Chase acquired a credit card loyalty business, which indicates confidence in the next stage of credit cards following the impact of COVID-19. The move offers confidence in the future credit card market, with an acquisition that will help attract and retain cardmembers.
As the Nilson Report indicates, JPMorgan Chase is the top global issuer of credit cards, has $168.9 billion in outstandings. This metric is more than one-third larger than the next three issuers, with Citi at $118 billion. American Express at $115 billion and Bank of America at $109 billion.
The buzz today is that Chase acquired cxLoyalty, a Stamford, CT firm. According to the official press release, “The deal includes cxLoyalty’s leading technology platforms, full-service travel agency, gift card, merchandise, and points bank businesses. cxLoyalty will operate as a business unit within JPMC. The transaction excludes cxLoyalty Group Holdings’ Global Customer Engagement division and other ongoing businesses (collectively “the Global Customer Engagement Division”).
cxLoyalty offers everything you would expect from a loyalty company, including the technologies, analytics, content, and experience, so it fits nicely into Chase’s quiver. The acquired firm also services Citi, Capital One, and Mastercard, according to CNBC. The purchase reprises Chase’s prior relationship.
- JPMorgan had partnered with cxLoyalty for its popular credit card rewards program until 2018 when the bank switched to using Expedia. Now, the bank will eventually return to using cxLoyalty as the tech platform underpinning its travel program, with an emphasis on giving personalized recommendations based on users’ travel history.
- A key rationale JPMorgan had for buying the operations was that by gaining cxLoyalty’s technology, it will own both ends of a two-sided platform. With millions of credit card users and direct relationships with hotel and airline companies, the bank can eventually command unique deals from those partners.
When Chase makes a move, every credit card issuer needs to consider the impact on their market. No one has more at stake than the New York-based bank, and they face-off with every national, regional, and local credit card issuer.
There are three important takeaways.
- Chase’s purchase expresses confidence in the consumer credit market. The purchase comes when few are traveling, and analysts scratch their heads trying to project when COVID-19 will subside.
- The move suggests that Chase will protect its franchise from voluntary and involuntary attrition.
- Chase’s action also indicates that consumer travel will rebound, which will restore value to cobranded travel cards.
The ‘Oh, Wow” here is in Chase’s move to leap beyond the crisis. They are well-reserved against COVID credit risk. Here, it is clear that Chase is planning ahead of economic recovery. It is time to think beyond the current crisis and engineer credit card programs to face-off with Chase in the long game.
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group