Amex OptBlue's Canadian Expansion Builds on U.S. Results

American Express estimates that about 750,000 merchants do business in Canada, and the card brand is relying on its successful OptBlue program to attract as many of them as possible.

Amex launched OptBlue in the U.S. about a year ago, enabling acquirers to offer merchants who process less than $1 million annually in Amex transactions more competitive pricing as well as a transaction statement that includes all other major card brands. The threshold in Canada for small merchants will be less than $500,000 in Amex transactions.

In Canada, "that 750,000 is existing merchants, some we may already have, and not all are prospects or small merchants," said Jennifer Hawkins, vice president and general manager of merchant services for American Express Canada. "But with OptBlue, we are going to significantly increase the number of small merchants we have."

In the U.S., 14 major acquirers have signed on for the OptBlue program, with 11 already providing the service to small-merchant clients.

OptBlue won't reach that level in Canada, which has only six major acquirers, though it is already working with Global Payments to launch OptBlue in the country. Amex's top priority in the Canadian market is to improve small merchant coverage and satisfaction within the brand's merchant services operations and Amex Bank of Canada, Hawkins said.

"We acknowledge that we have work to do in the small merchant space, and that the Saturday morning shopping experience has not been great for our card members," Hawkins said, referring to Amex's reputation in travel and entertainment, where it is not always accepted at small retail locations.

OptBlue addresses all of those concerns in giving acquirers the ability to work directly with the merchants on pricing, one transaction statement and one contact for service issues, Hawkins added.

Moving OptBlue into a new market builds on Amex's success and momentum with the program in the U.S., said Michael Taiano, senior research analyst with Burke & Quick Partners LLC.

"Canada is not a particularly large market for American Express, but it would like to broaden OptBlue and expand it globally if possible," Taiano said.

It could also make up for Amex's loss of the Costco business in Canada and the U.S., but it is not a direct response to that event, he said. Costco dropped American Express last fall to begin accepting Capital One branded MasterCards in Canada on Jan. 1, 2015. American Express suffered a similar setback in the U.S. Costco stores, which are turning over network operations to Visa on April 1, 2016.

"I'm not seeing any real correlation with Costco, but Canada is a lot smaller for American Express now with having lost Costco," Taiano added. "It may cause an acceleration of OptBlue, but the program's success would make you want to expand it [on its own merits]."

Like any card brand in the past that tried to expand coverage into a merchant segment it may have been lacking, American Express will deal with some familiar challenges, Taiano said.

For example, it may create tension with merchants who fall just outside the $500,000 cutoff to qualify for OptBlue, he said. In addition, the cashiers or waiters at a merchant site have to be aware that the company has begun accepting American Express cards, he said.

"A lot goes into this process and its takes some time to get up and running," he said.