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American Express Co.'s conversion to a bank holding company could enable AmEx to offer a range of new banking products, including debit cards, analysts say. AmEx says it applied for its new status to align it with competitors and to increase its deposit-gathering capabilities. The move also enables AmEx to tap into some of the government's $700 billion in bailout funds, which it needs to shore up funding for its core credit and charge card business. But AmEx's change in structure also provides substantial room for expanding products, including offering debit cards, Brian Riley, a research director with TowerGroup, tells CardLine. "It is highly likely to expect some sort of a debit offering, perhaps a decoupled debit card, that might link (AmEx) closer to customer deposits and daily transactions. Even though the company has owned several banks before, wrapping the organization into a bank holding company offers them many more options." AmEx yesterday announced that the corporation, along with American Express Travel Related Services Co., won approval from the Federal Reserve Board to become bank holding companies. AmEx already operates American Express Centurion Bank and American Express Bank FSB, which issue credit and charge cards and certificates of deposit. AmEx previously has said it has no interest in issuing debit cards. Kenneth I. Chenault, AmEx chairman and CEO, said yesterday in a statement that its status change enables the company to take advantage of government-funding programs during a time of "continued volatility in the financial markets." The change will not affect AmEx's core focus on the payments industry or require any divestitures, Chenault said. The Fed said yesterday in a statement that it expedited approval of AmEx's proposal because of "emergency conditions" in the financial markets. Shifting to a bank holding company would enable AmEx to become stronger and more diversified, with the ability to offer expanded financial products and services, the Fed noted. Scott Strumello, an associate with Westbury, N.Y.-based Auriemma Consulting Group, tells CardLine AmEx probably would not issue debit cards immediately. "I wouldn't expect to see anything in the short term, but the idea (of AmEx issuing debit cards) could be considered in the future," he says. AmEx last month announced it will cut $1.8 billion in costs next year and plans to immediately eliminate 10% of its global workforce (CardLine, 10/30).
