The big 4

[Lyythine]

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@Anonymous wrote:

Discover is ok for the forseeable future, especially due to the fact that 90% of places that take Visa or Mastercard also take Discover. I can't ever see them becoming a big force like Visa or Mastercard though.

AmEx probably has the worst outlook of the big four at this point. I can see AmEx being bought out by a big name bank. The problem with AmEx is that they catered to "high end" clients, who are now moving away from AmEx as they realized the whole "high end" factor was BS.

As far as alternatives to Visa and Mastercard? China UnionPay (the Chinese version of Visa) could potentially have an impact in 50 or so years, so that's a possibility. Beyond that, the only company that I can see that could potentially get into the credit card market is Apple.

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I whole-heartedly disagree with this statement.  In my opinion, Amex lost its way when it tried to open up to a larger client base.  If anything, I see Amex going back to its upper-middle to upper class customer base. That is what they do best and if they continue to cater to that base, they will be fine.  In my business, in which I cater exclusively to the high net worth and ultra high net worth clientele, Amex is far and away the credit card favorite.

[dollar_bill]

AMEX is at a crossroads, and anyalyst projections are flat earnings projections for the next two years as they try to regroup and form a new plan after the recent Costco setback as well as handling rising costs.

You'd be a fool to bet against them, IMO, and now is the time for management to earn their metal. I think they'll end up fine and we'll have to see how they adjust their lending criteria... will they tighten up or continue down the path of allowing sub 700 credit scores with lower middle class incomes into the fold? I don't know. It will be interesting to watch, but they aren't going anywhere anytime soon.

They still have the best of the best compared to the other 3 in terms of customers, and it shows when you compare deliquency rates to VISA, MC, and Discover.

[MJ-san]

I think we're getting card issuers confused with card networks. Neither Visa or MasterCard issue cards ... they are networks that were started by (and formerly owned by) banks but are now independent companies. BofA actually started Visa as BankAmericard, and competing banks formed Interbank/MasterCharge, but Amex and Discover are and have been both issuer and network. Diners Club is still "technically" a network but now owned by Discover and in North America issues cards on the MasterCard network.

The future of the networks is an interesting topic - look at how debit cards have completely changed how the world pays for stuff - and all those new transactions moving from checks and cash are now on Visa and MC. Banks are heavily courted by each of them for both debit and credit card affiliation- my own credit union is dumping Visa for MasterCard and recently Chase moved to an all-Visa relationship, Target is moving from Visa to MasterCard. Very few banks issue Discover cards (do any now? I think SyncB moving Walmart from Disco to MasterCard was one of the last ones I can think of). Amex - they have a few banks actively pushing new cards (FNBO, Citi-Macys, USAA, Penfed) and some banks that do offer it as a "premium" product but seem to be somewhat more quiet (Citi, Wells, Barclays, BofA). 

I think all 4 will remain intact - but I don't see a 5th - as noted earlier, Diners moved over to the MasterCard network, and it took Sears almost a decade to get Discover's acceptance anywhere close to V/MC/AX levels.An interesting way to look at the networks (# cards from CardHub, avg spend $ from nerdwallet 2010):

Network          Cards#    /    % Share     Avg. annual spend/card $

Visa                 285M             49.3%            1,725

MasterCard      178M             30.8%            2,099

Amex                 53M               9.2%           7,714

Discover            62M              10.7%           1,911

I'm sure Amex's numbers are juiced up by heavy company/corporate use, but still ... more than 3.5x the average annual spend of the nearest competitor! 

What I found interesting was the "real big" list - the actual issuers (also CardHub- volumes 2011, balances 2009 - somewhat old data, but I'm sure it's still somewhat true today):

Issuer               Purchase Volume     Outstanding Balances       

Amex                      $519.47B                  $78.16B

Chase                      $370.83B                  $165.87B

BofA                       $248.59B                  $145.10B

Citi                          $194.66B                  $102.54B

CapOne                   $147.66B                  $  76.26B  (incl. HSBC)

Discover                  $100.14B                  $ 48.90B

USBank                   $  82.47B                  $ 20.17B

Wells                       $  56.22B                  $ 30.89B

It will be interesting to see what happens to Amex when Costco actually shuts down - they are only 4th (maybe 5th by now) in terms of outstandings, but far and away #1 in charge volume - all of us pay-in-full customers. 

You can find all sorts of interesting trends and stats at cardhub.com and nerdwallet.com  

[Goblin]

A long time ago in a galaxy far far away there were Imperial credits.

there's a few conspiracy theorists that believe there will be a new world order with one currency. We'll just have implants instead of emv/strips

[Anonymous]

If this past year is any indication I think security may have a much greater impact on future success. Imagine the impact if a whole network was somehow compromised.

As far as a 5th, it's a global economy now and it will definitely create some new opportunities.

[Anonymous]

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@Lyythine wrote:

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@Anonymous wrote:

Discover is ok for the forseeable future, especially due to the fact that 90% of places that take Visa or Mastercard also take Discover. I can't ever see them becoming a big force like Visa or Mastercard though.

AmEx probably has the worst outlook of the big four at this point. I can see AmEx being bought out by a big name bank. The problem with AmEx is that they catered to "high end" clients, who are now moving away from AmEx as they realized the whole "high end" factor was BS.

As far as alternatives to Visa and Mastercard? China UnionPay (the Chinese version of Visa) could potentially have an impact in 50 or so years, so that's a possibility. Beyond that, the only company that I can see that could potentially get into the credit card market is Apple.

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I whole-heartedly disagree with this statement.  In my opinion, Amex lost its way when it tried to open up to a larger client base.  If anything, I see Amex going back to its upper-middle to upper class customer base. That is what they do best and if they continue to cater to that base, they will be fine.  In my business, in which I cater exclusively to the high net worth and ultra high net worth clientele, Amex is far and away the credit card favorite.

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I think this is mostly spot on.  Remember all the posts over the last year or so with people dropping mega tips on meals and bar tabs?  Every single one of those I saw the card type was always AMEX.  Certainly JPM has gotten a few customers away but I feel AMEX will remain the "go to" card for the elite.

In regards to AMEX's financial health they are fine and will shape business as needed to continue such.  Currently 48 hedge funds hold long positions in AXP with an aggregate value of roughly $17.5B.  EPS last quarter came in at $1.39 versus expected $1.38 and revenue came in at $9.11B versus estimates of $8.46B.

[Anonymous]

I may on the lower income level for Amex but I always tip well.😉