NEW YORK -- Cutthroat competition from American Express Co. is throttling the business plans of Interpayment Services Ltd., the chief issuer of Visa Travelers Cheques worldwide.
Interpayment, a joint venture between Barclays Bank and BankAmerica Corp., may drop out of some markets and is laying off staff as a result of declining profitability, said Richard Butt, its chief executive officer.
In the United States, he added, the company is raising fees charged to the agent banks that sell its checks and is severing relationships with those that will not agree to new contract terms.
|Becoming More Selective'
"We used to be prepared to do business with everyone anywhere," Mr. Butt said in a telephone interview. "We're becoming much more selective."
In the United States, where more than one-third of worldwide check purchases are made, American Express Travel Related Services Co. is benefiting from Interpayment's woes, said Amy McIntosh, a vice president in charge of travelers check marketing.
The company has gained "several hundred million dollars in travelers check sales" as former Interpayment agents switch to Amex, she said.
"In recent weeks, we have received over 100 phone calls from people responding to some initiative that Interpayment is taking in the marketplace," Ms. McIntosh said.
Loss of Agents Foreseen
Mr. Butt said Interpayment expects to lose 5% of its U.S. agent base to other issuers as a result of recent contract negotiations. He would not disclose how may agents sell the company's checks.
"We want to continue to supply travelers checks," he said, "but we have to find a mutually agreeable situation with our agents."
American Express issued 63% of the $19 billion worth of travelers checks sold in the United States in 1991 and 36% of the $56 billion of checks sold worldwide, according to Mr. Butt.
Interpayment Visa had 16% of the U.S. market, while other banks that issued Visa checks comprised about 8%. Smaller players, including MasterCard/Thomas Cook and Citicorp, make up the rest of the market.
Barclays and BankAmerica formed Interpayment in 1990, whey they combined their travelers check units. Their strategy was to supply agent banks with checks that bear the Visa logo and the seller's name, rather than the BankAmerica or Barclays marks.
Interpayment believed that "private-label" checks would appeal to institutions that did not want to promote products bearing a competitor's name. But a faltering economy - and stiff competition from America Express - has stalled Interpayment's plans.
"We are dissapointed with the level of profitability one can glean from this market," Mr. Butt said. "Competition has driven down margins in this market to the point where it is uneconomic."
Historically, issuers of travelers checks have collected commissions from the banks and other institutions that sell their checks. But in recent years, issuers have waived those fees, forcing them to rely on a single source of profitability: interest earned on float.
Travelers check float occurs between the time people buy checks and cash them. But as interest rates have plunged, issuers' float income has fallen.
"Our revenues are down," said Mr. Butt, who would not be specific about profits or losses.
Interpayment, which has 725 employees, has laid off several senior sales and marketing executives, Mr. Butt said. They include John Hayes, who headed the company's New York office.
Interpayment employs 250 in New York; the rest work in London. Mr. Butt would not reveal how many jobs have been cut overall.
Ready to Move Fast
American Express, meanwhile, is telling agents that they can become part of its check program within one week. Mr. Butt responded that the travel-and-entertainment giant has been contacting Interpayment customers to spread inaccurate rumors about the company's health.
Ms. McIntosh denied the charge.
In 1991, Visa travelers check sales - consisting mostly of Interpayment sales - totaled $15.68 billion, a 28% share of the worldwide market, Mr. Butt said.