American Express's long-term, global strategy of opening its merchant network and card product portfolio to third-party issuers has born quite a bit of fruit of late, with a raft of deals announced by Amex's European operations. Three new European relationships, a Russian partnership and a novel arrangement to boost its network in Africa were all announced in an April flurry.
What it all adds up to, says Peter Wright, svp of American Express, "is that Eastern Europe and Russia have a rapidly improving financial services market. They are coming to understand payments technology and are asking questions about it."
To some degree the deals in Bulgaria, Latvia, Russia, the U.K. and Africa are coincidence, Wright explains, but the expansion of the European Union is certainly playing a role, as is the seven years that Amex has been developing models and honing products that can now take advantage of ripe markets.
The deals further the goal of building volume, which simultaneously brings more benefits to members and lowers the overall cost of the network, Wright says. Critically, Amex has not insisted on a boilerplate partnership agreement, but has tailored arrangements based on the credit sophistication of local markets.
For instance, its most recently announced deal is with Lloyds TSB of the U.K., a well established market for credit card products, far ahead of Eastern Europe, but one with decided differences with the United States. "It's a mature market," says Wright, "and banks are looking for ways to differentiate themselves in the market. They want to offer something special."
Katrina Cliffe, head of cards marketing at Lloyds, explains that as part of the arrangement, Lloyd's will create the products, issue the cards and manage the customer account, billing and credit management. Its first card, expected to launch June 1, will have a rewards program, something that Lloyd's has never before offered. "The customers kept asking for loyalty cards. So we said, 'we've got a great revolving credit product, but this is what we're missing.' For Lloyds this will be our first proper loyalty-based card."
Lloyds also hopes to get a leg up on the relatively lackluster loyalty programs that exist in the U.K. Right now, the programs mostly include cash back and airline miles, with some retailers offering cards that give points toward future purchases. By contrast, Lloyds' no-fee card will offer greater redemption breadth, with a slew of high-end retailers participating, such as Marks & Spencer.
On the technology front, the Amex card issued by Lloyds will be the first Amex card in the U.K. that is chip- and PIN-enabled. For an added layer of fraud protection, customers will enter their PINs at the point of sale. Next up for Lloyds will be a more premium market card. "In a highly competitive market, this agreement with American Express will give us a real edge on our competitors and the opportunity to grow our credit card business further," Cliffe says. "By combining the strengths of the two brands, we can offer customers increased choice and a wider range of benefits and services to suit their needs."
Elsewhere, Amex announced an agreement with Russian Standard Bank (RSB) to exclusively issue and market American Express card products in Russia. These RSB-issued cards will display the classic look of traditional American Express cards and be accepted on the American Express global merchant network. RSB will issue the first Russian ruble-denominated American Express Cards and can also issue U.S. dollar-denominated American Express Cards.
Like Lloyd's, RSB will be responsible for issuing the cards, managing the customer relationships, providing customer service, billing and credit management. RSA was founded in 1999 and in five years has become the leading operator on the Russian consumer finance market, with more than seven million loan customers, the overall volume of which has exceeded $2.9 billion, and more than 2.4 million credit cards issued.
The agreements that American Express announced with Latvia-an E.U. member-and Bulgaria-an aspiring one-were quite similar and came just a week apart. "It's been exciting, and it points to [Eastern Europe and Russia] being one of the hottest regions for financial services in the world right now," Wright says.
In Bulgaria, Amex announced the launch of the country's first American Express card through Postbank, which will be the exclusive issuer of the Amex card. The new American Express Cards offer 24x7 customer service in Bulgaria, emergency card replacement, protection against fraud and access to specially negotiated savings. The cards were available mid-April.
In Latvia, Parex Banka and American Express announced the launch of the first American Express Cards in that Baltic state. As in Bulgaria, the agreement means that Parex Banka will be the exclusive issuer of the American Express Platinum Credit Card and American Express Gold Credit Card. The cards were available at the beginning of May.
Like in the U.K., the cards in Latvia will be chip- and PIN-enabled for security purposes. In addition, they can be used with ATMs in Latvia that have the Amex logo.
By comparison, the deal that Amex has struck with Barclaycard is altogether different, displaying versatility in terms of the kind of agreements it's willing to ink in different locales-in this case several countries in Africa. "Africa is a different market," says Wright. "The infrastructure is poor and we're working through Barclaycard to acquire merchants." He explains that Amex was drawn to those countries in Africa with high eco-tourism industries-which in turn tend to draw high-net-worth, Amex-card toting individuals from the developed world.
Barclaycard, which operates throughout Africa and the Indian Ocean, will be the exclusive acquirer and processor of American Express card transactions in nine African countries. This service began in Kenya on May 1 and in the spring and summer will roll out to eight other countries: Botswana, Gambia, Ghana, Malawi, Seychelles, Tanzania, Uganda and Zambia. Barclaycard has over 60 percent of the Kenyan credit card market and is the largest issuer of credit cards in Europe with over 10 million cards in circulation. Overall, the company operates in 62 countries worldwide-28 countries in Africa.
Barclaycard, which will acquire and manage the merchant customer relationships, will not issue American Express cards. In effect, the deal with Barclaycards is the reverse of the deals in Europe and Russia, where those banks are issuing cards to consumers and Amex is generally managing the merchant relationships.
The deal is part of the Barclaycard's drive to improve services in the Kenyan card center that acts as a regional processing center. The deal will offer full local customer market servicing and support availability by calling a local phone number; 24 hour card authorizations locally from Barclaycard; and potential to improve its target customer base to include inbound American Express corporate and consumer card members.
Amex will continue to maintain a visible presence in Kenya through Express Travel, the local American Express travel office that has been the face of the company in Kenya for 40 years. Wright says that one of the great advantages for American Express, especially going into new markets like Russia or expanding in Africa where fraud fears are a barrier to consumer and merchant adoption, is the brand's identification with trust and integrity. "You'll be seeing another announcement in two to four months," he predicts.
