OBSERVATIONS FROM THE FINTECH SNARK TANK
The Wall Street Journal reported that JPMorgan Chase:
“Has been assembling the pieces to launch a full-service travel business where customers can plan and book trips ranging from a simple domestic flight to an extravagant safari. It bought a booking system, a restaurant review company and a luxury travel agent. It is building its own airport lounges and a force of thousands of travel agents. A new website will launch in the coming months.”
The big question, of course, is “Why?” According to the article:
“The idea is for JPMorgan to control the entire shopping and buying experience for a purchase customers are passionate about. Automobiles and homes might be next, executives said.”
What’s JPMorgan Chase’s Thinking Here?
Allison Beer, the bank’s head of cards explained:
“These are huge circles of customer spend where we have a real opportunity to differentiate what it means to use Chase products.”
Yeah, sure, but the amount of money it has taken Chase—and will continue to require of the bank—to build out a full-service travel business isn’t just about serving existing customers. It’s about new customer acquisition and changing the nature of competition in the credit card space.
Today, the big card issuers compete for the big spenders with rewards. Rewards is a huge differentiator and motivator in the credit card space, and Chase will surely continue to battle it out on the rewards fronts with the other large issuers.
An integrated travel business, however, changes the nature of how Chase can reach prospects and offer a more targeted credit card offer.
Chase has co-branded credit card relationships with travel-related companies including airlines Southwest, United, Aer Lingus, British Airways, and Iberia. In addition, it offers cards for hotel chains like IHG, Marriott, Hyatt, and Disney.
Taking (and making) travel reservations for consumers gives Chase an opportunity to provide instant offers for their co-branded card portfolio at the point of sale.
For existing Chase cardholders, the travel business would be able, theoretically, to make smart buy now, pay later (BNPL) offers based on past purchase and repayment behavior.
The Bigger Picture: Activity-Based Marketing
In 2019, I published a report titled Point-of-Sale: The New Battleground for Bank Marketers. The premise of the report was that the debate between the superiority of inbound marketing versus outbound marketing was missing the emergence of a new type of marketing—activity-based marketing—defined as:
“Marketing within the context of the research, shopping and/or purchasing activity being performed by a customer or prospect.”
Activity-based marketing is an imperative for banks because for many categories of purchases, decisions are based on shopping (or research) processes, and not on prior relationships.
As the report noted:
“Activity-based marketing changes consumers’ behavior and the process by which they make their product and provider choices. It changes the point of interaction for banks, moving that point much closer to the identification of the need or want for the product or service. In addition, it provides education within the context of the activity on which the consumer is being educated.”
The benefits of activity-based marketing include:
- Brand awareness and affinity. Anyone—not just existing customers—can use the activity-based marketing apps from the financial institutions listed above. In effect, the apps are a form of advertising that creates brand awareness and positive affinity toward those companies.
- Early engagement in the buying cycle. The well-known challenge that banks have regarding many lending products—autos and home, in particular—is that the choice of loan provider isn’t typically considered before the selection of the product. By providing a tool to help with the product selection process, a bank providing an activity-based marketing app is engaging prospects earlier in the buying cycle than they had been able to in the past.
- Consumer insights. McKinsey & Co.’s prescription for marketers to build personalization capabilities includes: 1) Assembling a rich real-time view of customer engagement, and 2) Mining data to identify consumer signals along the customer journey. One problem with this prescription is that bank marketers don’t have that data. Activity-based marketing helps address that problem by establishing the activities and processes that create the data.
- Tender steering. With activity-based marketing, banks can help steer customers to using their debit and credit cards with rewards and/or discount offers or be there when a customer has a point-of-sale financing (POSF) need.
I had anticipated that banks would start with the home and automobile buying processes (as USAA and Commonwealth Bank of Australia have already done), not the travel experience.
But with its portfolio of travel-related co-branded credit cards, the travel business is a smart place for Chase to disrupt.
Chase might not call what it’s doing “activity-based marketing” (it prefers the term “connected commerce”), but the bank continues to show that it’s willing to make big bets and take big risks to change the world of financial services.