American Express issues a small business card with Amazon, and Synchrony Financial issues the Amazon store card. Both issuers are bidding on the Amazon consumer co-brand business according to Bloomberg.
Amazon.com Inc. is fielding bids to replace JPMorgan Chase & Co. as the issuer on its popular co-brand credit card, according to people familiar with the matter.
…JPMorgan is willing to part with the Amazon portfolio, according to some of the people familiar with the matter.
Chase certainly has the financial resources to retain the business if they want it, but according to reports “JPMorgan could fetch a 15% premium on the portfolio, which contains more than $15 billion in loans.”
Given’s Chase’s aggressiveness in acquiring new cardmembers and stretching for growth, it surprises me to read that they’re considering shedding a huge portfolio said the generate over $50 billion a year in consumer charges (making it perhaps half the size of the United card business) and after a nearly 20-year relationship.
The problem of course is that consumers take the Amazon card and then use it for Amazon spend and not for all of their spend. That makes it an expensive value proposition, because regardless of how the cost is split between the card issuer and merchant Amazon charges with the cards are a loss leader. The bet is that 5% can be paid out on a low enough portion of total spend that it’s a worthwhile investment to attract the revolve that consumers do on these cards.
I’d be surprised if Synchrony Financial had the wherewithal to pull off a marquis co-brand deal of this size. American Express might be willing to overpay for it, however.