How Bad Will It Get for American Express? | Hacker News Reader

How Bad Will It Get for American Express?

bloomberg.com

51 pointssomeear77 comments

I've been an AMEX user since 2002. I have a MasterCard also, and use it where AMEX is not accepted. However, I prefer using AMEX because:

1. It has a rock solid dispute system. I've disputed charges where the merchant didn't deliver on promise and AMEX took really good care of it. Same thing with a Visa card didn't go very well. You can do everything off the AMEX website and over email. With others, you have to call them and deal with lousy customer support.

2. They have a really good website and overall user experience. Its a pleasure to go to the website to see the charges, or to get a well laid out annual spending report. Their mobile app is also the best as compared to others.

3. They have stellar customer service. I rarely need to call them, but when I do, the wait times are in seconds.

4. They support mobile payments - Its the first one to be on Samsung Pay and I happen to have a Note 5.

FWIW, I just have the "American Express Blue Cashback" card, which no annual fees.

> Same thing with a Visa card didn't go very well

I agree with the overall sentiment of your post, but unlike Amex, Visa does not issue credit cards, and relies on banks ("Issuing Banks") to deal with disputes. So if you had a bad experience with your Visa card, you should consider switching to a different issuer, vs. just assuming that all banks that issue Visa cards will act the same.

Your experience point by point matches my own, the customer service feels exactly how it should. The premium product I need from Amex isn't the lounges and the prestige, just a credit card company that has my back and isn't trying to avoid me when I need to contact them.

Let me also note that since Amex has become a commercial bank, they offer a FDIC insured savings account[1] at an extremely competitive .9% APY. That was the highest I could find a couple years ago when I started looking. That product too, to me, feels very premium.

[1]https://personalsavings.americanexpress.com

For something as fungible as credit card transactions, it's hard to understand how a "brand" could be truly valuable. (Or is the grocery store cashier secretly really impressed when I produce my Amex Blue?)

I've live in New York and I've literally never been to a single bar or grocery store that accepts American Express.

Anyone know why this is?

Higher fees than the competition. Otherwise known as their "brand premium".

They charge significantly more off the top vs Visa/Mastercard, and they want their money before you get yours.

I appreciate it because its good for me as far as consumer protection, but I fully understand smaller businesses not wanting to deal with the added expense/hassle.

For regular businesses, the transaction fees (both % and per transaction) are higher for AMEX than VISA or Mastercard. So a lot of small businesses don't take them.

With some processors, there's also a monthly fee if you take any AMEX, so it's better to not take it all.

Amex charges higher fees per-transaction. Because they're a charge card, they make their money off the transaction fees, and not off the interest rates a card accrues. Conversely, this means they have to charge more on the front-end to maintain profitability.

They also offer credit cards. They differ from VISA and Mastercard in that they underwrite many of the lines of credit themselves (they make about $5 billion per year on interest).

Most AMEX cards are credit.

Yep - great to see them in trouble. Most small businesses hate them as they take from their bottom line.

IIRC amex also tried to stop retailers letting customers know just how much they charge per transaction and wouldn't let shops offer different prices to counter-balance Amex greed.

Overall they sound thoroughly nasty and I cheer their demise.

ps whenever I can I use cash at an independent business so they keep the 2-3% instead of some big bank.

Is there a bank or credit issuer who doesn't act substantially the same?

>Overall they sound thoroughly nasty and I cheer their demise.

They're wonderful as a consumer, and I would be quite sad if they were to go anywhere. I've had multiple large companies try to screw me over, and I went to Amex and they went to bat for me and took care of the issue.

I have 100% confidence that I will be taken care of for all purchases related to my Amex card, which I cannot say even for my other "prestige" cards such as the Chase Sapphire Preferred, etc.

2.5% transaction fees instead of 2%.

The average grocery store has a profit margin of 1% to 3%, from what I understand.

Yeah, it's as simple as that. When their product that is 25% more expensive than competitors and less useful (accepted at less retailers), they deserve to get knocked off their pedestal. No one cares about the Amex brand. They are a commodity provider in the payment market.

Their consumer protections are significantly better than other credit card companies. That alone makes owning a gold card worth it to me.

It's 3.5% vs 2-3% on most cards.

https://www.nerdwallet.com/blog/credit-cards/retailers-accep...

So they are all taking a good wedge for very little.

Thing is they don't have to. Visa and co often have lower transaction fees for places like grocery stores exactly for that reason. Amex can adopt the same behavior.

Higher fees.

FWIW I live in Chicago and rarely find a place that doesn't accept AmEx.

I live in Manhattan and my experience has been that every bar accepts Amex.

You've never been to a Whole Foods?

Where in New York do you live? Everywhere I go in Manhattan accepts Amex. I've even been to a bar that only accept Cash or Amex ("the Costco of bars").

If you live in NYC, you must be actively trying to avoid places that accept AMEX. It's accepted practically everywhere in Manhattan at least.

If you live elsewhere in New York State then, yeah, AMEX charges higher fees to merchants so many smaller ones don't want to deal with them.

IIRC, Aqua Santa in Williamsburg used to only accept AMEX. Think they take other cards now though.

I live in New York and have been to a lot of bars and grocery stores that accept American Express.

I have to assume you're lying.

The vast majority of bars and even most grocery stores in NYC accept AmEx.

Yeah, this struck me as odd:

> Who cares what card you have if you’re paying for your expensive meal through your smartphone’s digital wallet?

Digital payments didn't kill Amex-as-a-status-symbol, the productization and growing availability of credit cards of all brands did. A status symbol brand doesn't send unsolicited junk mail asking for people to sign up for its product.

It seems to me like the company is caught between a rock and a hard place: the only way to make the card popularly accepted enough that the high-end "status" cardholders can use it anywhere they like is to dilute the brand by convincing as many people as possible to use it.

That's well-stated.

I wonder why they couldn't just use a sliding fee - take a bigger fee only for larger transactions and secure agreements with retailers not to ask customers to use lower-fee cards when available (as opposed to trying to enforce it by law, which the article talks about), with the promise that accepting Amex will actually bring in these bigger spenders.

I'm wondering if they can play the Apple role of sticking with the higher end, but smaller user base. They already have enough cardholders and usage to the point where not accepting Amex is pretty brain-dead.

The AmEx brand is—or, at least, originally was—aimed at people who don't care about the cash or discount rewards most other cards offer, and would rather have massages in airports, on-call concierges, personal shoppers, and so on.

Just getting the mystical Centurion Card (aka the "Black" Card) requires being personally invited by the company after spending at least $21,000 a month on AmEx cards. They have no credit limit at all, and some people have made multimillion-dollar purchases using them.

And then other companies worked out you could print black cards and undercut them.

I guess if I want to make a multi-million dollar purchase I'll have to do some extra admin. That aside every other time I purchase from a retailer they and I get to benefit.

> They have no credit limit at all

To be fair, none of AmEx's charge cards have a limit. But even the Centurion Card will get declined if you try to spend too much, they just don't tell you what "too much" is. I would even bet that the credit limit formulas across all their charge cards are the same and that the inputs are purely customer & purchase specific.

Note that AmEx DOES have credit limits on their credit cards, where the distinction between charge & credit cards is that you "have" to pay off the charge card balance each month (although that isn't even totally true any more).

It's about consumers and merchants knowing they can trust the brand of the card to be a) accepted everywhere to reduce the complexity of managing multiple credit card accounts and b) fraud-protected so they know they won't have to pick up the tab for losing/having a card stolen.

Having customers view the Visa/Mastercard/Amex "brand" (aka network) in this light is very valuable.

Perks such as cash back, no foreign transaction fees, and miles/points are nice, but they're pretty standard across the different credit tiers of all the major cc providers.

Perhaps having an Amex was once considered prestigious, but speaking for myself and my friends in the mid 20's, credit card providers/payment networks are perceived as largely homogeneous. Nobody cares if you're throwing down an Amex or a Visa to split the Korean BBQ bill. If anything, you'll get a comment of "when are you switching off Amex, their network coverage sucks in Europe".

I will add my own opinion as a mid 20 year old male myself:

My friends and I do not view all cards the same. There are obviously "top tier" versions of each card provider, and those are the ones that are looked at with "Prestige"

Whether or not those are Visa, Mastercard, or Amex makes no difference. But if you have a Amex Black, or the metal Chase card with no limit, it does come with opinions.

At the end of the day you're right in that a card sometimes functions status symbol, just a less visible one than say a car. But its strength is weakening, and status can't compete with network coverage and fraud protection functionality. Can't wait for the day when we can do away with physical cards altogether.

But surely their is value in the brand when it comes to customer perceptions about how good Amex support is or how easy chargebacks are.

I agree that thinking Amex can be a "status" symbol is foolish unless they really up their marketing budget (after all, anyone could become a lifestyle brand if they tried). More importantly, thats not something consumers care about when picking a credit card.

I'm wondering how you assess, say, Louis Vuitton or Rolex?

That's the irony of brands in the modern era. In a commodified market, where all services or products are virtually interchangeable, you either compete on price -- a race to the bottom with ever-declining margins -- or you move upmarket by competing on prestige and perception. Amex's prestige hasn't fundamentally changed how valuable the card is to hold, but it's signed up customers in the first place, and it's signed up an affluent segment of customer. (See: the article's note about the Amex customer's average spend vs. that of other cards.)

But brand relies to some degree on information asymmetry. As a consumer, you assume that a prestigious brand is somehow better, and to whatever degree your assumption is based on pure speculation, the stronger you buy into that assumption. These days, information is widely available at a moment's lookup. You can compare as never before, across as many scenarios as you like. Interchangeable services, like credit cards, are revealed for what they are. Couple this with the fact that cards are becoming a means to an end, and no longer the physical payment mechanism they once were, and the prestige and mystique of a certain color of plastic fades even faster.

These days, the benefits of holding one card over another can be reduced in seconds to a rough mathematical function. How many vendors accept this card? What are the annual fees? What are the interest rates? What is the expected value of the fringe benefits? Amex pioneered the loyalty card ("affinity card," to use the article's parlance) as a means of locking in better fringe benefits. But now everyone's got a loyalty card, and partners in the travel and retail sectors have deals with almost everyone.

This basically means that since Apple doesn't need to sell info, only services, then Apple Pay will win in the end?

Well thats how they've lasted...and theres a reason you have Visa...so...

This is typical modern Bloomberg reporting - telling a misleading, emotion driven story from anecdotal data and rumors.

"The Amex people, most of whom had MBAs, sometimes found it amusing to deal with Costco veterans who spoke about starting out stocking warehouse shelves. Less endearing was the habit Costco executives had of referring to Amex as a “vendor.” That made the Amex people seethe. After all, they represented one of America’s oldest corporations. But they smiled and said nothing, and the corporate marriage endured for 16 years."

Seriously?

The Young Thug reference raised an eyebrow for me

It seems like a hit piece from Bloomberg - someone must want AmEx's stock to drop this week.

While I don't entirely agree, this article put me off a little.

The first three paragraphs didn't make sense to me and seemed like you said, anecdotal/rumor.

Same with the part about Chenault at the Museum of Natural History event with Sheryl Sandberg and how "yet his dark slacks were creased, and his shoes gleamed as if they'd just been polished." Reads as if the author has something personal in this. What was he supposed to show up in?

I got the impression the author was trying to reinforce the image of Amex being a stodgy Wall Street company that is increasingly out of touch with technology and culture.

I think they were more trying to demonstrate their elitism, which is kind of the brand that Amex has.

I don't understand the criticism. The "personal" level at which this story was told, is an asset to the reporting. Many long form pieces follow this same formula; mixing personal anecdotes from subjects within the story, with factual "outside" sources of information to create a richer story.

I was really bummed when I found out that the Costco Amex card was getting cancelled, as I was thinking about getting one.

But having read the article: good. I'm glad Costco did not hesitate to tell them to take a hike when they found a better deal.

The Costco Amex vanishing seems like no big deal. However, Costco refusing to take Amex for payment at all introduces far more inconvenience.

Costco was giving away 0.6% swipe fees to AMEX. If they accepted AMEX as "just another payment method" without the partnership, that rate would quadruple.

Not really. Before AMEX, Costco had an exclusive deal with Discover. That's the definition of inconvenience. This new deal will result in a Costco branded Visa but Costco will be accepting ANY Visa card. For the vast majority of consumers this is much more convenient.

FWIW, AMEX has been doing the hard sell trying to get me to switch to a new card. So far, I haven't seen any offers worth my time. It's a shame really. I've been a cardholder for 15 years and even worked for them for a few years. Personally, I see no reason to continue the "relationship".

Yeah, when we moved back to the states, I signed up with Costco. Only I couldn't pay for it with any of the cards that I had. So I also had to sign up for their Amex card. Quite a bit of paperwork and hassle...

There's always cash.

Now here's the real question: Why won't Costco just buckle down and accept any major card?

For some card holders, it may be worth it to transition to another no annual fee card rather than closing the account itself. Age of credit is one important component of your credit score, and my AMEX is my second oldest account.

"And you know the surest way to go broke? Keep getting an increasing share of a shrinking market. Down the tubes. Slow but sure. You know, at one time there must've been dozens of companies making buggy whips. And I'll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead. Let's have the intelligence, let's have the decency to sign the death certificate, collect the insurance, and invest in something with a future."

Not a fan of elitism, however one good effect AMEX has on people who use their charge cards is to make them be more responsible with their spending habits. Credit cards make their money by charging interest on revolving credit, which steers people toward being less responsible with their spending.

Ironically, I think the people who would stand to benefit the most from a charge card, those just getting started i.e. in college, probably don't qualify for a charge-only AMEX, whereas the credit card companies aggressively pray on them.

Most of Amex's non-corporate business now is regular ole credit cards.

Do you have a citation for that?

Most mid-to-high-end Amex cards (which generate the majority of revenue) are still charge cards.

In my view, AMEX will not survive, unless it innovates by creating new 'types and ways' of credit card usage. Eg offering multiple currency balances, digital currencies, using a card for non-payment functions, integrating with phones for security/etc.

Their network is small and getting smaller, and I think soon corporations will just stop issuing AMEX to its employees for corp expenses (this were AMEX is still strong (guessing)) -- as there are enough attractive business-friendly alternatives are out there.

Anyone else go into a Costco and then try to pay only to be hit with the Amex deal, and say no thanks? I wouldn't mind having a Costco membership, but the Amex thing really rubbed the wrong way, so I never bothered to get a membership.

I have been an AMEX user since 2005. I love their customer service, and I like that my card is travel ready. I do not have to call up some place to tell them I am traveling over seas. That is a huge benefit for me.

Amex has been offering pretty sweet signing bonus for new cards. I think I have raked in enough points for two first class international flight tickets.

Chenault's strategy of pursuing the New Jersey EBT card program was when things really started to go downhill.

Article references Costco getting bummed that their customers could use VISA in plenty of places and that's correct. However, I'm an AMEX cardholder and I've yet to run into a place who doesn't accept AMEX.

However, Costco is right AMEX is just a vendor and if they can find cheaper or better vendor with benefits then more power to them.

Yeah, but I'm in the demographic being discussed in the article: I'm an AMEX cardholder for the sole purpose of being able to shop at Costco. The AMEX doesn't otherwise come out of my pocket, for the simple reason that there are places that won't take it and I'm too lazy to turn around and look for the sticker on the door. When the Costco contract drops, I'm almost certainly going to cancel the account.

Really? I only have an AMEX card and unless it's a chain store it's almost never accepted. I often get lectures from small business owners about the higher rates charged by AMEX and why they can't accept it.

i'd be more impressed if they hadn't done the half-assed chip-and-sig thing and actually supported pins.

Goddamn this was brutal

Is AMEX really struggling... ?

I really had no idea. That's really disappointing, how could that be?

Why would that be disappointing? (Unless you own stock..)

They offer a strictly inferior, more expensive product in an industry that has been effectively commoditized.

Their service for cardholders is strictly superior to any other card issuer.

That is the correct answer.

They have high fees. Plenty of small vendors do not accept Amex at all.

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