I think we need to change the way we think about American Express. They first tried to partner with banks in the 1980s, but were quickly locked out by an illegal agreement between Mastercard and VISA. It took twenty years to resolve, but American Express is now positioned to compete against Mastercard and VISA rather than against the banks that owned those networks.

Citibank's migration of Diners Club to Mastercard, and Morgan Stanley's decision to spinoff Discover, rationalizes the industry structure. There will be card networks (American Express, Discover, Mastercard, Visa), and there will be card issuers (American Express, Bank of America, Capital One, Chase, Citibank, etc). Only American Express will be both a network operator and a card issuer. To my knowledge neither Capital One nor Chase has agreed to issue American Express cards, but it appears Bank of America, Citibank, and many smaller issuers are comfortable working with American Express because they were released from liability in the Mastercard/VISA antitrust damages action and because American Express can offer higher transaction fees. I believe most banks are thinking of American Express more as a partner than a competitor, and certainly not as a threat to their high end banking businesses.

If the information posted in the other thread is accurate Chairman card will certainly not be a "loss leader", nor would I expect it to be. I think, however, that Citi will not repeat the mistake that American Express made basing Centurion eligibility on charge volume and will base it on investable assets.

<< cull the rolls of non SB clients?>>

I would, but then its hard for me to see why Citi opened Chairman Mastercard to individuals who are not Smith Barney clients. I can only think that they had so few Smith Barney cardholders that they couldn't really see how the customer service, concierge and travel services performed. The change in travel agencies may well be one result. However, I think Citibank has substantial work remaining if they intend Chairman card to be a compelling feature in choosing a bank. The benefits and rewards described in the other thread are unimaginative and pathetic.

dennis