Bread Financial Holdings, Inc. (BFH): Business Model Canvas [10-2024 Updated]

In today's fast-paced financial landscape, understanding the mechanics behind successful companies is crucial for investors and analysts alike. Bread Financial Holdings, Inc. (BFH) stands out with its innovative business model, which seamlessly integrates partnerships, advanced technology, and tailored financial solutions. This blog post delves into the Business Model Canvas of BFH, revealing how it effectively serves diverse customer segments while driving revenue through strategic collaborations and digital offerings. Read on to discover the key elements that fuel BFH's success in the competitive financial services market.

Bread Financial Holdings, Inc. (BFH) - Business Model: Key Partnerships

Collaborates with large consumer brands (e.g., Dell, NFL)

Bread Financial Holdings, Inc. has established significant partnerships with large consumer brands, including Dell and the NFL. These collaborations allow BFH to leverage the brands' extensive customer bases and enhance its financial product offerings.

As of September 30, 2024, BFH reported approximately $17.9 billion in total credit card and other loans, which includes loans from partnerships with major brands. The collaboration with the NFL, for instance, has led to innovative financing solutions tailored for NFL fans, increasing customer engagement and driving loan growth.

Partners with small and medium-sized businesses

In addition to large corporations, BFH actively partners with small and medium-sized enterprises (SMEs). These partnerships are crucial for expanding its reach and providing tailored financial solutions that meet the unique needs of smaller businesses. The total loans extended to SMEs contribute significantly to BFH's portfolio.

As of September 30, 2024, the company reported that approximately 30% of its credit card loans were generated from partnerships with SMEs, reflecting a growth strategy focused on diversifying its customer base.

Engages in contractual relationships with brand partners

Bread Financial engages in contractual relationships with its brand partners to ensure mutual benefit and risk mitigation. These contracts typically include terms for revenue sharing, marketing support, and product development, which are essential for maintaining strong partnerships.

For instance, in 2024, BFH secured contracts with multiple retailers, resulting in a 15% increase in transaction volume compared to the previous year. The company also reported total non-interest income of $983 million for the third quarter of 2024, which includes income generated through these contractual agreements.

Partnership Type	Examples	Impact on Loans (as of Sept 30, 2024)	Revenue Contribution (Q3 2024)
Large Consumer Brands	Dell, NFL	$17.9 billion	$983 million
Small and Medium-Sized Businesses	Various SMEs	30% of total loans	N/A
Contractual Relationships	Retailers	15% increase in transaction volume	$983 million

Bread Financial Holdings, Inc. (BFH) - Business Model: Key Activities

Provides payment, lending, and saving solutions

Bread Financial Holdings, Inc. offers a robust suite of payment and lending solutions, including credit card and buy now, pay later (BNPL) products. As of September 30, 2024, the total credit card and other loans amounted to $17.933 billion, a decrease from $19.333 billion at the end of 2023. The allowance for credit losses stood at $2.190 billion, reflecting a conservative approach to credit risk management.

Manages credit card and BNPL products

Bread Financial actively manages a diverse portfolio of credit products. The company reported a net income of $270 million for the nine months ended September 30, 2024, compared to $675 million for the same period in 2023. The provision for credit losses for the nine months in 2024 was $980 million, up from $747 million in 2023.

Credit Product Type	Loan Amount (as of Sept 30, 2024)	Loan Amount (as of Dec 31, 2023)
Credit Card Loans	$17.630 billion	$18.999 billion
BNPL and Other Loans	$303 million	$334 million
Total Loans	$17.933 billion	$19.333 billion

Develops digital technology for enhanced customer experience

Bread Financial is focused on enhancing its digital technology capabilities to improve customer experience. The company has made significant investments in technology, reflected in an employee compensation and benefits expense of $655 million for the nine months ended September 30, 2024. Additionally, marketing expenses reached $99 million during the same period, underscoring the company's commitment to driving customer engagement through innovative digital solutions.

Expense Type	Amount (Nine Months Ended Sept 30, 2024)	Amount (Nine Months Ended Sept 30, 2023)
Employee Compensation and Benefits	$655 million	$647 million
Marketing Expenses	$99 million	$115 million
Total Non-Interest Expenses	$1.525 billion	$1.576 billion

Bread Financial Holdings, Inc. (BFH) - Business Model: Key Resources

Insured depository institution subsidiaries (Comenity Bank, Comenity Capital Bank)

Bread Financial Holdings operates through its insured depository institution subsidiaries, primarily Comenity Bank and Comenity Capital Bank. As of September 30, 2024, total deposits across these banks amounted to $12.8 billion, a decrease from $13.6 billion at the end of 2023. The breakdown of deposits includes:

Deposit Type	September 30, 2024 (Millions)	December 31, 2023 (Millions)
Direct-to-consumer (retail)	$7,483	$6,454
Wholesale	$5,339	$7,140
Total Deposits	$12,822	$13,594

The banks provide a variety of financial products, including credit cards and personal loans, which are essential for Bread Financial's business model. The average interest rates on non-maturity deposits range from 0.70% to 5.14% as of September 30, 2024.

Data analytics and marketing capabilities

Bread Financial leverages advanced data analytics and marketing capabilities to optimize its customer engagement and product offerings. In 2024, the company invested significantly in technology modernization, which is expected to enhance its operational efficiencies and customer targeting strategies. The marketing expenses reported for the third quarter of 2024 were $38 million, a slight increase from $36 million in the same period of 2023.

The company utilizes a statistical model for estimating expected credit losses, incorporating macroeconomic data and credit quality assessments. This approach aims to refine risk management and improve credit performance.

Diverse funding sources for liquidity management

Bread Financial maintains a diversified funding structure to ensure liquidity. As of September 30, 2024, the company reported a common equity tier 1 capital ratio of 13.3%, reflecting a 40 basis points improvement year-over-year. The following table summarizes the company's conduit facilities and their capacities:

Facility	Capacity (Millions)	Drawn Amount (Millions)	Maturity Date
Comenity Bank - WFNMNT 2009-VFN	$2,650	$1,380	October 2025
Comenity Capital Bank - WFCMNT 2009-VFN	$2,250	$377	February 2025
Total Conduit Capacity	$5,425	$2,198

The diverse funding sources include retail deposits, wholesale funding, and securitization programs, which collectively enable Bread Financial to manage liquidity effectively and support its lending operations.

Bread Financial Holdings, Inc. (BFH) - Business Model: Value Propositions

Offers personalized financial solutions.

Bread Financial Holdings, Inc. (BFH) focuses on delivering tailored financial products that cater to individual customer needs. This personalization is reflected in their credit card offerings, which are designed to enhance customer experience and satisfaction. For instance, as of September 30, 2024, the total credit card loans amounted to $17.9 billion. The company employs data analytics to assess customer preferences and behaviors, which aids in creating customized credit solutions.

Provides ease and flexibility in payment options.

BFH emphasizes convenience by offering various payment options to its customers. As of September 30, 2024, the company reported a total of approximately $105 billion in unused credit card lines, indicating significant available credit for customers. This flexibility allows customers to manage their finances effectively, enabling them to make purchases and pay over time according to their financial situations. The weighted average interest rates on their credit card loans ranged from 5.94% to 6.13% as of the same date.

Delivers competitive products across various customer segments.

Bread Financial offers a diverse range of financial products that cater to various customer segments. The company has segmented its credit card loans based on credit risk, with 57% classified as strong credits (Vantage scores of 661 or higher) as of September 30, 2024. The competitive nature of their products is evident from the reported net interest income of $3.08 billion for the nine months ended September 30, 2024. Additionally, BFH continues to acquire new credit card portfolios, including a recent acquisition for approximately $383 million in August 2024, showcasing their commitment to expanding their market share.

Metrics	Q3 2024	Q3 2023
Total Credit Card Loans	$17.9 billion	$19.3 billion
Unused Credit Card Lines	$105 billion	$113 billion
Weighted Average Interest Rates	5.94% - 6.13%	6.36% - 6.59%
Net Interest Income	$3.08 billion	$3.19 billion
Strong Credit Percentage (Vantage 661+)	57%	57%
Recent Portfolio Acquisition	$383 million	N/A

Bread Financial Holdings, Inc. (BFH) - Business Model: Customer Relationships

Focuses on building long-term partnerships

Bread Financial Holdings, Inc. (BFH) emphasizes the establishment of long-term partnerships with its customers through tailored financial products and services. This approach is evident in their strategic focus on direct-to-consumer (DTC) offerings, which aim to enhance customer engagement and loyalty.

Offers customer support and financial guidance

BFH provides extensive customer support and financial guidance to help clients navigate their financial decisions. As of September 30, 2024, the company reported total deposits of $12.8 billion, with direct-to-consumer deposits reaching $7.5 billion, representing a significant increase from $6.5 billion as of December 31, 2023. This growth signifies BFH's commitment to understanding customer needs and providing relevant financial solutions.

Financial Metric	September 30, 2024	December 31, 2023	Change
Total Deposits	$12.8 billion	$13.6 billion	-5.8%
Direct-to-Consumer Deposits	$7.5 billion	$6.5 billion	15.4%
Wholesale Deposits	$5.3 billion	$7.1 billion	-25.4%

Engages customers through direct-to-consumer solutions

BFH actively engages customers through its direct-to-consumer solutions, which include a range of credit products tailored to meet diverse consumer needs. The company has seen a net principal loss rate of 7.8% for the three months ended September 30, 2024, a noticeable increase from 6.9% in the same period of the previous year. This statistic highlights the importance of maintaining robust customer relationships to manage credit risk effectively.

Furthermore, BFH's customer engagement strategy includes the use of advanced analytics to personalize offerings and improve customer experience. The company utilizes credit scoring models to assess the financial health of its customers, categorizing them based on Vantage credit scores:

Credit Score Category	Percentage of Credit Card Loans (September 30, 2024)
661 or Higher	57%
601 to 660	27%
600 or Lower	16%

This segmentation allows BFH to tailor its products and services to better meet the needs of different customer segments, enhancing overall satisfaction and retention.

Bread Financial Holdings, Inc. (BFH) - Business Model: Channels

Utilizes digital platforms for service delivery.

Bread Financial Holdings, Inc. leverages various digital channels to deliver its services, primarily through its online platform. As of September 30, 2024, the company reported total credit card loans amounting to $17.6 billion. This shift towards digital is evident as the company continues to enhance its online user experience, contributing to a significant portion of its revenue derived from digital transactions.

Provides services through partner brand networks.

The company has established partnerships with various brands to enhance its service offering. For instance, in 2023, Bread Financial announced the non-renewal of its contract with BJ’s Wholesale Club and subsequently sold the BJ's portfolio for a total purchase price of $2.5 billion. This transaction reflects a strategic shift in its partner network, focusing on more lucrative partnerships that align with its long-term growth strategy.

As part of its partner network, Bread Financial utilizes a co-branding strategy, which allows it to integrate its credit solutions directly into the partner's customer journey, enhancing customer engagement and loyalty.

Engages customers via direct marketing efforts.

Direct marketing remains a core strategy for Bread Financial, with marketing expenses reported at $99 million for the nine months ended September 30, 2024. The company's direct marketing efforts are aimed at both customer acquisition and retention, utilizing targeted campaigns that leverage customer data analytics to identify and reach potential clients effectively. The focus on data-driven marketing has shown a positive impact on engagement metrics, evidenced by a year-over-year increase in customer sign-ups and usage of financial products.

Channel Type	Description	Financial Metrics
Digital Platforms	Online service delivery for credit card products	Total credit card loans: $17.6 billion
Partner Networks	Co-branding with various brands, including integration into customer journeys	Sale of BJ's portfolio: $2.5 billion
Direct Marketing	Targeted campaigns for customer acquisition and retention	Marketing expenses: $99 million (9 months ended September 30, 2024)

Bread Financial Holdings, Inc. (BFH) - Business Model: Customer Segments

Targets Gen Z, Millennials, Gen X, and Baby Boomers

Bread Financial Holdings, Inc. (BFH) focuses on a diverse customer base that spans multiple generational segments. As of 2024, the company's products and services are designed to cater to:

• Gen Z: Individuals aged approximately 18-25, who are increasingly seeking financial products that offer flexibility, such as buy now, pay later (BNPL) options.
• Millennials: Aged 26-41, this group values technology-driven solutions and personalized financial services, including rewards credit cards.
• Gen X: Individuals aged 42-57, who often look for reliable credit options and loyalty programs.
• Baby Boomers: Aged 58-76, focusing on savings and investment products that offer financial security.

Services Consumers Across Various Industries

BFH serves a wide range of industries, enhancing its customer segment appeal. Key industries include:

• Travel: Partnerships with major travel brands allow BFH to offer tailored financing solutions for travel expenses.
• Beauty: Collaborations with beauty retailers facilitate consumer credit options for beauty products and services.
• Health and Wellness: Financial products aimed at supporting health-related purchases.
• Home Goods: Financing solutions for home improvement and furnishing purchases.
• Technology and Electronics: Credit options for purchasing high-value tech products.

Industry	Key Partnerships	Product Offerings
Travel	Caesars, AAA	BNPL, travel rewards credit cards
Beauty	Ulta, Victoria’s Secret	Private label cards, loyalty programs
Health and Wellness	Various health product retailers	Flexible credit options, savings solutions
Home Goods	Academy Sports + Outdoors	Installment loans, credit cards
Technology	Dell Technologies	Financing for electronics, cashback offers

Focuses on Both Individual Customers and Business Clients

BFH employs a dual strategy that addresses the needs of both individual consumers and business clients:

• Individual Customers: BFH offers retail credit products, including the Bread Cashback® American Express® Credit Card and Bread Savings® products, enhancing personal financial flexibility.
• Business Clients: Services include providing tailored financial solutions for small and medium-sized businesses, allowing them to offer branded credit options to their customers.

Financial Overview

As of September 30, 2024, BFH reported total credit card and other loans of $17.933 billion, with an allowance for credit losses of $2.19 billion. The company has a diversified partner base that supports its revenue model, primarily driven by interest and fees on loans. BFH's total assets stood at $21.736 billion, with stockholders' equity of $3.112 billion.

Bread Financial Holdings, Inc. (BFH) - Business Model: Cost Structure

Major expenses include interest on deposits and loans.

The total interest expense for Bread Financial Holdings, Inc. for the three months ended September 30, 2024, was $107 million, an increase of $29 million compared to the same period in 2023. For the nine months ended September 30, 2024, the total interest expense was $427 million, up $113 million from the previous year.

Key components include:

• Interest on deposits increased by $14 million and $76 million for the respective three and nine months ended September 30, 2024, due to higher average interest rates.
• Interest on borrowings increased by $7 million for the three-month period and by $38 million for the nine-month period, attributed to higher average interest rates.

Costs associated with marketing and customer acquisition.

Marketing expenses for Bread Financial Holdings amounted to $38 million for the three months ended September 30, 2024, reflecting a slight increase from $36 million in the same period of 2023. For the nine-month period, marketing expenses totaled $99 million, down from $115 million in the previous year.

The company has focused on digital marketing strategies and customer loyalty programs, aiming to enhance customer acquisition while managing costs effectively.

Period	Marketing Expenses (Millions)	Change (%)
Q3 2024	$38	5.56%
Q3 2023	$36	-
9M 2024	$99	-13.91%
9M 2023	$115	-

Operational expenses for technology and compliance.

Bread Financial's operational expenses reflect significant investment in technology and compliance to meet regulatory requirements and improve service delivery. For the three months ended September 30, 2024, total non-interest expenses reached $574 million, an increase of $72 million from $502 million in Q3 2023. For the nine-month period, non-interest expenses totaled $1.525 billion, down from $1.576 billion in the prior year.

Specific operational costs include:

• Employee compensation and benefits: $228 million for Q3 2024, up from $210 million in Q3 2023.
• Card and processing expenses: $77 million for Q3 2024, down from $104 million in Q3 2023.
• Information processing and communication: $73 million for Q3 2024, unchanged from the prior year.
• Depreciation and amortization: $22 million for Q3 2024, slightly down from $23 million in Q3 2023.

Expense Type	Q3 2024 (Millions)	Q3 2023 (Millions)	Change (%)
Employee Compensation and Benefits	$228	$210	8.57%
Card and Processing Expenses	$77	$104	-26.00%
Information Processing and Communication	$73	$73	0.00%
Depreciation and Amortization	$22	$23	-4.35%

Overall, Bread Financial Holdings, Inc. continues to balance its cost structure strategically, focusing on enhancing operational efficiencies while navigating the complexities of the financial services landscape.

Bread Financial Holdings, Inc. (BFH) - Business Model: Revenue Streams

Primarily from interest and fees on loans

Bread Financial Holdings, Inc. generates a significant portion of its revenue from interest and fees associated with its loan products. As of September 30, 2024, the total credit card and other loans amounted to $17.933 billion, a decrease from $19.333 billion at the end of 2023. The net interest income for the nine months ended September 30, 2024, was $3.077 billion, reflecting a net interest margin of 18.5%.

Income from contractual agreements with brand partners

In addition to direct lending, Bread Financial engages in contractual agreements with brand partners. These partnerships typically involve revenue-sharing arrangements that contribute to the overall income stream. The company reported a gain of $230 million from the sale of a loan portfolio in February 2023, demonstrating the financial impact of such agreements.

Additional revenue from digital financial products and services

Bread Financial also derives revenue from digital financial products and services, including buy now, pay later (BNPL) options. For the nine months ended September 30, 2024, the allowance for credit losses on BNPL loans was approximately $31 million, showcasing the scale of this product offering. The total revenue from digital offerings complements the interest income from traditional loan products, expanding the company's revenue base.

Revenue Stream	Amount (Millions)	Notes
Interest and fees on loans	$3,077	Net interest income for nine months ended September 30, 2024
Total credit card and other loans	$17,933	As of September 30, 2024
Gain on portfolio sale	$230	From BJ's portfolio sale in February 2023
Allowance for credit losses on BNPL loans	$31	As of September 30, 2024

Article updated on 8 Nov 2024

Resources:

1. Bread Financial Holdings, Inc. (BFH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Bread Financial Holdings, Inc. (BFH)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Bread Financial Holdings, Inc. (BFH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.