers,” said Joyce.

One analyst notes that while consumer excitement for BNPL credit continues, the profit outlook is not as clear.

“Lenders should be careful,” said Brian Riley, head of credit counseling at Mercator Advisory Group, noting that the largest BNPL lenders lost more than $ 8 billion in market cap over the past 12 months as stock prices fell .

But after Alliance Data turned a profit through careful management of credit lines despite the tough retail environment in 2020, it could be in a good position to offset future market risks, Riley suggested.

“Given Fiserv’s broad risk and Alliance Data’s ability to serve a wide range of second-tier retailers, businesses are likely to pull in at the physical point of sale,” said Riley.

The final element of Alliance Data’s turnaround came in May with the announcement of a plan for Spin-off of the extensive customer loyalty unit this proved to be a distraction for Alliance Data’s core business.

Alliance Data’s LoyaltyOne unit has been running Canada’s popular Air Miles coalition program for years with BrandLoyalty, a global grocery marketing program. Both saw a dramatic decline in rewards earned and redeemed during the pandemic due to travel restrictions and bans, the company reported in April.

Bread’s challenge – now that retail sales recover and Victoria’s Secret prepares to go public after resolving its own problems – will capitalize on post-pandemic shopping trends by creating a seamless checkout experience for borrowers.

“The shopping journey has become more holistic, with consumers using online and mobile, as well as roadside pickup and going to stores where they can expect a full range of funding options,” said Joyce.

Although credit card claims have declined during the pandemic, it was a short-term response to economic uncertainty and the largest segment of consumers – millennials – are ready to spend, according to Joyce.

“For many years there was the notion that millennials didn’t use credit cards, but in reality they were late adopters. Most millennials have credit cards and will be able to spend money, especially electronics and housewares, when we are through the pandemic, ”he said.

Bread, with offices in New York and Tampa, Florida, will maintain its existing offices while working closely with Alliance Data using a technology team spread across the country, Joyce said.

“It’s a great addition because Bread continues to acquire merchants directly, but with Alliance Data we are expanding our reach to merchants exponentially and Alliance now has the industry’s leading installment loan technology,” he said.