The Death Spiral of the Centurion Card
Dec 14, 2014, 5:51 pm
#256
Join Date: Dec 2006
Location: SXSW
Programs: DL Plat; HH Diamond; SPG & Hyatt Plat
Posts: 996
Amex has ingeniously made the qualification or re-qualification requirements unknown for Centurion and added a initiation fee for Centurion. That is why people on Flyertalk are keeping the card. I can assure if both of these hurdles were eliminated or defined you would not hear that many complaints.
FI just spent a free night in a $2000 night suite, with free breakfast, free spa massage, free dinner and drinks, etc. That one night covered my annual fee. Then there are the Centurion clubs, especially the private Centurion rooms inside the clubs like the one at MEX. And of course the number one benefit is awesome customer service from Amex which really shows when things go wrong, like when your rental car is smashed in an accident.
Also, what do you mean by their customer service? It's still a nightmare for me, even something as simple as purchase protection, you have to go through all the same hoops as everyone else. When your account has a suspected fraudulent transaction or security issue, they still transfer you to India or wherever for verification... it's a joke.
Towards airfare? For US Cent? Are you sure? Hasn't worked for me that way.
Dec 14, 2014, 10:13 pm
#257
Join Date: Jul 2011
Location: Asia Pac
Programs: AA UA DL AS CXDM JL NH Hilton Hyatt Marriott SPG IHG
Posts: 545
For me it's the opposite. The benefits are increasing rather than decreasing. It depends on how you use these benefits. I'm surprised no one mentioned the awesome new Hertz Platinum benefit. That's been huge for me, nearly outclassing all the other benefits. The Hilton Diamond benefit is another one I use quite a bit. And some of the Wow offers are amazing. I just spent a free night in a $2000 night suite, with free breakfast, free spa massage, free dinner and drinks, etc. That one night covered my annual fee. Then there are the Centurion clubs, especially the private Centurion rooms inside the clubs like the one at MEX. And of course the number one benefit is awesome customer service from Amex which really shows when things go wrong, like when your rental car is smashed in an accident.
I understand that some of you are upset about the airline benefit losses, but not all of us needed those. I almost never used them because I already have top elite status in all 3 alliances, so it was no loss for me.
I understand that some of you are upset about the airline benefit losses, but not all of us needed those. I almost never used them because I already have top elite status in all 3 alliances, so it was no loss for me.
To have top tiers in all three alliances by BIS miles means that you are practically always on the road, either up in the air or in a mid way hotel. I envy your status, but not your life. Hope your Centurion membership has made your road warrior life a lot easier
Dec 15, 2014, 12:43 am
#258
FlyerTalk Evangelist
Join Date: Oct 2014
Posts: 10,904
No, for Citi prestige. The sub-discussion was about whether there was any real competition for the platinum card; my pointwas that not only does Citi Prestige compete with it, it's probably a better product for most.
The Centurion has no real competion, on the other hand (at least, not that I'm aware of)
The Centurion has no real competion, on the other hand (at least, not that I'm aware of)
Dec 15, 2014, 12:55 am
#259
Join Date: Jul 2014
Location: LAX
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Posts: 1,305
I know someone who had elite status (not sure if it was top level) with all three as well when he was working as a consultant with one of the big consulting firms. They do a lot of international flights on first or business class and if you are living in Europe, it makes it even easier.
Dec 15, 2014, 1:07 am
#260
FlyerTalk Evangelist
Join Date: Feb 1999
Location: Seat 1A, Juice pretty much everywhere, Mucci des Coins Exotiques
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Dec 15, 2014, 1:10 am
#261
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Join Date: Feb 1999
Location: Seat 1A, Juice pretty much everywhere, Mucci des Coins Exotiques
Posts: 34,339
Two of the alliances are effectively comped via lifetime status and the 3rd is easily retained each year thanks to a residence in continental Europe. So while I flew a lot in my younger days, I don't need to do it anymore to retain status. Ditto for hotels. And yes Centurion makes it a lot easier and a lot more fun!
Dec 15, 2014, 1:21 am
#262
Join Date: Jul 2014
Location: LAX
Programs: Hyatt Globalist, AA EXP, Hilton Diamond, Wyndham Diamond, DL PM, Marriott Platinum, IHG Platinum
Posts: 1,305
1. In no market does the Centurion card face competition. American Express' only motivation to maintain or improve the product is to avoid cancellations. Benefits are not added unless they are projected to improve account retention sufficiently to pay for themselves. This leaves benefits which are funded by merchants (such as retail giftcards). American Express probably makes money on these by charging the retailers for access to the Centurion customer base.
One thing that convinces me that while Cent has no real competition, it's mostly because JP Morgan, Citi, Merrill and even Barclays just aren't as committed to credit cards.
They actually are the most well positioned to not just offer great competition but make it even harder for Cent to compete with them as they have some of the wealthiest people as their clients thanks to their investment banking and wealth management businesses.
Let's look at the annual fee a bit differently for a second: Amex charges $2,500 per year. Citi requires minimum $50,000 deposit in the checking/savings account. Even when interest rates were high, banks make 3% to 4% spread on deposits. That's 2K of spread profit. Now, $50 is the minimum and most customers keep more than that.
The point I am making is because of the breadth of operations, the top four banks not only have existing clients that they can tap into but can get new clients if they offered a very premium card and run circles around Amex.
Practically, Citi or Chase/Merrill/Barclays could issue a card with benefits better than Centurion and charge less than half of what Amex charges!
A few things have happened in the last two years that makes me think we could have competition to Centurion: Banks have realized there is money to be made in CC. Second, because of digitization, banks want to control the ecosystem just the way Apple controls its ecosystem -- PayPal could potentially have half the market capitalization of Amex after it splits from ebay. And three, regulations after the financial crisis are forcing banks to take less derivatives and investment banking risk which is forcing them to look at other businesses to grow.
My bet is that Chase could focus on Palladium make it more mass market -- give out more benefits than Centurion (vs. Platinum like benefits) for $700 or even $1,000 a year but require clients to have a high minimum balance in their accounts vs. the current requirement where you need private banking relationship. The other bank is Citi. They already have Prestige which I think is as good if not better than Platinum in terms of palpable benefits.
For all we know, one of the banks is already trying out a card that gives better benefits at half the annual fee and make money from other relationships. The CC they issue would be a very high end loss leader.
Dec 15, 2014, 4:43 am
#263
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Join Date: Nov 2010
Location: Paris, Chicago, Rome, London, St John
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1. In no market does the Centurion card face competition. American Express' only motivation to maintain or improve the product is to avoid cancellations. Benefits are not added unless they are projected to improve account retention sufficiently to pay for themselves. This leaves benefits which are funded by merchants (such as retail giftcards). American Express probably makes money on these by charging the retailers for access to the Centurion customer base.
2. In most markets the Platinum Card does not face sustained effective competition. This gives American Express a pool of profitable cardholders to which they can send Centurion invitations if the Centurion cancellation rate increases. This is more cost effective than increasing Centurion benefits. American Express competes with itself. It needs to differentiate Centurion from Platinum for this strategy to work.
3. American Express does not issue cards in Switzerland, they are issued under license by a bank. It appears that the issuing bank need not even offer the same benefits as American Express offers in other western European countries. I suspect this is because no other Swiss issuer offers a better product at similar price.
2. In most markets the Platinum Card does not face sustained effective competition. This gives American Express a pool of profitable cardholders to which they can send Centurion invitations if the Centurion cancellation rate increases. This is more cost effective than increasing Centurion benefits. American Express competes with itself. It needs to differentiate Centurion from Platinum for this strategy to work.
3. American Express does not issue cards in Switzerland, they are issued under license by a bank. It appears that the issuing bank need not even offer the same benefits as American Express offers in other western European countries. I suspect this is because no other Swiss issuer offers a better product at similar price.
The airline changes are not totally AM Exs fault. AA has always refused such bened
Dec 15, 2014, 7:25 am
#264
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VISA does not issue cards. What is the specific VISA card which you find competitive with American Express Centurion? In the USA there are many cards which compete on rewards, but they don't match American Express's benefits for more than a year or two, then they start to reduce because they don't have the scale to compete with American Express's large Platinum card customer base.
Dec 15, 2014, 7:37 am
#265
Join Date: Feb 2010
Location: ORD
Programs: UA 1K
Posts: 4,220
If you're talking about the Visa Black, that's issued by Barclays. And it doesn't even come close to the Cent. The Amex Plat is a better, and cheaper, card than the Visa Black.
Dec 15, 2014, 7:59 am
#266
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American Express's model has been based on operating their own network with higher merchant fees, foreign transaction fees, and annual fees (including fees for supplementary cards.)
Other banks can tap into this higher revenue stream by issuing Amex-network cards. Bank of America, Barclays and Citi have done this, Chase has not. Bank of America and Citi even experimented with issuing top tier cards on Amex network, but backed away.
Until another issuer figures out a way to market a profitable card to compete against Platinum, American Express will have a pool of Centurion candidates which they can tap to replace those who cancel or downgrade.
Last edited by mia; Dec 15, 2014 at 8:25 am
Dec 15, 2014, 8:15 am
#267
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Join Date: Dec 2010
Posts: 4,153
Visa Thailand went to a product called Visa Exclusive (from Visa Signature). I have no idea what exactly that's supposed to accomplish, but it does offer a bunch of extra services. NONE come anywhere close to Amex Centurion, and barely touch Amex Platinum.
Dec 16, 2014, 5:10 am
#268
Join Date: Jul 2014
Location: LAX
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At any point in time we can see a USA-issued card (or two) which looks competitive with American Express Platinum, but they don't last because they don't have the scale to provide the same depth of benefits year after year. Bank of America, Barclays, Chase and Citi have all introduced cards intended to compete with American Express Platinum, but they are hindered by their affiliation with MasterCard and VISA. The issuers must share revenue with the networks, and these networks were built by lowering merchant transaction fees, allowing the issuers to make most of their profit from finance charges, such as interest and foreign transaction fees. This isn't a good match with the demographic which will pay $400+ for a card.
American Express's model has been based on operating their own network with higher merchant fees, foreign transaction fees, and annual fees (including fees for supplementary cards.)
Other banks can tap into this higher revenue stream by issuing Amex-network cards. Bank of America, Barclays and Citi have done this, Chase has not. Bank of America and Citi even experimented with issuing top tier cards on Amex network, but backed away.
Until another issuer figures out a way to market a profitable card to compete against Platinum, American Express will have a pool of Centurion candidates which they can tap to replace those who cancel or downgrade.
American Express's model has been based on operating their own network with higher merchant fees, foreign transaction fees, and annual fees (including fees for supplementary cards.)
Other banks can tap into this higher revenue stream by issuing Amex-network cards. Bank of America, Barclays and Citi have done this, Chase has not. Bank of America and Citi even experimented with issuing top tier cards on Amex network, but backed away.
Until another issuer figures out a way to market a profitable card to compete against Platinum, American Express will have a pool of Centurion candidates which they can tap to replace those who cancel or downgrade.
A few things have happened in the last few years that makes me more confident that the MC/Visa card issuers are close to, if not already, offering better rewards than Amex.
First, while MC/Visa take a share, they only take transaction fee, which is a flat fee and not based on value of transactions. So, if you do one transaction of $1,000, MC gets the same 5 or 10 cents and if you do a $1 transaction, they still get the same.
Second, merchant discount from MC is not the same anymore. Meaning, if the card is heavy, say like the Citi Prestige, they charge retailers more, almost approaching Amex levels.
Third, Amex merchant discounts have been coming down because they want to grab market share.....Amex and Discover are neck and neck and the fastest growing network is China's UnionPay. If you look at Amex's annual report over the years, you will see that merchant discounts are now some 30 or 40 bps more than what Visa charges.
Fourth, CC have always been a mass market game. Meaning, you are not making huge sums of money from one person but small amounts from many individuals.
Fifth, card issuers make money from four main sources: transaction fees, loans or credit lines, annual fees and using your info for target marketing. It is the fourth point where I think Citi/Chase has a massive competitive advantage. They don't need to sell your info to Rob Report.....they need to get you as your private client and they will make a hundred times the money that Amex makes from Platinum and Centurion cardholders.