NEWS ANALYSIS: Chase Makes Strategic Hookup with Nynex

Chase Manhattan Corp. and Nynex Corp. surprised few card industry people last week when they announced a long-anticipated cobranding agreement, but they sparked speculation about future cooperative ventures between the two powerful New York-based companies.

Chase has said it aims to become a major force in computerized home banking, in part through an alliance it announced last fall with Microsoft Corp.

Nynex, one of the Baby Bell companies, is well wired into the interactive services trend.

Ultimately, the bank-telecommunications overlap is expected to lead to other partnerships.

"The interesting twist," said Corey Stone, principal with Easton Consultants in Stamford, Conn., "is that Chase is a pioneer in some virtual banking products, and the idea of hooking up with Nynex would make sense."

"It's a good partnership for a lot of other possible relationships," added Michael J. Auriemma, manager of Auriemma Consulting Group Inc., Westbury, N.Y. He called it "a melding of communications and finance."

In March, Chase Manhattan Bank and Nynex plan to begin issuing their cobranded Visa card in New York State, where Nynex has almost seven million of its 11 million residential telephone subscribers in six states. The companies said they will expand the program to New England when they get regulatory approvals later this year.

Chase said the Nynex card will come without a fee and provide a competitive introductory interest rate for a year. Nynex cardholders in New York will be able to earn points redeemable for products and services such as Call Waiting and Voice Messaging, or for the lowering of monthly phone charges.

Exact pricing and other details will be unveiled in March.

"The difference between this and many of the other (cobranded) programs is that the reward will be earned faster, and therefore it has the ability of satisfying customers earlier," said John A. Ward 3d, executive vice president of Chase Bankcard Services.

Mr. Auriemma, who consulted for Nynex, hinted that the value package will differ from those of previously announced Baby Bell rebate programs.

Others have offered a 10% rebate on local and long-distance calls charged to the credit card, plus 1% to 2% rebates on general purchases.

"It's important to have unique features because regional Bell cards compete with all other cobranded cards," Mr. Auriemma pointed out. "I'm not sure some of the other Bell cards do that."

"This one is for a customer who wants faster rewards and is particularly concerned about spending money smartly in terms of buying telephone service at a very good price," Mr. Ward added.

Similar to the last Baby Bell cobranding announcement - by SBC Communications Inc. and Mercantile Card Services Inc. in the Southwest in January - Nynex and Chase have geography in common. The supperregional has branches in New York, Connecticut, and Massachusetts.

"We're really excited about this," Mr. Ward said. Nynex "matches our retail bank footprint very well."

Therefore, the two companies can share customer lists for cross-selling, and Chase expects to convert many of its classic and gold credit card customers to the Nynex package.

A Nynex spokesman said the partnership allows both companies to build customer loyalty. And Nynex can increase name and brand recognition, having removed all references to its former identity as New York (or New England) Telephone.

The announcement comes on the heels of a great fourth quarter at Chase, Mr. Ward said. "We have probably for the first time attracted more balances than we lost to the traditional rate discounters."

Chase's is a top-10 card program, with more than $12 billion of receivables and 13 million cards.

Its Nynex alliance marks a major push into cobranding. The New York bank is expected to launch a cobranded card with Texaco in the coming months.

Among the big credit card companies, Chase may have been the most cautious about entering the cobranding game. Michele Turkel, co-founder of Spectrum International Corp., a credit card consulting firm in Scarsdale, N.Y., was vice president at Chase for five years and has observed a change in the bank's philosophy.

"I think there was a real negative attitude toward cobranding programs and sharing any of the revenue," she said. As a result, Chase lost its bid to issue cards for Trans World Airlines. "They are now more aggressive than I've ever seen them. I think they woke up."

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER