(Bloomberg) — Wells Fargo & Co. Chief Executive Officer Charlie Scharf is embarking on his biggest push to expand a major business line since taking over, launching a roster of credit cards aimed at competing with popular products from larger rivals.
The first volley is the Active Cash card, offering a flat 2% cash-back rate on all spending, a challenge to Citigroup Inc.’s Double Cash product and a card offered jointly by Synchrony Financial and PayPal Holdings Inc. Wells Fargo will introduce a low-interest-rate card in coming months and a new rewards card line next year.
Scharf, who previously led Visa Inc. and JPMorgan Chase & Co.’s retail-banking arm, is focusing on a business he knows best as he tries to reinvigorate the embattled San Francisco-based bank. Wells Fargo should have an advantage with its expansive branch network, but its customers have long picked up credit cards from more formidable issuers, such as JPMorgan, Citigroup and American Express Co. The first part of Scharf’s new card lineup is notable for its simplicity — and for stripping the bank’s stagecoach logo from its front.
“Wells Fargo has definitely punched below its weight in the credit-card space,” said Krista Phillips, whom the bank lured from Citigroup last year to lead marketing, product, loyalty and digital for its credit-card business. “We have the opportunity to be a competitive player in the space, and everybody from the top to the staff understands what that looks like.”
The firm is unusually lopsided among U.S. card issuers. It ranks No. 2 in debit cards but languishes at No. 8 in credit cards, even after revamping its Propel card in recent years, according to the Nilson Report.
“Our card propositions are not competitive,” Scharf said of its credit cards in April. “Every step of the way, we think we have opportunities to make material improvements.”
Wells Fargo’s cash-back card offers 2% back on all purchases. Citigroup’s offers 1% back after purchases and an additional 1% when they are paid off.
Scharf arrived in 2019 and quickly made it clear he planned to make changes to its card business. Among his first recruits, he lured fellow JPMorgan alum Ray Fischer out of retirement to oversee cards, retail and merchant services. In recent months, as the bank prepared new offerings, the CEO has repeatedly opined on the business during conference calls, talking about its potential for improvement.
Wells Fargo now plans to embark on its biggest credit-card marketing campaign ever, spending about three times what it has in the past, according to Phillips. The firm intends to pitch cards during the opening and closing ceremonies of the Tokyo Olympics set for this summer, while ramping up advertising across a variety of platforms.
That’s an about-face. In 2019, the bank carefully reviewed the digital channels where it advertises and accepts credit-card applications, leading enrollment to slump much of that year. The drop continued in 2020 as the pandemic sent unemployment soaring, causing many issuers to slow sign-ups.
It’s not the first time Wells Fargo has attempted a card makeover. Just three years ago, the firm rejiggered the Propel card to offer more rewards for spending on streaming services and travel. Wells Fargo has said customer response to the card was better than expected. Yet the firm’s broader card business continued to lose market share. It stopped taking new applications for Propel this year.
The bank has also tried to make gains in the highly competitive world of co-branded cards, touting recent work with the travel chain Hotels.com, including the introduction of that brand’s first credit card last year.
Wells Fargo will seek to reel in more co-brand partners, according to Mike Weinbach, another JPMorgan alum who joined last year to run consumer lending. “We believe the business is ripe for growth,” he said in a statement.
Since taking over, Scharf has been focusing on cleaning up the compliance and risk issues that begot years of scandals. While that still soaks up much of his time, he assured investors last week that executives “are working on lots of different things that also relate to the future and how we’re going to evolve and change and grow.”
Aside from removing the stagecoach, the new cards will have a red plastic rim — designed to make them stand out when customers look into their wallets from above.
“We know we need to refresh our brand,” Phillips said. “It’s very deliberate.”
More stories like this are available on bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2021 Bloomberg L.P.