With Amazon.com Inc. and other top retailers on the hunt for new credit-card tie-ups, competition is fiercer than ever among potential bank partners.

Delinquencies are at historic lows and consumer spending is accelerating, meaning banks are once again mining their card businesses for growth. That’s led to a ratcheting up in the fight for co-brand and private label credit-card portfolios, with many retailers fielding lucrative bids to replace their existing banks.

Amazon has attracted interest from firms including American Express Co. and Synchrony Financial to replace JPMorgan Chase & Co. as the longtime issuer on its popular co-brand credit card. Any potential switch would follow similar recent moves by rivals such as Wayfair Inc. and Gap Inc.

Recent deals in the co-brand space “speak to the current highly competitive landscape within the card space, particularly as issuers have large levels of loan-loss reserves and excess capital as a result of the pandemic,” Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods Inc., wrote in a note to clients.

Banks have long favoured store cards because they draw on consumers’ deep loyalty to a brand, meaning they’re often the first ones customers reach for when they’re checking out. Spending on co-brand and private-label credit cards has climbed to more than $350 billion a year, making them 10 percent of the overall market, according to a report by Deloitte.

New Entrants

Part of what’s driving the competition is a flood of new entrants to the world of co-brand partners. Goldman Sachs Group Inc., for instance, has shown more interest in inking new deals after debuting a card with Apple Inc. in 2019 and later acquiring General Motors Co.’s portfolio.

Just this week, Wells Fargo & Co. vowed it would beef up its presence in the space as well, following its recent partnership with travel chain Hotels.com.

“We look forward to bringing even more co-brand card partners to Wells Fargo’s proven marketing and underwriting capabilities, as well as new rewards strategies,” said Mike Weinbach, Wells Fargo’s CEO of Consumer Lending.

In some cases, retailers’ existing bank partners have chosen to walk away. Synchrony said it was unable to reach contractual and economic terms with Gap that made sense for the firm’s shareholders when the clothier announced it would shift its portfolio to Barclays Plc in April.

Macy’s Inc. this week revealed that its longtime credit-card partner, Citigroup Inc., had informed the retailer it would be terminating their existing card deal after sales dropped below a threshold set out in their original agreement.

“The company plans to continue negotiations with Citibank as well as evaluate a potential transfer of its credit-card program to another financial service entity,” Macy’s said in a regulatory filing.

JPMorgan is willing to part with the Amazon portfolio, according to people familiar with the matter. The lender already offers a lucrative set of rewards for the partnership, including offering the e-commerce giant’s Prime members 5 percent cash back on purchases made on its site and at its Whole Foods Market subsidiary

“The massive co-brand portfolio would be a huge win for loan balances,” Sakhrani said in the note. Still, he cautioned, “the significant rewards associated with the program could be prohibitive, as evidenced by JPMorgan potentially being willing to walk away.”

By Jenny Surane