👀 Why A Bank Wants to Become A Travel Agent!
The world's biggest bank is not happy with its title. It wants to become more than just a bank, which is why it is becoming a travel agency.
After ages of being cooped up in our houses, there's only one thing on our minds: Travel.
We've all been bitten by the travel bug and the aesthetic Instagram stories that influencers (or worse, friends) are posting, are not helping.
But we're not the only ones feeling the Wanderlust.
JPMorgan has also got a case of the travel bug.
🏦 From Banker To Travel Agent
Yes, the world's largest bank wants to be a travel agent now.
And no, it is not a demotion or a sad pivot. It is in fact an expansion.
For this expansion, the bank went on a shopping spree. Over the past 18 months it got its hands on a booking system, luxury travel agent, and a restaurant review company.
Now, it is all set to become a luxury travel booking company.
Because like we said, travel is the most happening sector right now.
Even amid sky-high inflation, people want to travel as much because Covid has truly made them realise that "Zindagi Na Milegi Dobara."
An average American is willing to spend $2,644 on vacations this year, which is a whopping 30% increase from pre-Covid times.
Add to this the return of in-person meetings and corporate events.
The travel industry is in for a major boom (something that is also helping ITC shares rise).
So, JPMorgan wants in on this cash-making opportunity.
But it didn't dream up this travel agency idea overnight. Good ideas have to be nurtured and grown and that's exactly what JPMorgan did.
The bank already plays a small role in the travel industry through its credit cards. Huh?
You see, these credit cards allow customers to win travel rewards points, which they can cash in through the bank's Ultimate Rewards booking site. It even introduced its own airport lounge last year.
But even though one-third of all travel spending in the US is done by JPMorgan's customers, very few were using the banks' site, depriving it of precious business and even precious data.
Why?
Because most people prefer cashing these rewards from full-blown travel websites that can give them better packages and better deals.
So, JPMorgan channelised its inner Aman Gupta and went all…
And the bank did it in a very calculated manner. The travel agency plan had been in its pipeline for sometime now, but when the pandemic hit, it knew it was time to act on it.
Because a lot of travel-based companies were going under due to lockdowns.
This was basically a bumper discount sale for JPMorgan, who scooped these companies up for its business.
The bank knew that travel was on hold, but when it would come back, it would be back with a bang so these companies were safe investments.
Thanks to this clearance sale haul, the bank plans to make $15 billion from its travel arm.
Now, you may think that banking and travel is a weird combination for a business.
But for some reason, just like pineapple and pizza (controversial opinion alert!), the bizarre combo seems to work out.
Don't believe us?
Well, American Express is the sixth-largest travel agent in the US. And Capital One Finance Corp. is also getting into the travel business with its own booking agency now.
So, seems like finance institutions are doing well in the travel space.
But if JPMorgan had parents they would probably tell the bank what we have heard countless times: "If all your friends jumped off a cliff would you too?"
So, we should analyse whether it makes sense for the bank to enter the travel space.
↪️ A Right Move or A Wrong Turn?
Well, like it or not, JPMorgan is already in the travel space in some way.
But this has already ruffled a lot of feathers.
You see, the bank partners with a lot of airlines and other travel companies for business.
If it launches its own travel vertical, this could jeopardise those partnerships.
Already airlines like United are mad at JPMorgan for its Sapphire Reserve credit card. Huh?
The card provides a lot of awesome benefits and a ton of rewards, because of which no one uses United or other airlines' credit cards (Yes, these airlines have their own credit cards. Told you, finance and travel work).
And this is a conflict of interest because United has a partnership with JPMorgan. And this partnership aims to drive more customers to United instead of taking them away. United has already been vocal about this issue.
With JPMorgan now entering the travel space completely, more partners could have issues.
Plus, the bank has given customers unbelievable rewards points to attract them but this costs it a pretty penny.
So, is this a bad decision?
Well, not really.
You see, the biggest bank in the world has not been doing so good lately.
It missed earnings per share estimates in both of its last quarters, and revenue has also been down than the previous year.
That's because due to the economy being in the state that it is, the bank had to store a lot of money to account for bad loans.
And with a recession coming up front, its other businesses could face slow growth.
So, adding another revenue stream, especially one that seems so lucrative right now, makes sense.
Also, in the long run, JPMorgan wants to become a one-stop destination for customers.
Customers shouldn't just store and borrow money from the bank but also spend it at the bank by shopping, booking tickets and so on.
This will further drive the bank's business and create a virtuous cycle where money flowing out of the bank comes back in.
And JPMorgan can do well at this game. It already has data about customers' spending habits. It can use this to give them offers and discounts best suited for them.
Plus, new verticals will bring in more data which can help the bank disburse more loans and sell more credit cards.
So, it seems like a win-win for the bank.
But we'll have to wait and watch to see how this actually plays out.
⚡ In a line: JPMorgan is entering the travel space to make the most of people's Wanderlust.
💡 Quick question: Do you think any Indian banks will also make similar moves anytime soon?
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