(Bloomberg) -- JPMorgan Chase & Co. has begun internally testing a new credit-card product as part of plans to expand its offerings to UK consumers, according to people familiar with the matter.
Senior JPMorgan executives have been testing the credit cards within their mobile apps, the people said, asking not to be identified discussing non-public information. The product has been in the works for over a year, they added.
The moves come as the company has attracted about £20 billion ($26.4 billion) in deposits since it started its UK retail bank three years ago, the people said. That compares with £15 billion at this point in 2023, though it pales in comparison to the $1.07 trillion that JPMorgan’s consumer bank has amassed in the US.
The soaring growth has put the UK division on track to become profitable next year and it’s made Chase one of the country’s biggest digital banks, with more deposits than London-based digital rivals like Monzo, Starling Bank, and Revolut.
The new credit card will join investment products from JPMorgan’s digital wealth-manager Nutmeg on its UK retail app. Nutmeg has attracted over 200,000 customers, which JPMorgan says makes it the largest of these online platforms in the UK.
JPMorgan’s credit card offerings in the US range from fee-free cards like the Freedom Unlimited — offering 1.5 points per dollar spent — to the $550-a-year Chase Sapphire Reserve, which offers premium perks on travel and dining. It also has co-brand card partnerships with major retailers including Amazon.com Inc. and United Airlines Holdings Inc.
The lender is also exploring taking over Apple Inc.’s credit card portfolio that rival Goldman Sachs Group Inc. has been trying to ditch.
The company’s existing products have turned JPMorgan into the world’s largest credit-card issuer, with $216 billion in outstanding loans.
In the UK, the company is planning to start out by offering more basic credit cards than what it provides in the US, though the hope is to roll out more options over time, the people familiar with the matter said.
The growth in deposits “is encouraging as we look to meet a broader set of customers’ financial needs across daily banking, savings, lending, and investments,” Kuba Fast, the chief executive officer of Chase UK, said in an emailed statement.
Turning a Profit
That JPMorgan is expecting to turn a profit within its UK consumer division next year shows just how far the fledgling unit has come since it got its start in 2021.
One year after JPMorgan made a splash with the opening of the division, the broader international consumer unit was on track to lose about $450 million. At the time, executives figured losses of that magnitude would continue for the next few years and they didn’t expect to break even on the investment for at least five years.
“We feel the right way to think about the business is to think about the cash burn, let’s understand it and aggressively manage the cash burn,” Sanoke Viswanathan, a top deputy for Chief Executive Officer Jamie Dimon and the executive in charge of international consumer banking, said at the time. “The main challenge, of course, for attackers has been – and they haven’t made sufficient headway — is in building primary banking customer relationships.”
In the US, JPMorgan partly relies on a network of nearly 4,900 branches to get its products into the hands of consumers. In the UK, the bank has at times had to use pricey perks — like 3.85% on deposits kept in savings accounts as well as cash back rewards for spending on the firm’s debit cards — to lure consumers to its platform.
Recently, though, the bank tweaked some of the rules and eligibility requirements it has for these rewards.
For instance, the banking behemoth had offered 1% in cash back to customers for every pound they spend on the firm’s debit cards for the first 12 months they have the account. Earlier this year, though, JPMorgan began requiring customers who’d had their accounts for more than a year to deposit £1,500 a month to continue to be eligible for the reward, up from a minimum of £500 previously.
The move risked irking customers but it was meant to encourage users to treat their Chase accounts as their primary bank account. There’s early signs that it worked, according to the people familiar with the matter, who said the share of customers that set up direct deposit of their salaries into the accounts increased by 39% from a year ago.
“We are not going to have branches or anything like that — it’s all digital,” Daniel Pinto, JPMorgan’s president and chief operating officer told investors at a conference earlier this month. “And at some point, we will expand into the rest of Europe.”
(Updates with further information about JPMorgan’s credit-card business in seventh paragraph.)
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