Dive Brief:

• U.S. Bank is betting a new co-brand credit card partnership with Amazon will drive expanded business opportunities on the banking side, too.
• The Minneapolis-based lender recently struck a deal to become the e-commerce giant’s small business co-brand credit card issuer, which “meaningfully expands our small-business reach,” U.S. Bank CEO Gunjan Kedia said Thursday during a first-quarter earnings call. The tie-up is “unique from traditional co-brand card arrangements in anticipating a clear pathway to product banking relationships over time,” she said.
• The $701 billion-asset bank expects that card partnership to come online in the third quarter, CFO John Stern said. It will add about $1.6 billion in loans and between $75 million and $85 million in quarterly revenue, mostly as net interest income, he said. 

Dive Insight:

U.S. Bank counts about 1.4 million small-business banking clients. As the super-regional lender seeks to grow its business banking segment, it aims to pitch its services to the 700,000 small-business owners the Amazon card deal will bring, Kedia said. 

“It's a pathway to a very different type of growth that doesn't need to come with deposit pricing erosion, or any of the usual ways banks grow their business,” she said. 

U.S. Bank – replacing American Express as Amazon’s card issuer – will issue two credit cards for small-business owners. The tie-up is set to “meaningfully accelerate credit card revenue growth by the end of the year,” Kedia said during Thursday’s call.

Since taking over as CEO a year ago, Kedia has sought to kick the bank’s payments efforts into a higher gear and double down on fee-based growth.  

The bank’s credit card loans jumped 6.4% in the first quarter, to about $37 billion, contributing to a 3.8% increase in total loans, according to an earnings release. Payment services net revenue rose 3.9% year over year, to $1.7 billion, although net income remained about the same, at $231 million. 

U.S. Bank initially built a digital platform to serve co-brand card clients with banking services for its partnership with insurance provider State Farm, forged in 2020, and then improved the platform after linking with investment firm Edward Jones, Kedia said. 

“It's very attractive to partners, because you can provide a full range of service to your clients under your user experience,” Kedia said. “The Amazon deal allows us to take that platform and then expand it to the small business side, at which point it becomes a very big asset to attract big co-brand mandates.” 

For the bank, co-brand growth relies heavily on the expansion of a partner’s customer base, Kedia noted. “Amazon's ability to grow its small-business base and their aspirations around this segment give us optimism around our path forward,” she said. 

“Our goal here is to take our payments business to a more robust, long-term growth trajectory, and that's what this platform helps us do,” she said.