Amex to cut interchange fees to increase acceptance

Old Mar 17, 18, 6:05 am
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Amex to cut interchange fees to increase acceptance

I saw this article when I logged onto FT this morning and was surprised that there was no discussion thread started (unless I missed it):
https://www.flyertalk.com/articles/a...ance-rate.html

I'd love to see Amex get wider acceptance so that I don't have to carry a Visa card as a backup. Hopefully, this new approach will work.
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Old Mar 17, 18, 8:34 am
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Originally Posted by Low Roller View Post
I saw this article when I logged onto FT this morning and was surprised that there was no discussion thread started (unless I missed it):
https://www.flyertalk.com/articles/a...ance-rate.html

I'd love to see Amex get wider acceptance so that I don't have to carry a Visa card as a backup. Hopefully, this new approach will work.


With this article, I must say there's simply no reason to carry an AMEX anymore unless you're very loyal to Hilton, Delta, or some of their transfer partners.

At the top, they're almost as bad as Citi in the management department. AMEX should not care about acceptance, but should base their business model off of higher interchange fees, promoting the use of higher spenders who have their cards, while providing exceptional benefits other card networks/issuers can't match.

You must not know much about the history of AMEX or what this means for them. Because of AMEX's flop, cardholders no longer can look at them as cards that give "the customer the power," rather than the merchant. Visa and MC have always been more of a customer for the merchant rather than the cardholder, AMEX was the opposite, but not anymore apparently. Lower interchange fees will mean less revenue, despite what AMEX thinks will happen if more merchants start accepting them. What happens when your revenue goes down? You have to cut from somewhere, whether it's customer service, perks, or rewards, or whatever. So instead of coming out with an innovative card system, they'll just stoop down to the V/MC business model instead. AMEX will not be able to compete with V/MC based on card popularity, bank choices, and now what will be the lack of interest for most of their cards from the consumer.

Why would I go out of my way to use an AMEX anymore? The decreased interchange fees will mean they side with the merchant first, cut purchase purchase protections, etc. I'll just dump AMEX and use my Visas and MasterCards.
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Old Mar 17, 18, 10:08 am
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Originally Posted by mikesyr18 View Post
With this article, I must say there's simply no reason to carry an AMEX anymore unless you're very loyal to Hilton, Delta, or some of their transfer partners.

At the top, they're almost as bad as Citi in the management department. AMEX should not care about acceptance, but should base their business model off of higher interchange fees, promoting the use of higher spenders who have their cards, while providing exceptional benefits other card networks/issuers can't match.

You must not know much about the history of AMEX or what this means for them. Because of AMEX's flop, cardholders no longer can look at them as cards that give "the customer the power," rather than the merchant. Visa and MC have always been more of a customer for the merchant rather than the cardholder, AMEX was the opposite, but not anymore apparently. Lower interchange fees will mean less revenue, despite what AMEX thinks will happen if more merchants start accepting them. What happens when your revenue goes down? You have to cut from somewhere, whether it's customer service, perks, or rewards, or whatever. So instead of coming out with an innovative card system, they'll just stoop down to the V/MC business model instead. AMEX will not be able to compete with V/MC based on card popularity, bank choices, and now what will be the lack of interest for most of their cards from the consumer.

Why would I go out of my way to use an AMEX anymore? The decreased interchange fees will mean they side with the merchant first, cut purchase purchase protections, etc. I'll just dump AMEX and use my Visas and MasterCards.
Must be nice to have access to all the same data, research, and analysis that Amex has internally. I somehow doubt that Amex came to this decision lightly...

Amex can tout its appeal to higher spenders all day long and it won't make a shred of difference if a high roller wants to buy something from a merchant that doesn't accept Amex.
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Old Mar 17, 18, 10:36 am
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Originally Posted by gooselee View Post
Must be nice to have access to all the same data, research, and analysis that Amex has internally. I somehow doubt that Amex came to this decision lightly...

Amex can tout its appeal to higher spenders all day long and it won't make a shred of difference if a high roller wants to buy something from a merchant that doesn't accept Amex.
It's embarrassing that AMEX has to keep devaluing their brand. The typical AMEX user doesn't care if one merchant doesn't take their card... They'll just go to a competitor that does.
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Old Mar 17, 18, 11:07 am
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Originally Posted by mikesyr18 View Post
It's embarrassing that AMEX has to keep devaluing their brand. The typical AMEX user doesn't care if one merchant doesn't take their card... They'll just go to a competitor that does.
I don't think this is the case anymore. I regularly go to a small store that only takes Visa and MC because I like them. I wish they took Amex but the benefits of their services outweigh using whatever Amex card I'm wanting to use. Amex diluted their brand with the Costco card and have been walking down this path for a while now. You could call the introduction of Blue as the initial watering down. Now they're just another card issuer but one that doesn't get accepted everywhere like Discover. Their historical prestige is carrying them at this point but they can't rely on that for long.
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Old Mar 17, 18, 11:08 am
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Originally Posted by mikesyr18 View Post
The typical AMEX user doesn't care if one merchant doesn't take their card... They'll just go to a competitor that does.
This could be true, but what evidence do you have to support the assertion? I don't mean anecdotes, I mean the type of data that American Express would use to make decisions.

In 2017 Costco stopped accepting American Express. Did they lose members? No, increased from 47.6 to 49.4 million. Did they lose sales? No, increased from $159 to $163 million per warehouse. If there is an American Express loyalty effect, it seems to be pretty weak. (Costco Annual Report, 2017).
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Old Mar 17, 18, 11:55 am
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Originally Posted by bradpetrik View Post
Now they're just another card issuer but one that doesn't get accepted everywhere like Discover. Their historical prestige is carrying them at this point but they can't rely on that for long.
Even Discover isn't accepted everywhere. Yes, it's accepted in more places than AMEX, but my insurance through USAA takes AMEX and not Discover... It's one of a few examples I've seen.

Originally Posted by mia View Post
In 2017 Costco stopped accepting American Express. Did they lose members? No, increased from 47.6 to 49.4 million. Did they lose sales? No, increased from $159 to $163 million per warehouse. If there is an American Express loyalty effect, it seems to be pretty weak. (Costco Annual Report, 2017).
You bring up a good point, but you can't expect loyalty if you don't give it back. When AMEX stopped becoming a card where the consumer had all of the power, it became useless to use because it's acceptance isn't nearly as high as the other networks. I think AMEX should fix what broke rather than become "just another issuer."

I still think those people who are loyal to the programs AMEX offers (SPG/Marriott, Delta, Hilton, etc.) may look for a competitor that accepts AMEX because they want to use their specific card to gain points through their loyalty program.

Last edited by mikesyr18; Mar 17, 18 at 12:00 pm
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Old Mar 17, 18, 11:59 am
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Originally Posted by mikesyr18 View Post
Even Discover isn't accepted everywhere. Yes, it's accepted in more places than AMEX, but my insurance through USAA takes AMEX and not Discover... It's one of a few examples I've seen.
I think that's the point bradpetrik was trying to make. That Discover is a useless card because it isn't accepted everywhere and Amex is similar.
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Old Mar 17, 18, 12:01 pm
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Originally Posted by mia View Post
In 2017 Costco stopped accepting American Express. Did they lose members? No, increased from 47.6 to 49.4 million. Did they lose sales? No, increased from $159 to $163 million per warehouse. If there is an American Express loyalty effect, it seems to be pretty weak. (Costco Annual Report, 2017).
I don't think a Costco shopper is their primary audience. Their primary audience traditionally was the high roller who doesn't bat an eye when plumping down thousands or even hundreds of tousands of dollars on luxury. I don't know of any luxury stores that wouldn't accept Amex. Of course there's only so many of those high rollers out there and Amex needs to grow their business. So they're now targeting the less affluent, which they can't if their cards aren't accepted. It is basically a race to the bottom and not for the better.

Just look at the Platinum card: it is a charge card and you are supposed to pay off the balance every month. Yet now they're introducing various ways to carry a balance. For the past 6 months they have been pestering me with ads and mailers, offering me 6 months of 0% if I carried a balance on the Platinum. Basically they're trying to convince people who can't afford it to spend on expensive travel and luxury items with their Platinum. The reason? Their traditional revenue (interchange fees, advertising) is drying up.
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Old Mar 17, 18, 12:05 pm
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Originally Posted by Low Roller View Post
I think that's the point bradpetrik was trying to make. That Discover is a useless card because it isn't accepted everywhere and Amex is similar.
I disagree. Discover is accepted at over 95% of the merchants I encounter, or perhaps even more.

AMEX on the other hand is closer to 65% (maybe) but I accept that fact, especially if they were giving me more power than the merchant would have to contest purchase and all that.
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Old Mar 17, 18, 12:07 pm
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Originally Posted by mikesyr18 View Post
I disagree. Discover is accepted at over 95% of the merchants I encounter, or perhaps even more.
Not in my experience. During the last resturant quarter I tried to use Discover for all my dining. This was in New York City and San Francisco. My success rate was less than 50%.
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Old Mar 17, 18, 12:08 pm
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Originally Posted by mikesyr18 View Post
It's embarrassing that AMEX has to keep devaluing their brand. The typical AMEX user doesn't care if one merchant doesn't take their card... They'll just go to a competitor that does.
As long as Amex saves me more than than the annual fee for the Platinum Card with their IAP, I'll keep the card. Save me a grand on a couple of r/t tix and I couldn't care less about it's acceptance when shopping.
I carry a BarclayCard Arrival Plus for when Amex doesn't work.
And I have my choice of West Coast-based carrier-branded Visas for Costco.
​​​​​​I'm simply using these cards to suit my needs. I am not trying to maximize awards and such. So I can understand how the knock on effects of this reduction might concern those that do.
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Old Mar 17, 18, 12:10 pm
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There is a middle ground. There are lots of middle class professionals who aren't spending hundreds of thousands on luxury items, but still put $50-$100k on credit cards every year. However, much of that spend is on everyday things like utility bills and groceries. If those places don't take Amex, they lose that business to Visa. That's the situation I'm in. I'd love to put all my spend on Amex because I like the points and benefits, but it just isn't possible.
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Old Mar 17, 18, 12:13 pm
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Originally Posted by Low Roller View Post
There is a middle ground. There are lots of middle class professionals who aren't spending hundreds of thousands on luxury items, but are still put $50-$100k on credit cards every year. However, much of that spend is on everyday things like utility bills and groceries. If those places don't take Amex, they lose that business to Visa. That's the situation I'm in. I'd love to put all my spend on Amex because I like the points and benefits, but it just isn't possible.
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.
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Old Mar 17, 18, 12:16 pm
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Originally Posted by blaz View Post
.... in New York City and San Francisco. My success rate was less than 50%.
Historically those places have had difficulties with merchant acceptance for all cards in general. As I've read on the EMV thread, some places have a large percentage merchants that will only accept V/MC and think it's a "courtesy" to accept any card at all.

For everywhere else, Discover acceptance is over 90%. You also have to figure in the Diner's Club acceptance that pairs with Discover's own acceptance, and then there's some merchants out there, including small businesses who took Discover when I gave them the card, but only display the V/MC symbols on their window.

https://www.valuepenguin.com/where-v...cover-accepted
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