Bread Financial Holdings, Inc. operates as a tech-forward financial services company. The company provides simple, personalized payment, lending, and saving solutions to millions of the U.S. consumers. The company’s payment solutions, including Bread Financial general purpose credit cards and savings products, empower its customers and their passions for a better life. Additionally, the company delivers growth for some of the most recognized brands in travel & entertainment, health & beauty, jew...
Bread Financial Holdings, Inc. operates as a tech-forward financial services company. The company provides simple, personalized payment, lending, and saving solutions to millions of the U.S. consumers. The company’s payment solutions, including Bread Financial general purpose credit cards and savings products, empower its customers and their passions for a better life. Additionally, the company delivers growth for some of the most recognized brands in travel & entertainment, health & beauty, jewelry and specialty apparel through its private label and co-brand credit cards and pay-over-time products providing choice and value to its shared customers.
The company’s partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs). The company’s partner base is well diversified across a broad range of industries and retail verticals, including travel and entertainment, health and beauty, jewelry, sporting goods, technology and electronics, home goods and the industry in which it first began, specialty apparel. The company’s comprehensive suite of payment, lending and saving solutions, along with its related marketing and data and analytics, offers it a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers). The breadth and quality of the company’s product and service offerings, coupled with its customer-centric approach, have enabled it to establish and maintain long-standing partner relationships. The company operates its business through a single reportable segment, with its primary source of revenue being from Interest and fees on loans from its various credit card and other loan products, and to a lesser extent from contractual relationships with its brand partners.
With its range of offerings, the company provides relevant products across consumer segments, including Gen Z and Millennials who are more likely to be drawn to cash flow management products, such as its pay-over-time installment loans and split-pay offerings, while Gen X and Baby Boomers generally gravitate toward rewards and the convenience of a private label or co-brand credit card. In addition, the company continues to develop and scale its direct-to-consumer lending, payment and saving products for new and existing customers, including through its proprietary credit cards and Bread Savings products. The company also continues to diversify and optimize its portfolio, prioritizing its investment in strong and profitable partners, industries and affinity brands, while continuing to develop its Bread Pay products, which are its installment loans and split-pay offerings, and exploring various strategic business opportunities adjacent to its core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.
Primary Product Offerings
The company’s primary product offerings consist of its private label and co-brand credit card programs with retailers and other brand partners; direct-to-consumer (DTC) credit cards; Bread Pay products; and Bread Savings products.
Private Label and Co-Brand Credit Card Lending
The company’s core business is working with many of the country’s best-known brands and retailers (who it calls its partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs. In these programs, the company (through its Banks) are the credit card issuer and lender to its partners’ customers, and it also services the loans and provides a variety of other related services. The company’s private label and co-brand partner base, with approximately 100 brands and numerous online merchants, consists of many large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret. The company’s partners benefit from customer insights and analytics, with each of its branded credit card programs tailored to its partner’s brand and their unique customers. The company’s private label and co-brand program agreements with its brand partners are generally long-term, exclusive contracts, with terms typically ranging from 5 to 10 years.
The company’s co-brand credit cards are general purpose credit cards that can be used to purchase goods and services from the applicable partner, as well as any other retailers wherever cards from the named card network are accepted. The company issues co-brand credit cards for use on the MasterCard and Visa networks (its DTC general purpose credit cards use the American Express network). Credit extended under the company’s co-brand credit cards is typically on standard terms only. Charges made using a co-brand credit card, particularly charges made outside of the co-brand partner, generate interchange income for the company. Relative to the company’s private label loan portfolio, its co-brand loan portfolio generally haslower revenue yields. In addition, the company’s co-brand customers generally have higher credit scores and therefore higher credit lines, with the majority of its co-brand customers having a Vantage score in excess of 660.
The company offers deferred interest rate, as well as low or no interest rate promotional financing to customers in certain of its brand partner programs. In both the company’s private label and co-brand partner relationships, it receives a merchant discount fee from its partners to compensate it for all or part of the foregone interest income associated with promotional financing. The company’s credit card program agreements may also provide for royalty payments, or retailer share arrangements, to its brand partners based on purchase volume or if certain contractual incentives are met, such as if the economic performance of the program exceeds a contractually defined threshold, or for new accounts acquired. These amounts are recorded as a reduction of revenue in the period incurred.
In addition to the retailer share arrangements, the company’s program agreements typically provide that the parties will develop a marketing plan to support the program, along with the terms by which a joint marketing budget is funded. Marketing costs for which the company is responsible under the plan are expensed as incurred. The company’s program agreements also typically provide that the parties will develop the terms of the rewards program linked to the use of its product (such as opportunities to receive double rewards points for purchases made on a product), along with the allocation of costs related to the rewards program. More broadly, the credit card programs the company operates typically provide rewards points, which are redeemable for a variety of products or awards, or merchandise discounts earned by the customer having achieved a preset spending level.
As a general matter, the financial terms and conditions governing the company’s private label and co-brand credit card products vary by program and product type and may change over time; although, it seeks to standardize the non-financial provisions consistently across all products. The terms and conditions of all of the company’s credit card products are governed by a cardholder agreement and applicable laws and regulations. The company assigns each credit card account a credit limit when the account is initially opened by the customer. The company also may enter into arrangements with delinquent customers to modify their payments and/or waive or reduce interest charges and/or fees. The company makes it easier for customers to make payments by offering recurring automatic payment functionality and other electronic payments methods on all cardholder accounts.
Direct-to-Consumer Credit Cards
In 2022, the company launched its branded Bread Cashback American Express Credit Card, which is a DTC, general purpose cashback credit card. The company’s DTC credit cards are an important component of its overall product offerings and allow for it to capture incremental, non-discretionary spend and build and retain customer relationships.
In addition, in 2023, the company introduced its newest DTC general purpose credit card, the Bread Rewards American Express Credit Card, which offers 3% rewards points on gas station, grocery store, dining and utility purchases, among other benefits. The company issues its DTC credit cards on the American Express network.
Bread Pay
Bread Pay is the company’s payment technology solution for its pay-over-time products, which includes both its installment loan and split-pay offerings, as described in more detail below. Through Bread Pay, the company offers an omnichannel solution for more than 1,300 SMB retailers and merchants, and it continues to explore and pursue growth opportunities in various business adjacencies, including through the integration of its suite of products (primarily Bread Pay installment loans) into third-party platforms to gain efficient distribution of its lending solutions.
Bread Pay also offers the company’s existing private label and co-brand credit card partners a broader digital product suite and additional white-label product solutions for those customers preferring a non-revolving loan with fixed repayment terms, such as its installment loans and split-pay offerings. The company offers a flexible platform and robust suite of application programming interfaces (APIs) that allow merchants and partners to seamlessly integrate online point-of-sale financing and other digital payment products.
The company’s Bread Pay installment loans are fixed extensions of credit where the customer pays down the outstanding balance in monthly installments, typically over a 3 to 48 month period. The terms of the company’s installment loans are governed by customer agreements and applicable laws and regulations. Installment loans are generally assessed interest charges using fixed interest rates.
The company’s Bread Pay split-pay loans are short-term, interest-free financing, to be repaid by the customer in four equal installments, with the first payment due at the time of purchase and the remaining three payments due in subsequent two-week intervals. The terms of the company’s split-pay loans are governed by customer agreements and applicable laws and regulations.
Bread Savings
Bread Savings refers to the company’s DTC, or retail, deposit products, primarily in the form of certificates of deposit and high-yield savings accounts, including traditional and Roth Individual Retirement Accounts. As of December 31, 2024, average retail deposits represented 43% of the company’s total funding sources and as of that same date, deposits that exceeded applicable Federal Deposit Insurance Corporation (FDIC) insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $574 million, or 4% of Total deposits.
The company’s online Bread Savings platform is scalable, allowing it to expand without having to rely on a traditional brick and mortar branch network. The company continues to focus on growing its Bread Savings operations.
Services Supporting Primary Product Offerings
The company’s primary product offerings are supported and enhanced by numerous services and capabilities that it provides, including risk management, account origination and funding services; credit card and other loan processing and servicing; fraud prevention; marketing, and data and analytics; and its digital and mobile capabilities.
Risk Management, Account Origination and Funding Services: The company provides risk management solutions, account origination and funding services for its private label and co-brand credit card programs, as well as its Bread Pay partnerships.
The company processes millions of credit card applications each year using automated proprietary scoring technology and verification procedures to make responsible risk-based underwriting and origination decisions when approving new accounts and establishing credit limits. Credit quality is monitored on a regular and consistent basis, using internal algorithms and external credit bureau risk scores.
Credit Card and Other Loan Processing and Servicing: The company manages and services the accounts it originates for its private label and co-brand credit card programs, as well as its DTC credit cards and Bread Pay products. In 2022, the company completed the transition of its credit card processing services to Fiserv, a leading global provider of outsourced payments and financial services technology solutions; this transition enables improved speed to market, including the ability to quickly and seamlessly add new products and capabilities that benefit its partners and cardholders. It has also strengthened its ability to ensure it is operating on a compliant core platform, and enables efficient integration of digital technology, while supporting its data and analytics capabilities and improving operational efficiencies.
The company’s customer care operations are influenced by its retail heritage, and it views every customer touch point as an opportunity to provide an exceptional experience. The company’s customer care operations offer omnichannel servicing, including through phone, mail, email, text, smartphone application and the web. The company blends domestic and off-shore locations as an important part of its servicing strategy, to maintain service availability beyond typical work hours in the United States. The company provides focused training programs in all areas to achieve the highest possible customer service standards and customer experience and monitor its performance by conducting surveys with its partners and its customers, including the recent development of an AI-powered knowledge management solution for its customer care associates. In 2024, for the nineteenth consecutive time, the company was certified by BenchmarkPortal as a Center of Excellence for the quality of its operations, the most prestigious customer care industry ranking attainable. Founded by Purdue University in 1995, BenchmarkPortal is a global leader of best practices for customer care centers.
Fraud Prevention: The company monitors its customers’ accounts to help prevent, detect, investigate and resolve fraud across the various products it offers. The company employs a variety of fraud mitigation controls during the lifecycle of accounts, including capabilities related to account acquisition, transaction processing and account management. The company uses proprietary custom fraud models developed by its data scientists, together with externally-sourced scores and solutions used across the industry, to seek to identify fraud and protect its stakeholders, including its customers and brand partners. The company leverages device intelligence technology to risk-assess digital applications and online servicing channels, and it subject monetary transactions to authorization and approval scrutiny through a variety of techniques designed to help identify and halt fraudulent transactions, including machine-learning models, rules-based decision-making logic, report analysis, data integrity checks and manual account reviews. The company has a cross-functional team of risk, fraud and security professionals that regularly evaluate its fraud-prevention capabilities and emerging industry trends and solutions.
Marketing, and Data and Analytics: Through its integrated marketing services, the company designs and implements strategies that assist its partners in acquiring, retaining and expanding customer engagement to drive a more loyal, frequent shopper that increases customer lifetime value. The company’s programs capture transaction data that it analyzes to better understand consumer behavior, which it uses to increase the effectiveness of its partners’ marketing activities. Through its data and analytics capabilities, including the use of machine learning and artificial intelligence (AI) technology, the company focuses on data insights that drive actionable strategies and enhance revenue growth and customer retention. The company uses multi-channel marketing communication tools, including in-store, web, permission-based email, permission-based mobile messaging and direct mail to engage customers in the channels of their choice.
Digital and Mobile Capabilities: The company is constantly seeking to improve its digital and mobile capabilities, in order to support and enhance its product offerings, drive growth for its brand partners and improve the customer experience. The company seeks to provide a seamless, personalized digital and mobile experience that is responsive to its customers’ evolving expectations. Recent improvements to its digital and mobile capabilities include API enhancements, enriched software development kits, virtual card commercialization, and its new Bread Financial mobile app which the company launched to Bread Cashback American Express Credit Card customers in the fourth quarter of 2023, then throughout 2024 began to roll out to brand partner customers along with all Bread Rewards American Express Credit Card customers, and in 2025 the company will complete the full rollout to all remaining credit card customers. The company is continually seeking to enhance customers’ self-service capabilities in its digital channels, which allows customers to address their needs when and how they want.
In addition, through its Enhanced Digital Suite, a group of marketing and credit application features, the company helps its brand partners capitalize on online trends by bringing through more qualified applicants, a higher credit sales conversion rate and a higher average purchase value. Enhanced Digital Suite includes a unified software development kit that provides access to its broad suite of products; it also promotes credit payment options, relevant to the customer, earlier in the shopping experience. The credit application is simple and easy, offers prefilled fields and pre-screens customers in real-time, allowing for immediate credit approval without leaving the brand partner’s site. Across all product offerings, the company remains focused on creating an exceptional digital and mobile experience for its customers.
Technology/Systems
The company leverages information and technology to help achieve its business objectives and to develop and deliver products and services that satisfy its brand partners’ and customers’ needs, all while seeking to enhance its governance and control over the availability, quality and security of its data.
A key part of its strategic focus is the development and use of resilient, efficient and flexible computer and operational systems to deliver growth for its brand partners, support sophisticated marketing and account management strategies, service its customers, and develop and scale new and diversified products. Consequently, the company continuously reviews capabilities and develop or acquire systems, processes and competencies to meet its unique business requirements, including strategic investments in cloud capabilities, machine learning and AI, emerging technologies and automation, and data and analytics.
Specifically, the company relies on third parties to help it delivers systems and operational infrastructure, these relationships include Microsoft and Amazon Web Services, Inc. for its cloud infrastructure and Fiserv for its credit card processing services.
The company is committed to safeguarding its customers’ and its own information and technology, implementing backup and recovery systems, and generally require the same of its third-party service providers.
Disaster and Contingency Planning
The company operates, either internally or through third-party service providers, multiple data processing centers to store and otherwise process its customer transaction data. Given the significant amount of data that the company or its third-party service providers manage, much of which is real-time data to support its partners’ commerce initiatives, the company has established redundant capabilities for its data centers. The company has a number of safeguards in place that are designed to protect it from data-related risks and in the event of a disaster, to restore its data centers’ systems.
Supervision and Regulation
The company operates primarily through its insured depository institution subsidiaries, Comenity Bank (CB) and Comenity Capital Bank (CCB), which together are referred to herein as the banks. Federal and state laws and regulations extensively regulate the operations of the banks. This regulatory framework is intended to protect individual consumers, depositors, the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation and the U.S. banking system as a whole, rather than for the protection of stockholders and creditors.
CB is a Delaware-chartered bank operating as a credit card bank under a Competitive Equality Banking Act (CEBA) exemption from the definition of bank under the Bank Holding Company Act (BHC Act). To maintain its status as a CEBA credit card bank, CB must continue to comply with the following requirements:
CB is subject to prudential regulation, supervision and examination by the Delaware Office of the State Bank Commissioner, as its chartering authority, and the Federal Deposit Insurance Corporation as its primary federal regulator. CB’s deposits are insured by the Federal Deposit Insurance Corporation up to the applicable deposit insurance limits in accordance with applicable law and Federal Deposit Insurance Corporation regulations.
CCB is a Utah-chartered industrial bank. As an industrial bank, CCB is exempt from the definition of bank under the BHC Act. CCB is subject to prudential regulation, supervision and examination by the Utah Department of Financial Institutions (UDFI), as its chartering authority, and the Federal Deposit Insurance Corporation as its primary federal regulator. CCB’s deposits are insured by the Federal Deposit Insurance Corporation up to the applicable deposit insurance limits in accordance with applicable law and Federal Deposit Insurance Corporation regulations. CCB is not a member of the Federal Reserve System.
Separately, under Utah state law the company is subject to examination by the UDFI. The banks are subject to certain risk-based capital and leverage ratio requirements under the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations adopted by the Federal Deposit Insurance Corporation. These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act. These quantitative calculations are minimums, and the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation may determine that a bank, based on size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
The deposits of the banks are insured up to applicable limits by the DIF of the Federal Deposit Insurance Corporation. The current standard maximum deposit insurance amount is $250,000 per depositor, per insured depository institution, per ownership category, in accordance with applicable Federal Deposit Insurance Corporation regulations.
Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit the extent to which the Parent Company and its non-bank affiliates (including non-bank subsidiaries) can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to the Parent Company or its non-bank affiliates.
The banks are also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the Federal Reserve Board's implementing Regulation O as made applicable to the Banks by the regulations of the Federal Deposit Insurance Corporation. These provisions impose limitations on loans and extensions of credit by the banks to their executive officers, directors and principal stockholders and their related interests, as well as those of the banks’ affiliates. The limitations restrict the terms and aggregate amount of such transactions. Regulation O also imposes certain recordkeeping and reporting requirements. The company is subject to the federal consumer financial protection laws implemented by the Consumer Financial Protection Bureau (CFPB), as well as by other federal agencies, including the Federal Deposit Insurance Corporation and Federal Trade Commission.
For example, the company is subject to the Gramm-Leach-Bliley Act (GLBA) and implementing regulations and guidance in the United States.
History
The company was incorporated in 1995. It was formerly known as Alliance Data Systems Corporation and changed its name to Bread Financial Holdings, Inc. in 2022.
