JPMorgan Weighs Opening Card Business to Private Credit

That’s according to a report late Tuesday (Sept. 22) by The Wall Street Journal (WSJ), which notes that the banking giant’s plan could give the private credit space access to a new slice of consumer debt.

The WSJ characterizes J.P. Morgan’s plan as an effort to ease a long-held point of contention with its credit card partners including retailers and airlines. 

While companies rely on card programs to attract more customers, the report said, there is often tension between them and banks, with merchants trying to get lenders to approve more applicants than meet the bank’s credit requirements.

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Sources familiar with J.P. Morgan’s efforts told the WSJ that the bank sent requests to several companies to gauge interest in “second-look applications,” which would let them take on the risk of approving applications the bank denies.

And some of those entities reached out to private credit firms, which have increasingly been moving into the consumer debt space, the report added. Teaming with J.P. Morgan would mark a new level of private credit’s acceptance into mainstream finance, the WSJ said, as the bank’s co-brand partners include United Airlines, Marriott and Amazon.

J.P. Morgan will eventually become the issuer for the Apple Card, taking over for Goldman Sachs. The WSJ cites the Apple-Goldman relationship as an example of the tension between merchants and banks, as Apple wanted Goldman to approve almost every card applicant, leading to greater-than-normal exposure to subprime customers.

J.P. Morgan’s rejection rates have led to a strain between it and United Airlines, some of the sources said, though a person familiar with the airline’s card program said the companies have worked to address the issue.

Sources said the bank’s plans were in their early stages and could not come together at all. A spokesperson for J.P. Morgan told the WSJ the bank has no plans for a second-look program.

In other credit news, PYMNTS wrote Tuesday about new research that illustrates how card issuers “can lose a customer’s spending without losing the customer.”

Data from “The Switching Trigger,” a PYMNTS Intelligence report produced in partnership with Elan, shows that 58% of consumers who changed their primary credit card in the last two years switched to a card they already hold. Only 42% obtained a new card for that purpose.