Wells Fargo Launches Fresh Attack on Credit Card Market

As the credit card market heats back up due to pent-up consumer demand, the #3 U.S. bank throws down a gauntlet showing its strong interest in becoming a major card player after years of lagging top issuers. Will it spend the marketing bucks to win?

Wells Fargo is making a major play to boost its standing in the credit card business, in a renewal of its consumer credit portfolio programs. The new effort began in June 2021 and will continue into 2022 with introduction of new rewards card programs as well as a heightened focus on co-branded cards.

The push is part of the megabank’s broader effort to transform its business lines across the organization to concentrate on activities with higher revenue potential.

To even match the next-highest card issuer, Wells will have to more than double the cards it has in circulation.

First out of the chute, debuting in July 2021, will be Well’s Active Cash Card, featuring no annual fee and unlimited 2% cash rewards. Card holders who spend $1,000 in the first three months of having the card will receive a $200 cash rewards bonus. This is considered a bold move, especially in the face of the Citi Double Cash Card, considered the leader in the category. The Citi product has no such incentive. (The Citi product pays 1% for every dollar spent and 1% for every dollar paid off.) Later in 2021 Wells will introduce a low APR card called Reflect. A new line of rewards cards will debut in 2022.

“We are very, very weighted towards net interest income and credit-related businesses,” CEO Charles Scharf told analysts at the Bernstein Strategic Decisions Brokers Conference. The company has been in the process of selling off some products and business lines that don’t mesh with the renewed revenue focus and putting more muscle behind others, such as cards. Scharf added that Wells’ enormous consumer base itself represents a strong opportunity for growth, because “we’re underpenetrated with our existing customer base in Card.”

In a statement about the Active Cash product, Scharf indicated that its simple, straightforward reward plan reflected Wells’ perception that consumers want simpler card products.

“The credit card rewards system is complicated,” states Krista Phillips, Head of Branded Cards and Marketing at Wells, in response to email questions. “While each of our new cards offers something different, the thread that ties them together is simplicity. So, we’ve designed a suite of cards that cut through the clutter.” All cards being introduced in 2021 feature no annual fee. Wells’ website and mobile app will feature a special product switching tool for current card customers who want to move to one of the new offerings.

Phillips came to Wells in September 2020, after spending eight years in marketing at Citi and four at JPMorgan Chase. Scharf has been hiring extensively from outside Wells to beef up operations.

Playing Credit Card Catch-Up:

While Wells is the nation’s third-largest bank by assets it hasn’t ranked nearly so high in credit cards. Among the top six issuers, the largest, Capital One, has 106.5 million credit cards in circulation, and the sixth, American Express, has 44.3 million, according to Nilson Report data. By contrast, Wells has 19.8 million. (Figures revised 6/21/21 per Nilson update.)

“Wells has punched below their weight, compared to the rest of the industry,” says Andrew Davidson, SVP and Chief Insights Officer at Comperemedia, a Mintel company. “They’ve made a big statement of intent and will compete across a whole range of credit card segments. They have clearly signaled that they’re going to go up against all of the big credit card issuers.”

Marketing Dollars Will Weigh Heavily in Continuing Battle

Davidson says the deciding factor will be how heavily Wells is willing to spend on marketing. During the height of the pandemic card programs had to go through a major metamorphosis, with rewards programs presenting alternatives to travel points, for example, to better fit the times.

That time is past. While issuers are busily devising more new spins on card products, Davidson says that top executives from the major issuers have made it clear that they intend to step up marketing spending.

“Right now consumers are starting to spend more and they are spending more on big ticket items.”
— Andrew Davidson, Comperemedia/Mintel

Credit cards are unusual among retail banking products in that they still rely heavily on expensive direct mail promotion, on top of all the digital channels that are utilized. Historically these promotions are highly segmented by credit scores and other demographic factors.

On top of that are ancillary programs, such as rewards, that also come out of card revenues.

Wells is making its move as the card business enters a “very intense period of competitive activity,” according to Davidson. New card introductions are already rolling out and efforts to encourage balance transfers will step up in the months ahead.

“It’s going to come roaring back,” says Davidson. One indication of the marketing spending that Wells has in mind is its plan to air a card commercial during the 2021 Tokyo Summer Olympics opening ceremonies.

All this comes as consumers are making a shift from paying down card balances, as they did during the pandemic recession, to accelerating card spending.

“It will settle down, but right now consumers are starting to spend more and they are spending more on big ticket items,” says Davidson.

The Active Cash and Reflect cards are specifically designed for the mass affluent segment. Phillips says most competitors focus on affluent consumers and so this is considered a point of differentiation.

Davidson believes card marketers will be trying new approaches as well as returning to techniques that paid off well in the past. Prior to the pandemic one of the hot promo tools was offering exclusive experiences — such as small group gatherings with concert stars or social media influencers — to holders of certain credit cards. Now that venues are reopening and gatherings are possible again, Davidson believes this will come back.

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Marketing Salvos and Innovation Will Come from All Sides

“From the consumer’s perspective, all the competition will mean better incentives that they will benefit from,” says Davidson. Multiple competitors, including TD Bank and Synchrony, have tried to go up against the Citi Double Cash Card, but both are much smaller players than Citi, with shallower marketing pockets. Wells, on the other hand, represents a larger institution that has decided to engage with Citi. That potentially makes for a bloodier battle.

Jostling Citi’s Winning Program:

Citi’s Double Cash Card has had such a hold on the cashback space that the bank has not had to provide a bonus incentive for some time.

“It will be interesting to see what Citi does,” says Davidson.

A few days after the Wells announcement, Citi unveiled a new “Custom Cash Card.” Though clearly not a direct response to the Wells moves, it features 5% cash back on charges in the top spending category each month — say, restaurant meals for someone who dines out frequently — and 1% on all other categories. That new card will pay a $200 incentive after the first $750 is charged to it. The concept came from research into Millennial card spending. Citi says it learned that this group wanted rewards that kept up with the month to month changes in their spending habits.

Citi says the new card is “a perfect choice for any customers who want to be rewarded for simply being themselves.”

Also looming out there is the rumored re-bid Amazon is said to be preparing for a bank to replace JPMorgan Chase as issuer of its Prime cards, which pay rewards both inside and outside the ecommerce giant’s ecosystem. Wells did not respond to an email question whether it would bid should such an opportunity be real, though its announcement indicated that it wants to add more co-brand partners to its program and Amazon would be a grand slam, though a costly one. The Bloomberg article that raised the possibility of Chase losing the program indicated that Chase might not even fight the rumored change, as it is an expensive program to run.

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Have Consumers Let Go of Concerns over Past Sales Practices?

An unknown hanging out there is any remaining consumer mistrust due to the sales scandals Wells endured in recent years. Fraudulent credit card accounts were among the signups that had consumers scratching their heads until the depth and breadth of the scandal were exposed.

Since then, as its image has been recovering, Davidson says, Wells has stressed trustworthiness.

In today’s market “brand values are very important to consumers,” says Davidson, “so we’ll have to see how that plays out as the marketing commences. The indication that Wells feels ready to go to market suggests that Wells feels the time is right.”

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