FINTECH SNARK TANK COMMENTS
The Wall Street Journal reported that JPMorgan Chase:
“Assembled 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. He bought a reservation system, a restaurant review company and a luxury travel agency. It builds its own airport lounges and a force of thousands of travel agents. A new website will be launched in the coming months.
The big question, of course, is “Why?” According to the article:
“The idea is for JPMorgan to control the entire buying and shopping experience for a purchase that excites customers. Automobiles and homes could be next, the executives said.
What does JPMorgan Chase think here?
Allison Beer, head of cards at the bank, explained:
“These are huge circles of customer spending where we have a real opportunity to differentiate what it means to use Chase products.”
Yes, of course, but the amount of money Chase has taken — and will continue to demand from the bank — to build a full-service travel business isn’t just about serving existing customers. It’s about acquiring new customers and changing the nature of credit card competition.
Today, big card issuers compete for big spenders with rewards. Rewards are a huge differentiator and motivator in the credit card space, and Chase will surely continue to battle on the rewards front with other major issuers.
An integrated travel business, however, changes the way Chase can reach prospects and deliver a more targeted credit card offer.
Chase has co-branded credit card relationships with travel-related companies, including Southwest Airlines, United, Aer Lingus, British Airways and Iberia. Additionally, it offers cards for hotel chains like IHG, Marriott, Hyatt, and Disney.
Taking (and making) travel reservations for consumers gives Chase the ability to provide instant offers for their portfolio of co-branded cards at the point of sale.
For existing Chase cardholders, the travel industry would theoretically be able to make smart buy-it-now-pay-later (BNPL) offers based on past purchase and refund behavior.
Overview: Activity-Based Marketing
In 2019, I published a report titled Point of sale: the new battleground for banking marketers. The premise of the report was that the debate between the superiority of inbound marketing versus outbound marketing missed the emergence of a new kind of marketing—marketing by activity-defined as:
“Marketing in the context of the research, buying and/or purchasing activity performed by a customer or prospect.”
Activity-based marketing is imperative for banks because for many purchasing categories, decisions are based on purchase (or research) processes, not past relationships.
As the report notes:
“Activity-based marketing changes consumer behavior and the process by which they make product and supplier choices. This changes the point of interaction for banks, bringing it much closer to identifying the need or desire for the product or service. Additionally, it provides education in the context of the activity the consumer is being educated about.
The benefits of activity-based marketing include:
- Awareness and affinity with the brand. Anyone, not just existing customers, can use the activity-based marketing apps from the financial institutions listed above. Indeed, apps are a form of advertising that creates brand awareness and positive affinity towards these companies.
- Early engagement in the buying cycle. The well-known challenge that banks have with many loan products, particularly auto and home, is that the choice of loan provider is usually not considered prior to product selection. By providing a tool to aid in the product selection process, a bank providing an activity-based marketing application engages prospects earlier in the buying cycle than they previously could.
- Consumer knowledge. McKinsey & Co.’s prescription for marketers to develop personalization capabilities includes: 1) assembling a rich, real-time view of customer engagement, and 2) mining data to identify signals consumers throughout the customer journey. A problem with this prescription is that bank marketers do not have this data. Activity-based marketing helps solve this problem by establishing the activities and processes that create the data.
- Tender direction. With activity-based marketing, banks can help customers use their debit and credit cards with rewards and/or discount offers or be there when a customer needs point-of-sale financing ( POSF).
I anticipated that banks would start with the home and auto buying processes (as USAA and Commonwealth Bank of Australia have already done), not the travel experience.
But with its portfolio of co-branded travel-related credit cards, the travel industry is a smart place for Chase to disrupt.
Chase may not call what it does “activity-based marketing” (it prefers the term “connected commerce”), but the bank continues to show it’s willing to make big bets and take big risks to change the world of financial services.