Jeff Bezos and Jamie Damon.
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Amazon She chose to renew a deal that allows c. B. Morgan Chase to issue a leading tech giant rewards credit card, ending months of heated negotiations, CNBC has learned.
Amazon Prime Rewards Card It was one of the most coveted co-branded deals in the industry, a rare award due to the sheer scale of Amazon’s loyalty program, with its recognition 150 million US members, according to people familiar with the talks.
While JPMorgan released the Amazon Card because it was little more than an online bookseller Two decades agoThat didn’t stop Amazon from soliciting bids to replace the bank in mid-2021. American Express, synchronization And the City Group were among the two sources participating in the discussions, and Master Card Credit Card He was hoping to leave visa As a payments network, the people who declined to be identified spoke about the private operation, he said.
“This was a once-in-a-lifetime opportunity to hack Amazon and make incremental change in your card business,” one person said. “If Chase loses it, it will be the shot heard across the payments world. Any winner will gain instant credibility and a new growth story for Wall Street.”
Credit card deals with popular brands including Amazon, costco And the American Airlines It has become one of the most hotly contested contracts in the financial world. This is because they instantly give the issuing bank a captive audience of millions of loyal customers who spend billions of dollars annually. The largest agreements can constitute a disproportionate share of the issuer’s business; American Express lost 10% of its cards in Rotation When Citigroup won the bid To get a Costco card in 2015.
Card deals are so important to banks that CEOs including JPMorgan’s Jimmy Damon Citigroup Jane Fraser They are known to have been involved in settling transactions, people said.
tense conversations
Discussions about the Amazon card have included JPMorgan’s position on it can turn away of the two-decade partnership and sale of its loan portfolio, Bloomberg reported in June. The loans made by Amazon Prime clients held in the bank’s Chase division total about $20 billion in loans, the sources said. Doing so will spark the arduous process of transferring millions of customers to a new bank while making sure their cards are still working perfectly.
This may have been a negotiating tactic by JPMorgan, because while Amazon has seen explosive growth during the pandemic as people have been forced to stay at home, other sectors for which Chase cards are popular — hotels, restaurants and entertainment — have fallen sharply. This made Amazon even more important to the largest US bank by assets.
Despite its importance to American banks and consumers who have become obsessed As card rewards are maximized, the contracts themselves are shrouded in secrecy. One person said Amazon required participants to sign nondisclosure agreements, and they made their own RFP, or Request for Proposal, for the deal, largely with the exception of third-party advisors.
The people, who are known for driving tough deals with partners, said Amazon has pushed issuers to accept their terms. This included maintaining the card’s rich rewards rate of 5% for Amazon.com and Whole Foods purchases, while also having to forego a portion of the bank’s revenue from making loans, as well as deducting some of the interchange fees that the bank would normally hold. the people.
longer deals
As major retailers have flexed their sway over banks over the past decade, forcing lenders to accept more onerous terms for sharing revenue and offering richer bonuses, deals have grown for longer. What was normally a five-year term has extended to deals of seven and ten years, or even longer, according to industry participants, giving banks a better chance of making money on cards. For example, two people said Costco’s deal with Citigroup actually stretches back a decade.
Many of the banks involved had hoped that they could displace JPMorgan at least part of the business, perhaps by naming them as a secondary issuer alongside Chase. American Express and Synchrony already had other cards with Amazon, including small business and private label offerings. They and other banks declined to comment for this story.
MasterCard payments network sensed the opening last year amid Dispute between Amazon and Visa on the exchange fees that the e-commerce giant has to pay. MasterCard has solicited interest from banks, including American Express, to see if they can get involved to replace Chase and Visa, one of the people said. Convenient, Visa and Amazon I reached a global agreement Last month, this allowed Visa cardholders to continue using their cards.
In the end, Amazon chose to stay with JPMorgan and the Visa network. The company’s relationship stretches back to 2002, when a Chicago lender called Bank One (led by then-CEO Jamie Dimon) first Subscribe Young internet company promising card deal. JPMorgan acquired Bank One two years later.
Damon Bezos
The personal relationship between Damon and Amazon founder Jeff Bezos goes back even further, to Amazon’s early days. Damon said that even Enjoyed for a while Join Amazon before taking on the Bank One job. Recently, the leaders formed a three-company joint venture with Berkshire Hathaway called Haven that aims to disrupt American healthcare by disassemble voltage in 2021.
The latest corporate deal means that for users of the popular Amazon Prime Rewards Visa Signature card, not much will change. Prime members will still earn 5% on Amazon.com and Whole Foods purchases — the highest rate among reward cards — plus 2% at restaurants, gas stations and pharmacies, and 1% elsewhere.
In a brief statement provided to CNBC, Amazon Vice President Max Pardon said the company looks forward to “continuing our work with Chase and its technologies and capabilities to enable a seamless and rewarding payment option for Amazon customers.”
For its part, JPMorgan touted the “multi-year” co-branding deal and said it was “extremely proud” of its relationship with Amazon.
“Looking forward to the future, we’re excited to continue to introduce new features for this product that will delight Cardmembers,” said Chase Co-CEO Marian Lake.
