Credit Cards Will Be A Great Business for Wells Fargo, But They Have a Long Way to Go

Wells Fargo (NYSE: WFC  ) is one of the top financial institutions in the U.S., and for good reason. But there's one arena where the megabank would like to move up in the ranks -- credit card lending. By taking a cue from its rivals' key partnerships, Wells Fargo could rise to be king of the cards.

Already gaining ground
As one of the bank's top priorities, according to CEO John Stumpf, expanding its credit card operations has been working well so far. By focusing on existing retail customers, Wells Fargo has been able to increase both its card count and its balances, growing accounts by 22% in 2013.

With a new 10-year deal, Wells Fargo has partnered with high-end retailer Dillard's (NYSE: DDS  ) and will begin providing the chain's private label and co-branded credit cards during the fourth quarter. By teaming with a popular store, the Wells Fargo's team is on the right track for enticing new customers. But its rivals may have deeper benches -- full of retailers that customers really want to frequent.

Building relationships
Focusing on the various providers' cash-back credit card options, plus Wells Fargo's new Dillard's card, you can see that the San Francisco-based bank is far behind on relationships with retailers that rank high on consumer-dollar priority lists:

Based on 2013 total U.S. retail sales, Dillard's is a small fish compared to the other department stores competitors are using to attract credit card customers:

Each card provider has its own reward-centered mall, with additional participating retailers, which can capture those who do most of their shopping online. But for the traditional brick-and-mortar shoppers, Wells Fargo is seriously lagging on options for its consumers.

Targeting rewards
One of the popular setups for cash-back rewards is the rotating calendar, with credit card companies focusing on seasonal spending. For the spring season, home improvement chains are key partners, while online retailers and department stores are highlighted during the fourth-quarter (think: Black Friday and Cyber Monday).

If Wells Fargo can expand its participation with retailers and offer targeted rewards like its competitors, there's a huge opportunity to draw in more customers -- whether by higher account balances or new accounts altogether.

By taking a page from its closest rivals, Wells Fargo could boost its already strong credit card division, enticing a broader range of customers and challenging the traditional credit card lenders for supremacy.

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Maybe Wells Fargo's push to up its credit card business is an exercise in futility. With the evolution of technology, credit cards may be the next thing on the extinction list.

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