American Express Co. is the latest card services company to embrace the trend toward employee incentive awards.
The New York-based financial giant, the leader in the corporate card business, introduced Incentive Funds, a prepaid card that companies can use to reward staff members.
"It is a natural fit for American Express" to target that market, said Margaret Simonetti Kelly, the company's general manager, incentive services.
The idea behind such cards is to reward employees for achieving certain performance goals with points or cash that can be used to buy merchandise or services.
The Incentive Funds card can be used wherever American Express cards are accepted; the employer determines the monetary value of the card.
The incentive-card concept has been around for at least six years, but interest has gone up in the past year, said credit card consultant Michele Turkel in Scarsdale, N.Y.
Michael L. Fraser, vice president of Meridian Enterprises Corp., a St. Louis-based company that develops employee incentive programs, believes many companies are trying to emulate the success that Meridian has had with its patented Meridicard program.
"We operated without competition for about six years," Mr. Fraser said. "I believe that those organizations didn't want to miss out on the success we have experienced."
Boatmen's Bancshares of St. Louis, First Bank System of Minneapolis, and Best Bank of Boulder, Colo., also offer employee reward cards.
John Haugh of Carlson Marketing Group, the Minneapolis-based company managing First Bank's award card, said that although Meridicard may have played some role, the employee incentive market has taken on a life of its own, and is estimated at about $7 billion a year.
Except for Meridicard, the incentive cards are debit cards; Meridian Enterprises has a patent protecting certain types of credit card transactions. Meridicard holders draw against an account that employers establish.
D. Mark Jackson, vice president of Boatmen's electronic banking business, said, "We are aware of the patent and didn't want to infringe on it."
Meridian is suing a number of big credit card players - including Visa, MasterCard, and Chase Manhattan Corp. - accusing them of infringing on its patent.
Incentive cards appeal to banks because they provide another source of merchant fee income, said Mr. Jackson.
Boatmen's has issued 200,000 cards in two MasterCard-branded incentive programs, Mr. Jackson said. Maritz Inc., a St. Louis company specializing in employee incentive packages, is managing the Boatmen's cards, Exclusively Yours and Your Choice, introduced in April 1995 and July 1996, respectively.
American Express, which has been testing Incentive Funds for several months with Allsteel, a furniture manufacturer, said the card is a logical extension to a similar program it has offered since 1987, the American Express Corporate Gift Cheques.
The gift check, like a travelers check, is usable once, whereas the Incentive Funds card can be used for recurring awards to the same group of employees.
American Express is marketing the program primarily to companies that offer its corporate travel and expense cards.
"If it strengthens those relationships, that's wonderful," said Ms. Kelly, "but the card was (inspired) by our preexisting work and experience with incentive programs."