May 6 - Eric Wasserstrom, financial services analyst at SunTrust, explains why Wells Fargo is wooing the wealthy through a new partnership with American Express.
Wells Fargo is releasing two new credit cards partnering with American Express to target wealthy customers. Eric -- astronomy is a financial services analyst with suntrust Eric thanks so much for being here thanks so. Still talk to you first about the strategy why is Wells Fargo moving into this wealthier. Consumers segment. Sure so well like a lot of its peers is looking to to better penetrate its own customer base to generate -- growth. The car business when they've been in for quite some time but it hasn't necessarily been a key driver for them. Now it maybe some of the other businesses doing less well it's become more relevant. And and they have a very significant presence of course among among wealthy constituents given where there. Where the physical presence is given their wealth management business and to the partnership with MX is largely directed. For better penetrating that specific part of their clientele with a more targeted cart product. What is their market share alike right now. Snakes in this space it's it's probably fractional. It's a very small. Obviously they're a little bit of of late entrant into. Into that into that area so there's others who clearly have much more significant market shares including of course American Express itself. Yeah and on them on the banking side who -- the major competitors and how is Wells Fargo and try to differentiate themselves here. So the given magic letters across the the banking space are mostly the big names that you know JPMorgan for example is there with a broad national presence and strong. Hold among via the affluent clientele of course and nexus -- specialty. Lenders is there. Yeah I think for well the strategy isn't so much about. About differentiate itself vs those other peers. But rather making it sort of more inclusive offering to existing customers. To to piggyback on those relationships that already exist. So these cards there's two of them they're called that propelled we 65 and -- world. What teachers our customers and -- -- unease cards. Well I think the key feature and this is why the relationship with -- probably most relevant is that they're gonna have a very robust. Rewards. Reward teachers. Probably tie in to some of the other things that that wells currently offers. And that of course is rewards in the -- platform -- infrastructure. Is it is one of the key competitive advantages of an accident like partner Amex competing with Amex probably make the most sense. What's. Roll out of that 2009. Card act. You did the idea there was -- to cut the cost of credit cards especially for borrowers with poor credit. Is that driving. This decision by Wells Fargo at all. Yeah it is probably contributing. In the card act eliminated. Some of the key profitability drivers. For -- the more traditional -- basically for example penalty pricing a lot of back and pricing. The card act that Durbin amendment some of the other Basel III some of these other. Capital. And and regulatory items. Have really eroded some of the profitability in some of the court cards strategies. And so wells. And so I think that that is contributing to all of the strategy along with this you know then that's a renewed interest in and better monetizing their customer base. So it is the release of these two new credit cards perhaps a sign a card act is actually working. Well I don't think the card -- would necessarily designed to drive competition and if it's days. But I think it shows is that they're clearly a lot of the the pricing strategies that existed. In the in the prime minister of MySpace are no longer viable and so it's created. An urgency for for banks to to find. Alternatives. Eric thank you so much for being here for -- regularly. My guess is Eric Wasserstein he's financial services analyst with suntrust and -- -- this is writers.