A year after JPMorgan Chase bought the retail banking operations of Washington Mutual Inc., it has finished integrating all of the failed Seattle thrift's credit card division. And little of Wamu is visibly left in JPMorgan Chase's card operations — despite a recent spate of brand-new-product announcements.
"We really wanted to make a break, in a sense, with the past," said Richard Quigley, JPMorgan Chase's president of business cards, in an interview last week. As the company unveiled a new line of business cards, Ink from Chase, he called such new products a "fairly dramatic way to showcase that Chase really is interested" in some — but hardly all — new customer segments.
Since June, JPMorgan Chase has introduced the Sapphire premium cards with a revamped "Ultimate Rewards" program, the Ink small-business cards (including a charge card), and the Blueprint payments tool for its most prominent credit cards. And it has done so all on its own, without incorporating either the products or much of the potential new audience it acquired along with Wamu's card operations.
That was, to some degree, to be expected. Wamu's credit card portfolio, which developed out of the former Providian Financial Corp., served a riskier customer base, and JPMorgan Chase said when it bought Wamu that it would let the subprime half of that card portfolio run off. The intervening year has only brought surviving issuers even further away from the higher-risk, less-creditworthy cardholders that Wamu cultivated.
But JPMorgan Chase has also raised some industry eyebrows by deliberately shutting down Wamu products like a secured credit card, and disbanding Wamu card groups with expertise in reaching a broader swath of customers. For example, although JPMorgan Chase considered retaining a Wamu card-risk group to help it eventually expand into a higher-risk — and sometimes more profitable — cardholder base, it ultimately rejected that plan by the end of this summer.
"Chase did toy around with the idea of maintaining a separate card-risk group that would maintain the Wamu portfolio, and help them better understand how to potentially grow a lower FICO portfolio than their own," said Rick Wittwer, who oversaw collections and recoveries as an executive at Wamu and Providian until he left Wamu in 2007. "They batted that around until August of this year, and ultimately said no. … They're very risk-adverse."
JPMorgan Chase ultimately retained only four of the 30 to 40 people in Wamu's card-risk group, according to Wittwer. Wamu executives who participated in the transition did not return calls. A spokesman for Chase said by e-mail: "As we have stated since the time we acquired the Wamu card portfolio, our intention is to allow it to run off. … We have centralized our portfolio management teams here in Wilmington and offered opportunities to a number of former Wamu employees, some of whom decided to relocate here."
Indeed, the contrast of JPMorgan Chase's efforts to eliminate as much as possible from one new card portfolio — at the same time that it built a second one from scratch — illustrates the focus and strategy that its credit card division has used to manage through the past year of crisis.
"Providian is not a direction that Chase would go in on its own," said John Grund, a partner at First Annapolis Consulting Inc. "The spots that Chase is picking are clearly that of loyalty, the high-spending, affluent market, and leveraging the Chase brand. One of the spots that they are picking is not the subprime space — that's one of conscious avoidance. … I don't think the rewards for Chase would have been worth the risk in terms of using that platform or that product set … to grow."
