Goldman Sachs Is Vying for JetBlue's Credit-Card Business -- Update
March 18 2021 - 12:12PM
Dow Jones News
By AnnaMaria Andriotis and Peter Rudegeair
Goldman Sachs Group Inc. is talking to JetBlue Airways Corp.
about taking over its credit-card program, according to people
familiar with the matter, the latest effort from the Wall Street
firm to push deeper into consumer finance.
Goldman is competing against Barclays PLC, which is the current
issuer of the JetBlue credit cards and is in discussions to hold on
to the deal, the people said. Discussions are ongoing, and JetBlue
may decide to stick with Barclays. JetBlue's contract with Barclays
doesn't end for another roughly three years, some of the people
said.
Known for most of its history as an adviser to blue-chip
companies and elite money managers, Goldman entered the credit-card
business in 2019 as part of a broader expansion into
digital-banking services for the masses. Its first credit card was
launched in partnership with Apple Inc. Last year, General Motors
Co. decided to move its credit-card offering from Capital One
Financial Corp. to Goldman.
As of December, outstanding balances on Goldman's credit cards
totaled $4.3 billion, more than double their level the year before.
The bank expects to add about $2 billion in GM credit-card balances
when that deal closes in September. That is still small compared
with the big card issuers. JPMorgan Chase & Co. had $144
billion in credit-card balances as of the fourth quarter 2020.
Airline co-branded cards are among the most competitive in the
credit-card industry. While there are hundreds of retailers that
banks could partner with to offer credit cards, there are a limited
number of U.S. airlines. The cards have historically appealed to
banks because they attracted big-spending frequent travelers.
But credit-card spending, particularly on airfare and other
travel, has been hit hard by the pandemic. Many people, worried
about taking on new debt in an uncertain job market, switched to
debit cards. Card issuers are betting that pent-up demand will
create a travel boom when the pandemic ends, boosting demand for
and usage of airline cards.
American Express Co. and JPMorgan have long run the credit-card
programs for Delta Air Lines Inc. and United Airlines Holdings
Inc., respectively. Citigroup Inc. and Barclays both issue credit
cards for American Airlines Group Inc.
In the past several years, Goldman has reached out to many U.S.
airlines to see if they were interested in partnerships, according
to people familiar with the matter. One challenge: Many of the
major credit-card deals have five years or more left to them.
A JetBlue deal could be risky for Goldman because of the
unusually long gap between when the deal would be signed and when
it would take effect, especially given the uncertainty around what
will happen to travel demand in the intervening years.
Barclays began issuing JetBlue credit cards in 2016, after
JetBlue parted ways with AmEx.
Goldman has courted JetBlue for a few years, according to one of
the people familiar with the matter. The bank recently started
offering a loan option to consumers who book vacation packages
through JetBlue Vacations, allowing them to pay in
installments.
Late last year, JetBlue asked Barclays to extend its contract
years before it was set to expire, in hopes that it would smooth
the way to JetBlue getting a loan from the Treasury Department,
people familiar with the matter said.
Soon after, JetBlue put out a formal request for bids from other
card issuers and entered into serious conversations with Goldman,
the people said. JetBlue is also in discussions with Barclays about
extending its contract, according to the people.
A JetBlue spokeswoman said Barclays has "been an instrumental
partner to our business and the success of our loyalty program."
She said JetBlue's request for bids "will help us evaluate the
right partner for us in this new travel landscape as we emerge from
this crisis."
Goldman started in consumer lending by mailing out unsolicited
offers for unsecured personal loans, but it scaled back those
offers during the pandemic. In addition to the new co-branded
credit-card deals, Goldman spent last year inking deals with
Amazon.com Inc. and Walmart Inc. to make loans to merchants that
sell goods through those companies.
Last month, David Stark, the executive who ran the partnership
strategy in Goldman's consumer business, decided to leave the bank
for a role at Walmart's recently-established financial-tech
subsidiary.
--Alison Sider contributed to this article.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and
Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
March 18, 2021 11:57 ET (15:57 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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