Wading into new waters: Microsoft launches Xbox-centric Mastercard

Microsoft launched an Xbox Mastercard last week exclusively for US users enrolled in the Xbox Insider program – members of which can preview and provide feedback on new Xbox features and system updates. Starting from the continental United States, Alaska, and Hawaii, the initial launch will be followed by common availability for all Xbox gamers by next year.

Issued by Barclays, the no-annual-fee card comes in five designs and offers points on purchases made at the Xbox or Microsoft store that can be redeemed on games and add-ons on Xbox.com. Eligible purchases at the Microsoft Store earn 5 points for every $1. Purchases can also be made on other platforms including streaming services such as Netflix and Disney +, and food delivery services like Grubhub and DoorDash. Eligible streaming and food delivery services earn 3 points for every $1.

The co-branded credit card also offers an introductory sign-up bonus of 5,000 points equivalent to $50 value and three months of Xbox Game Pass Ultimate for new Game Pass members after the initial purchase.

Why launch an Xbox-centric credit card?

Lockdowns, technology, and mobile devices have increased the accessibility of video games. Nearly 3.2 billion people — around half the world’s population — are estimated to have played games in 2022. Gamers spending a portion of their income on video game-related purchases makes the case why Microsoft capitalized on an opportunity to roll out a credit card targeting this segment.

“We know players are interested in getting more value from Xbox, and we’ve heard feedback from the community that they want more ways to get value from their purchases,” said the Xbox spokesperson in the announcement.

Moreover, it appears that the card launch is a step forward for Microsoft’s strategic plans to shape the commercial components – grow revenue and engagement – of its Xbox ecosystem. The tech firm plans to expand its Xbox Game Pass subscription service into new markets via cloud computing to reach additional customers. The company expects the service to surpass 100 million subscribers between 2029 and 2030, according to recently surfaced documents of the ongoing Federal Trade Commission vs. Microsoft case.

Mastercard, on the other hand, has forged various partnerships with video game firms over the years and most recently partnered with Xsolla, a video game commerce firm to provide customized payment options for video game players, developers, and creators. 

Although Microsoft and Mastercard have collaborated in the past, this is the first time the two have come together on a co-branded gaming card.

Embedded finance in gaming: A hit or missed opportunity?

Although the card comes in different designs with an option to customize it with a Gamertag, some believe that isn’t enough given its positioning as a modern gaming card. According to critics, newer options could have been inculcated by the brand in terms of the application process, accessibility, and loyalty points – overall enhancing the brand value and user experience.

Users can only manage the Xbox card from the Barclays banking app. This feels like a missed opportunity – financial products can now be operated and managed directly within a brand's app without interrupting the user experience while allowing businesses to maintain brand consistency and in some cases, control over the customer experience. This can also enable brands to access customer data and spending patterns to better anticipate their needs through the card program. 

One such example is the Apple Card by Apple in partnership with Goldman Sachs. The Apple credit card is integrated into Apple’s Wallet app and has a control panel that can be managed from any Apple device. Starbucks also uses its card to enhance its customer experience and fuel revenue through its app and in-house Starbucks Rewards, regarded as the most successful loyalty program in retail. 

Lastly, the Xbox card rewards are not tied to the Microsoft Rewards program and are limited to and only redeemable for Xbox purchases. This means the rewards are wired within the Xbox ecosystem and can only be used to buy more Xbox-related things, in the form of games or hardware. This could limit the card’s appeal to those users who decide to stick with the flexibility of a standard cash-back credit card or just want to continue their enrollment in the Microsoft Rewards program. Microsoft’s rewards can be earned by using any of its services and can be redeemed at partner retail outlets outside the Microsoft store, in addition to Xbox purchases.