Banks Issuing AmEx, But Who's Selling?

  It took six years for the U.S. Department of Justice to succeed in overturning Visa USA and MasterCard Inter-national policies that prevented their member financial institutions from issuing American Express cards. The U.S. Supreme Court in late 2004 upheld lower-court rulings that struck down those bans, yet a monolithic, coordinated marketing blitz to encourage banks to issue AmEx cards appears unlikely.
  In fact, the question of just how bank-issued AmEx cards will be marketed remains unanswered, according to many in the card industry. "We'll just have to wait and see," says Megan Bramlette, an associate at Auriemma Consulting Group Inc., a card consulting company in Westbury, N.Y.
  So far, three issuers have begun offering AmEx cards, and four more appear likely to follow suit this year, says an AmEx spokesperson. MBNA Corp. first made its versions of AmEx cards available in November 2004, followed by Citibank in December 2005 and Juniper Bank, a member of the Barclays Group, in January.
  Other banks expected to begin issuing AmEx cards this year include Bank of America, which now owns MBNA; HSBC-North America Holdings; GE Consumer Finance; and USAA Federal Savings Bank, the AmEx spokesperson says.
  AmEx itself has no plans to market bank-issued cards that bear its logo, the spokesperson says. "Their cards, their customers. They own the marketing function," she says of bank issuers.
  That decision was made, consultants note, even though AmEx led the card industry in advertising spending with an outlay of $304 million in the third quarter of last year, the latest period for which figures are available from TNS Media Intelligence.
  Just the same, a division of AmEx called Global Network Services will work with the issuing banks and could provide marketing tips, the AmEx spokesperson continues. "Each of our banks has a relationship team that can help them ensure that their products have compelling rewards and incentives," she says.
  A similar hands-off, advice-only approach appears likely for private-label cards bearing the AmEx logo, says a spokesperson for Stamford, Conn.-based GE Consumer Finance, a financial services company with a significant portion of its business in issuing private-label cards.
  GE in January announced plans to issue a co-branded Dillard's AmEx card with the perks of a store charge card that include access to special store events, as well as the convenience of a major credit card that consumers can use anywhere AmEx is accepted.
  Besides issuing the cards, GE manages customer relationships, which can include handling such duties as answering customer-service calls as well as billing and credit management, the GE spokesperson says.
  Dillard's will handle card marketing, but, like AmEx, GE stands ready to provide advice, the spokesperson says. "We help them understand that basing store promotions around the card does drive loyalty and store traffic," she says.
  Meanwhile, the banks that are co-branding AmEx cards are remaining tight-lipped about their marketing plans.
  For Bank of America or MBNA, it is too early to talk about marketing, according to a spokesperson for both of the recently merged institutions. AmEx's spokesperson says both entities are expected to issue AmEx cards.
  Several MBNA direct-mail solicitations have reached the doorstep of James Accomando, president of Accomando Consulting Inc., a Fairfield, Conn., card-consulting company. The direct-mail pieces offered the high-end MBNA Rewards AmEx card with 0% interest, he says.
  "It is almost a co-branded offer," Accomando says. He reports that the solicitations refer repeatedly to "MBNA/American Express," suggesting a joint relationship. The mailings also bear the slogan "You don't need a new card-you just need a better one."
  The online application for the MBNA Rewards AmEx card touts "no annual fee" and stipulates one point for every dollar spent, except for dining and travel, which earn double points until Jan. 1, 2007. Besides an array of rewards cards aimed at shopping, travel or cash back, MBNA is offering AmEx affinity rewards cards on the Web site.
  Like MBNA, Citi is distributing direct-mail solicitations for its AmEx-branded cards, says a Citi spokesperson. The Citi spokesperson also notes that Citi's AmEx entries are in their infancy, so it is early to talk about marketing. Citi also would not provide an executive to discuss the bank's AmEx card plans.
  Affluent Influence
  On Citi's card Web site, the AmEx cards get prominent billing at the upper right corner of the home page. The site provides details about five Citi AmEx cards in the travel, cash-back and premium categories.
  "Citi seems to be really embracing the partnership," says Auriemma's Bramlette. "They have integrated AmEx across their products."
  Citi may be trying to ratchet itself into the more-affluent end of the market by issuing AmEx cards, suggests Bramlette. That way, wealthier customers who already bank at Citi, which enjoys an upscale image in banking, might become more amenable to carrying Citi cards now that they bear the upmarket AmEx bug, she says.
  Defensive Moves?
  AmEx encourages that kind of social climbing among banks that are beginning to issue its cards, says the AmEx spokesperson. "AmEx remains focused on high-spending card members," she says. "So not only do we partner with banks that are committed to high-quality products and services and have marketing expertise, but we also work with them to make sure that the American Express products they issue do have some awards and incentives to drive more high-spending cardmembers to merchants."
  Some banks also may want to issue AmEx cards for defensive reasons, says Accomando, the consultant. Issuers do not want to lose business because customers defect to AmEx or simply add an AmEx-branded card to their wallets, he says. "When people want to leave for service-related problems, it's hard to keep them," Accomando says. "When they leave because of a product not being offered, it's a damn shame because you could offer that product."
  Issuing banks also have an opportunity to tie their marketing of AmEx cards to the mighty marketing machine at American Express, says Accomando.
  Still, the AmEx spokesperson says, there are limits to the potential synergy because AmEx and issuing banks offer different products.
  Visa has found that not many banks have hitched their marketing directly to broad association themes, like the "everywhere you want to be" campaign that ended recently after a 20-year run, says Susanne D. Lyons, Visa executive vice president and chief marketing officer.
  Indirect Help
  Even passively, however, banks that issue AmEx cards could benefit from the curiosity and name recognition generated by all that AmEx advertising, observers say.
  And joint marketing with banks would give AmEx something it now lacks-a brick-and-mortar presence with signs and brochures in lobbies across the nation, Accomando says. AmEx apparently valued such a presence in the past, he notes, recalling the displays of "Take One" AmEx card applications that once graced the counters of banks and restaurants a couple of decades ago.
  Fear of fraudulent use of the "Take-Ones" could put a damper on such displays these days, Accomando says. But co-marketing with banks could at least allow for AmEx signs in bank lobbies.
  On the downside, banks that advertise an AmEx card are contributing to the success of a competitor, says Bramlette of Auriemma. AmEx itself offers a growing array of charge cards that vie for customers who now carry bank-issued MasterCard and Visa cards.
  Moreover, some potential bank issuers still may be smarting from the AmEx civil suit that came on the heels of the federal antitrust suit. The roots to that case go back to 2004, soon after the U.S. Supreme Court declined to hear an appeal of the lower courts' rulings against Visa and MasterCard in the Justice Department case.
  Once the Supreme Court decision came down, AmEx filed a civil suit against Visa, MasterCard and eight major banks, seeking to recoup damages incurred because banks had not been allowed to issue AmEx cards. AmEx has dropped banks from the suit, including HSBC and Bank of America, after they agreed to begin issuing AmEx cards.
  In any event, how much time, effort and treasure the issuing banks will lavish upon their AmEx-branded card offerings remains to be seen, says Bramlette.
  So far, she says, caution appears to rule.
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