Key Takeaways
- • JPMorgan Chase has recently explored finding outside partners to underwrite credit card applications that it rejects for some of its co-branded credit cards, according to the Wall Street Journal.
- • The exploration aims to address a longstanding point of contention between the bank and co-brand partners such as airlines and retailers.
- • The potential arrangement would open the door for private-credit firms to acquire a new piece of consumer debt.
- • Banks currently absorb much of the default risk on co-branded card portfolios, which is central to the friction with merchant partners.
Summary
JPMorgan Chase has recently explored a way to ease a longstanding point of contention with credit-card partners such as airlines and retailers, according to the Wall Street Journal. The proposal would involve finding partners to underwrite applications that the bank rejects for some of its co-branded credit cards. Such an arrangement would open the door for private-credit firms to take on a new piece of consumer debt, which the Journal reports has generated interest among private-credit firms.
Co-branded cards are a significant part of the relationship between large merchants and banks. Airlines, department stores and other merchants rely on these programs to attract customers, build loyalty and increase revenue. Banks, however, assume much of the risk that cardholders will default on their payments, and that allocation of risk has long been a source of friction between the two sides.
The source article is a brief exclusive and does not provide deal values, fund names, or details on the structure, pricing, or timing of any proposed arrangement. Readers should treat the development as exploratory based on the reporting available.
Co-branded cards are a significant part of the relationship between large merchants and banks. Airlines, department stores and other merchants rely on these programs to attract customers, build loyalty and increase revenue. Banks, however, assume much of the risk that cardholders will default on their payments, and that allocation of risk has long been a source of friction between the two sides.
The source article is a brief exclusive and does not provide deal values, fund names, or details on the structure, pricing, or timing of any proposed arrangement. Readers should treat the development as exploratory based on the reporting available.
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