So far American Express Co. has been knocking on the doors of U.S. banks with the aim of forming partnerships to issue consumer credit cards.
But given that American Express' signature product is still the corporate card - and that it leads the small-business market, despite the best efforts of Visa U.S.A. and MasterCard International - some card industry executives wonder if Amex may soon start pitching the idea of a bank-issued small-business product. Amex said it would be happy to consider one if a partner bank is interested.
American Express says that its primary interest in working with U.S. banks is still in the consumer realm, and it has been rewarded in the form of a contract with MBNA Corp., the second-largest consumer credit card issuer. That deal will not kick in until (and unless) American Express gains final legal clearance to partner with banks, which hinges on whether the U.S. Supreme Court agrees to consider an appeal from Visa and MasterCard that has already been rejected.
But Visa and MasterCard are sharpening their swords to guard against Amex-led incursions into their small-business card product sets, which have been gaining popularity among bank card issuers.
Even in the absence of any announcement from Amex that it has intentions in this area, Visa has named three reasons why banks wouldn't - or shouldn't - be tempted to issue an Amex small-business card: One, that there is little or no interchange difference; two, that Amex would compete with the banks that are its putative partners; and three, that Amex is keeping both its Membership Rewards and Open small-business programs proprietary. MBNA and other bank partners will not be able to use them.
To be sure, the bank card associations did offer the same or similar reasons why banks such as MBNA wouldn't - or shouldn't - be tempted to issue Amex consumer cards.
"Amex is competing directly for those [small-business] customers - that's why it's keeping Membership Rewards and the Open network for itself," said Tim Attinger, a senior vice president of product development and management at Visa, in an interview Wednesday.
Nina Chang, an Amex spokeswoman, said that if bank partners are interested in issuing an Amex-branded business card, American Express will try to accommodate such an offer. She said MBNA, of Wilmington, Del., has not expressed plans to do so at this time.
Simply letting bank partners use Membership Rewards and the Open program, Ms. Chang said, would not be effective. "Bank partners like MBNA know what drives their customer loyalty and spending. They need a unique product" - not just replicas of Amex's programs. "We have the expertise from Membership Rewards and Open, and we can take the principles behind that and work with bank partners to come up with programs targeted for their customers," she said.
Last year Amex began issuing new types of business credit cards, one designated "platinum" and the other offering cash rebates. The company says it wants to increase the size of its revolving small-business cards, as well as charge cards, and keep its Membership Rewards and Open franchises proprietary.
Mr. Attinger of Visa asserted that over the past several years, Visa has grown twice or three times as fast as Amex among business cardholders that make less than $10 million a year. By the end of this year Visa expects to surpass Amex's share in that category, he said. Visa says it currently has 39% while Amex has 41%.
Mr. Attinger said Amex "has been losing out to financial institutions because it essentially had one product to offer small businesses, with arguably low acceptance." Retail banks - with deposit, lending, investment, and other products and services - are more attractive to small businesses that "want to have one banking relationship."
Tom Sclafani, an Amex spokesman, said its small-business segments have grown in the double-digits. He contested any notion that Visa is stealing sizable market share from Amex in the category.
Christopher Theoharides, the president of Advantage Consulting Group in Massapequa, N.Y., predicts there will be bank-issued Amex business cards in the near future. "American Express has been marketing small-business cards for so long that certainly they have very strong perception [among companies] in that niche." He added, "It would not surprise me to see issuers move toward an Amex business card, if they started migrating to Amex to begin with."
A market research survey released March 31 shows Amex nearly doubling its preference rate among businesses that pull in less than $1 million annually (but over $50,000). According to Informa Research Services of Calabasas, Calif., 27% of so-called "microbusinesses" named Amex as their primary card for expenses in 2003, versus 14% the year before.
"Amex has gone ballistic marketing to mom-and-pops," said the study's manager, Michael Marselli, in an interview Tuesday. Visa remained the leader of the below-$1 million category. It claimed 55% of microbusinesses' loyalty, up 4 percentage points from the year before. MasterCard fell to 18%, from 31%.
But both bank card associations made gains among somewhat bigger small businesses, where Amex lost ground. According to Informa, Visa captured 44% of the small-business category (businesses that make between $1 million and $20 million), up 4 percentage points from the year before. MasterCard's share was up 8 percentage points, to 32%; and Amex went down 13 percentage points, to 23%.
In the middle-market category (businesses that make between $20 million and $250 million), Visa's preference rate gained 10 percentage points, to 45%, MasterCard's rose 5 points, to 20%, and Amex's fell 15 points, to 35%.
Mr. Sclafani at Amex called Informa's methodology puzzling. "Seismic shifts like that just don't happen year over year," he said.
