Amex to cut interchange fees to increase acceptance
Mar 18, 2018, 10:50 am
#76
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It's hard to keep track when you're talking to five different people at once.
Reducing your merchant fees for 100% of your current customers [on the merchant side], and then adding a 30% additional acceptance rate in addition to what you have will likely barely have an effect on profits. The net gain probably wouldn't be that much (see below). .
Let's say I made $5,000,000 from my current merchants that make up 65% of the merchant population, while charging on average, a 3% rate.
If I significantly reduce the rate to 2% on average, I'm only making 2/3rds of what I made before if the same amount of spending takes place from the previous year ($3,300,000).
If I add additional 30% of the merchant population into the equation, and say, get $5,500,000.00 in revenue after the fact, I haven't gained that much money.
Chase isn't "revamping" their offerings. They're coming out with new products that either do or don't compete with AMEX. For example, the CSR "competes" with the Platinum, but it was introduced as a new product. AMEX on the other hand, had to go back and edit the current benefits and rewards structure just to keep up... If AMEX didn't feel threatened, they would have left the Platinum alone. The article states that AMEX's executives fear the additional competition will burn them, but with the way I interpreted the article (and their statement), the executives were feeling the heat before the CSR was even introduced by way of other product offerings (like the Citi Prestige, Merrill Lynch's Octave, etc.).
And of course I don't make sense to you... You have no grasp of how the free market works. AMEX is only reducing merchant fees because competition is forcing them to. or if they don't reduce them, they think they won't be able to compete anymore (apparently). Without competition, card interchange fees would go up in the U.S, not down.
Reducing your merchant fees for 100% of your current customers [on the merchant side], and then adding a 30% additional acceptance rate in addition to what you have will likely barely have an effect on profits. The net gain probably wouldn't be that much (see below). .
Let's say I made $5,000,000 from my current merchants that make up 65% of the merchant population, while charging on average, a 3% rate.
If I significantly reduce the rate to 2% on average, I'm only making 2/3rds of what I made before if the same amount of spending takes place from the previous year ($3,300,000).
If I add additional 30% of the merchant population into the equation, and say, get $5,500,000.00 in revenue after the fact, I haven't gained that much money.
Chase isn't "revamping" their offerings. They're coming out with new products that either do or don't compete with AMEX. For example, the CSR "competes" with the Platinum, but it was introduced as a new product. AMEX on the other hand, had to go back and edit the current benefits and rewards structure just to keep up... If AMEX didn't feel threatened, they would have left the Platinum alone. The article states that AMEX's executives fear the additional competition will burn them, but with the way I interpreted the article (and their statement), the executives were feeling the heat before the CSR was even introduced by way of other product offerings (like the Citi Prestige, Merrill Lynch's Octave, etc.).
And of course I don't make sense to you... You have no grasp of how the free market works. AMEX is only reducing merchant fees because competition is forcing them to. or if they don't reduce them, they think they won't be able to compete anymore (apparently). Without competition, card interchange fees would go up in the U.S, not down.
Got it.
Mar 18, 2018, 11:28 am
#77
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I have a green Amex as a corporate card. I am not much of a business traveler, but I am supposed to put all my business expenses on the corporate card, which is generally no problem; most restaurants and all hotels/car rentals/airlines take it. On the rare occasion where I choose a restaurant tha5 doesn’t take Amex I am allowed to use alternative means of payment (aka my personal Visa or MasterCard). So the window stickers indicating which cards are accepted are not particularly important to me. I choose the merchant based on other criteria.
On that note, I'm wondering if AmEx acceptance would be higher in the US if surcharging was easier. Right now the rules between states/networks are fairly patchwork so most businesses don't do much more than have a minimum amount--if they even bother doing that. Preempting the state laws/network rules and replacing them with one federal law that said that surcharges up to 3% were allowed (without having to notify the networks first and possibly without having to cap them to the amount they're paying) may convince some of the holdouts.
Of course, it could also make it so that nearly every business starts charging 3% to use any card. If that were to happen, I could see cards start getting frowned upon by the public (at least more than now, anyway; apparently the US still uses a lot of cash based on what I've heard from some Australians but that's a different subject.)
Mar 18, 2018, 12:26 pm
#78
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False. When a customer launches a new product I judge its potential and I act before they materially impact our business. American Express does this, and they have the additional advantage that both Chase and Citi hired former Amex executives to manage their card programs. American Express knows where Chase and Citi are trying to go before they even get started.
American Express isn't cutting discount rates across the board. They are going to offer lower rates strategically to obtain new acceptance, and this will have the effect of lowering the average to about 2.37%.
American Express isn't cutting discount rates across the board. They are going to offer lower rates strategically to obtain new acceptance, and this will have the effect of lowering the average to about 2.37%.
Mar 18, 2018, 12:29 pm
#79
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I know many business will still not add AMEX even with the lower charges. They have burned bridges in the past and all of these business have already survived without accepting AMEX. Their customers still come in and they know they will pay cash our use a form of payment already accepted.
Mar 18, 2018, 12:48 pm
#80
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I don't remember if my employer ever used AmEx for their corporate cards but the fact that they're Visas from Citibank now makes me think that they either got a good deal from them and/or they didn't want to deal with the extra paperwork resulting from the number of places that don't accept AmEx. (My employer is pretty big, so there are a lot of corporate cards floating around.)
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I had previously worked at a company that had Dinners Club, employee feedback before the Canadian dinners cards switched to using Master Card numbers was always negative from employees. After the switch it became a non-issue. The business was looking at making the switch and it so happened that Dinners Card fixed the problem before they go around to switching.
I had worked for a large engineering firm that had AMEX for many years. Employee complaints were common, especially if you were doing a project that involved travel into a rural area are staying in a small town/city. Other business expenses for things like printing companies, catering etc. were a problem.
In Canada, AMEX has a very large corporate account. The Government of Canada. If you put all the federal government employee travel together that is a massive amount of business. In British Columbia, the province I am in, I believe the provincial government is on BMO Master card.
Mar 18, 2018, 12:58 pm
#81
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I know many business will still not add AMEX even with the lower charges. They have burned bridges in the past and all of these business have already survived without accepting AMEX. Their customers still come in and they know they will pay cash our use a form of payment already accepted.
Mar 18, 2018, 1:24 pm
#82
Join Date: Apr 2005
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False. When a customer launches a new product I judge its potential and I act before they materially impact our business. American Express does this, and they have the additional advantage that both Chase and Citi hired former Amex executives to manage their card programs. American Express knows where Chase and Citi are trying to go before they even get started.
American Express isn't cutting discount rates across the board. They are going to offer lower rates strategically to obtain new acceptance, and this will have the effect of lowering the average to about 2.37%.
American Express isn't cutting discount rates across the board. They are going to offer lower rates strategically to obtain new acceptance, and this will have the effect of lowering the average to about 2.37%.
And previously reading about your second paragraph in a news article with exact figures in different types of businesses makes me wish I had kept the article or at least remember where I read it. I do remember that under the new program, Amex was going to charge low tab restaurants less than restaurants with high tabs, at least the new ones they acquired.
Mar 18, 2018, 1:47 pm
#83
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There's also no way AMEX acceptance here is worse than Australia seeing as American Express is a country based in the U.S - sorry, but your assumption is simply not true. Just because there isn't an AMEX sticker in the merchant's window, doesn't mean they don't take it.
+1
And previously reading about your second paragraph in a news article with exact figures in different types of businesses makes me wish I had kept the article or at least remember where I read it. I do remember that under the new program, Amex was going to charge low tab restaurants less than restaurants with high tabs, at least the new ones they acquired.
And previously reading about your second paragraph in a news article with exact figures in different types of businesses makes me wish I had kept the article or at least remember where I read it. I do remember that under the new program, Amex was going to charge low tab restaurants less than restaurants with high tabs, at least the new ones they acquired.
Mar 18, 2018, 2:00 pm
#84
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Who spends $50k per year on groceries? Plus, all the grocery stores around here accept Amex. Most utility companies don't accept credit cards anyway, so there's no difference between Amex and Visa there. In my experience the biggest gap are restaurants. A large percentage of smaller independents restaurants don't accept Amex.
Mar 18, 2018, 2:03 pm
#85
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My $100/month transit card is V/MC reload only; my utility bill is low, but same deal. My health insurance premium is OK with Visa/MC without a surcharge or fee pass through, but no AMEX.
Mar 18, 2018, 4:12 pm
#86
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But this is what you keep missing - if it's the merchant paying the fee, why is it you think this should result in better service for you? Under literally every logical path possible, that should result in better service for the merchant, not you. Because it's them that are paying a premium rate, not you.
... Whereas my experience in the US was you needed to carry cash because if you pull out a card at all, half the places death stare you and say they don't take cards, and of the ones that did take cards, half again of those required me to take out my MasterCard (which, being a foreign issued MC World card, had interchange higher than AMEX's merchant fee anyway to them).
On the global scale, AMEX is accepted at roughly 25,000,000 merchants - with roughly 6,000,000 of that being in the U.S alone. I would like to see some proof before I believe your argument that Australia has a higher acceptance rate of AMEX cards than the U.S does.
Your small business acceptance in Australia holds little water. In the U.S, AMEX has been pushing small business Saturday and other small business friendly business methods for years.
Not trying to sound like a jerk, but someone who's never lived in the U.S [you] is trying to tell someone who's lived in the U.S all of their life how widely accepted AMEX is.
Last edited by mia; Mar 19, 2018 at 6:20 am
Mar 18, 2018, 4:20 pm
#87
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The AMEX executives who left for banks like Citi and Chase knew what they were doing, and AMEX replaced them with people who don't know what they're doing; hence, the current state AMEX is in.
Mar 18, 2018, 5:22 pm
#88
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I'm not missing the point at all. AMEX's business model was to take more from the merchant and give more to the cardholder. Visa and MasterCard used to do the opposite. I"m not understanding why you're having such a hard time grasping this. Are you 17 years old and ignorant to the history of AMEX?
Their model is as follows:
- Collect money from merchants
- Collect money from card "members"
- Give money to shareholders
If you actually believe Amex is operating some sort of Robin Hood scheme, that says all we need to know about the perspective you bring to this conversation.
Mar 18, 2018, 5:37 pm
#89
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In fact, the U.S is probably the largest credit card market in the world when it comes to the big four, even more so than China. Merchant acceptance of AMEX in the U.S is well over 50%, and 90% of the time I don't have an issue with using my card at the merchants I frequent.
In any case, I'm probably going to start using my SPG card a bit more often now that there's an active bonus promo on my profile so we'll see if there's been any improvement in AmEx acceptance. (When I initially completed the minimum spend I could use it most places but did run into a few that didn't accept it.)
Mar 18, 2018, 5:53 pm
#90
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LOL. I promise you that is NOT Amex's business model.
Their model is as follows:
- Collect money from merchants
- Collect money from card "members"
- Give money to shareholders
If you actually believe Amex is operating some sort of Robin Hood scheme, that says all we need to know about the perspective you bring to this conversation.
Their model is as follows:
- Collect money from merchants
- Collect money from card "members"
- Give money to shareholders
If you actually believe Amex is operating some sort of Robin Hood scheme, that says all we need to know about the perspective you bring to this conversation.