J.P. Morgan further diversifies away from traditional banking with CxLoyalty Group acquisition

Wall Street banking giant JPMorgan Chase & Co. (NYSE: JPM) confirmed Monday morning an agreement to acquire cxLoyalty Group Holdings, a leading loyalty and customer engagement solutions company.

About CxLoyalty

CxLoyalty is a U.S.-based privately-owned loyalty and customer engagement solutions company. According to CNBC, cxLoyalty is among the largest third-party credit card loyalty operators. The company boasts more than 3,000 employees and works with credit card giants Citigroup, Capital One, and Mastercard.

CxLoyalty Group has more than 3,000 clients and marketing partners that serve tens of millions of clients, according to CNBC.

J.P. Morgan and cxLoyalty partnered together to work on a credit cards reward program. The deal ended in 2018 when the bank partnered with Expedia. But Monday’s confirmation of a deal means the Wall Street giant will partner again with CxLoyalty.

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Deal details

Under J.P. Morgan’s umbrella, cxLoyalty will have access to better resources to invest in data intelligence, growth initiatives, among others. The deal has the blessings of notable activist investor giant Elliott Management who is counted as one of cxLoyalty’s biggest investors.

The deal includes cxLoyalty’s technology platform, full service travel agency, gift card, merchandise, and points bank businesses. The deal does not include cxLoyalty’s Global Customer Engagement division and other businesses.

The transaction is expected to close within days.

Why is the bank interested?

It may seem like a complimentary business, but some investors are scratching their heads as to why a bank is betting on a company that relies on travel. It goes without saying, the global travel industry has been decimated by the COVID-19 pandemic and its ultimate rebound could take years.

Nevertheless, J.P.Morgan is likely looking at cxLoyalty’s platform. By gaining full control of the platform, J.P. Morgan will have access to millions of credit card users and form a direct relationship with hotel and airliners. The bank will be in a much better position to get better or unique deals from new relationships.

J.P. Morgan’s head of consumer lending Marianne Lake told CNBC in a statement that “hopefully” the travel and vacation industry will “become a reality for many in the near future.” The statement added:

“Acquiring the travel and rewards businesses of cxLoyalty will provide enhanced experiences to our millions of Chase customers once they are read, comfortably and confident to travel.”