mia

Visa and MasterCard do not issue cards.

TMM1982

All part of the same sub-industry, financial credit services.

Centurion

Mia is pointing out how they differ:

This partial quote from news article by Niclole Sinclair is good:

...<<Right now AmEx is trading at about 12.2 times price-to-earnings ratio, pretty much in line with large-cap banks. Some investors incorrectly see AmEx as cheap relative MasterCard (MA) and Visa (V), but this is an apples-to-bananas comparison. While AmEx owns its own “closed loop” network taking on merchant risk itself, MasterCard and Visa are essentially toll collectors along the payments highway -- a very different and less risky business model...>>


Also to clarify when I say the Demise of the American Express card I really mean the Demise of the American Express card as we have known it. The card you did not leave home without. The company that helped you when you were out of the country in a a bind or emergency. All of those services are now being marketed by other banks. Amex was the best. Now Amex is just one of the best but more expensive in many ways from merchant to card holder.

isriam

I had to bump this. With the loss of Serve and Bluebird, how is Amex going to report the earnings loss? I'm sure they used MS loads as actual income and the purchases of gift cards on other Amex as member usage. Do they really understand Serve/Bluebird gave them almost 5k of pretend spend from thousands of members a month?

Amex CC could report x.x in consumer purchases and debt each month, and Amex Serve/BB could report x.x in consumer loads and fee's each month. I wonder how that is gonna balance out long term for the Amex portfolio.

That's 60k a year of fake spending per cardmember that I'm sure Amex was reporting. There aren't many valuable ways to MS on Amex anymore.

jsk1973

I know a lot of the manufactured spending people are still in denial after the recent shutdowns, but if MS was profitable for Amex and other CC companies, they would encourage it or at least tacitly allow it rather than discourage it or even penalize people for doing it.

isriam

I think the problem is discerning it from fraud requires too much work. I can't imagine they wouldn't like normal MS, because of swipe fees and gift card fee's they earn. If they own the processing network, its straight profit to them.

jsk1973

Well, the profit margin isn't any higher than when a person buys a shirt or a cart full of groceries, so the cost, hassle, and potential legal liability of figuring out who is buying gift cards and why probably isn't worth it.

Algorithms mostly if not entirely handle fraudulent purchases, but some of these MS schemes/methods undoubtedly require eyeballs on accounts, which costs the banks money.

krazykanuck

Amex wouldn't report BB/Serve loads as income. That's not how GAAP accounting works.

Yes it would increase the asset side of the balance sheet (as in cash on hand), but it would increase liabilities the same amount (because that is an account available for withdrawal at any time). They would only report income based on the transaction fees or service fees generated by the BB/Serve accounts.

I just looked at their press release and there is nothing about BB/Serve, or prepaid cards at all. If anything I would assume that killing BB/Serve will probably save them money in the long run.

Edit: after reading the article posted below, it seems they did record a write down, presumably related to the prepaid cards.

eajusa

This article helps to explain the rationale behind Amex's decision to shut down Serve and Bluebird: http://www.bloomberg.com/news/articl...not-so-wealthy

krazykanuck

That is a good article. Though I'm perplexed by this line "About 90 percent of Serve customers are new or returning to AmEx, according to the company." So...what are the other 10%? Existing customers? Because returning would imply they aren't Amex customers at the time they signed up.

Also with that article, it's worth noting that since they classify Serve/BB under "Enterprise Growth", they reported a pre-tax write down of $419 million in the enterprise growth division in Q4 2015.

helvetic

At first, I was confused with the wording too… but I interpret it as meaning: "90% of Serve customers were not current Amex customers when signing up." i.e., they're customers that Amex is either acquiring or re-acquiring.

Steve M

Assuming a particular set of transactions isn't fraudulent (that is, assuming they are made by the authorized cardholder), there's another problem: It may be very difficult for a card issuer to distinguish charging patters between an MSer that is trying to earn points or cash back, and a cardholder that is in financial difficulty and is using the cash conversion aspect of the charges to do cash advances against the accounts, possibly in great excess of the cash advance limits. People doing the latter are also highly likely to default in short order.

jsk1973

Very true. No doubt there are people using this month's gift cards to pay off last month's CC bill.

wise2u

Amex stock lost 13% today on bad reports, after losing big last year they are feeling the stress in their stock prices for their managements ignorance and greed. Total disregard in trying to be competitive for the end user. I cancelled all but 2 of the many, many amex cards my wife and I had when they started the one bonus per lifetime rule. Now that they have axed our bluebird accounts (because they felt like it) I am glad to see them failing. Die Amex Die.
Any company that offers a card that has in the T&C that they can cancel your account for any reason they desire (or no good reason at all) should fail. I will love not having to use one for Costco, and until they come back with signup bonuses for past customers they will not see their card in my wallet.

PaidFlights

I think Amex is more concerned with new customer acquisition costs than MS. Their offers of xxxK points after spending 1-3K is a big-time money loser upfront. They hope that the customer holds the card afterwards, but I think most are dumping them soon afterwards. They can set a low limit for sub-prime borrowers.