As refinancing slows, banks turn to credit cards for growth

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Wells Fargo & Co. and U.S. Bancorp are betting on credit cards and payments to help fuel revenue growth as the mortgage refi boom fades in the rearview mirror.

Wells Fargo is making a big credit card push and will be testing products this fall as part of its new partnership with American Express Co. The bank is tight-lipped about just what it will be testing, but promises compelling rewards and benefits. Its target: existing Wells Fargo customers, only a third of whom currently pack a Wells Fargo credit card.

Rival U.S. Bank, meanwhile, has been investing heavily in mobile payments technology and quietly marching its behind-the-scenes card processing operation for merchants across Europe and into Mexico and Brazil. Now it's eyeing Asia. Payments, including its credit card issuing operation, is the Minneapolis-based bank's fastest growing business, and U.S. Bank aims to grow it from 26 percent of revenue to 30 to 35 percent in the next three to five years.

"It's game on for these two," said card industry consultant Robert Hammer. "Banks are looking to spend their war chest."

Hammer, head of California-based Card Knowledge Factory and a former Norwest executive, said he expects to see the two banks forming new credit card partnerships and affinity groups, and snapping up card portfolios.

The emphasis makes sense. When bank CEOs rank their multitude of business lines for profitability, Hammer said, "credit cards come out at the top of the list every time."

The moves come amid stiff competition for consumers who, clobbered during the Great Recession, are more prudent with their money now. They may be taking on car loans and student loans, but credit card borrowing has declined. Borrowing hasn't returned to previous levels, even though credit card spending on existing accounts continues growing.

"It's been a bit of a paradox," said Ken Paterson, vice president of research operations at Mercator Advisory Group in Maynard, Mass. "It might be a waiting game until consumers start borrowing again."

Then there are the nation's restive retailers, who despise fat credit card fees. There are legislative ideas brewing to reform credit card fees, said Doug Kantor, a lawyer for the National Association of Convenience Stores.