What is your plan, Amex?

[IgnatiusReilly]

As someone who worked for Amex 20 years ago and was there when they blew their chances to partner with United and American, as well as losing over $350 million on the first Optima card rollout, I have to say I am intrigued with what is happening with Amex.

Losing Costco equates to about a $82 billion loss in annual charge volume and I am curious how they make that up.  In addition, their rewards partners seem to be diminishing and their fees are going up. like BCP going to $95.  Add to that a lot of unsubstantiated rumors regarding Starwood....

Amex isn't going anywhere as a brand, but I am really interested to see what they look like in 5 years.  In the 90's, they wanted (and fully expected) to go head to head with Visa and MC across the board, Amex's "utility", in other words its acceptance, was going to equal V/MC.  At least that was Merchant Service's goal.  Never happened.  

At the same time, they have finally seemed to have grapsed that revolver market and have done well with many of those products.

I am curious to hear the opinions of the Board... with whom do they partner to improve their value?  Do people really care about the "prestige" (whatever that means) of carrying an Amex, Platinum or otherwise?  Or are the younger consumers, a lot of whom are on these forums, look at the value proposition only?

I have a relationship with Amex that goes back to 1987, so I am not bashing them.  I just see what Chase (to give one example) has done in the last few years and find a lot of my spend migrating there, spend that would have gone to Amex not that long ago.  

Look forward to your replies...

[kdm31091]

I'm young ish (25) and I could care less about the prestige of carrying an Amex. I only care about the value it offers me. I had a BCE and BCP previously. Didn't care the delay in rewards, the $25 increment redemption, etc. I don't like headaches when it comes to earning/redeeming. So for more, the fact that it was an Amex didn't matter. It just didn't provide anything I couldn't replace with other cards.

I am curious to see what direction Amex will head. They lost Costco, they lost Jetblue, they could lose Starwood after the merger, etc. The only thing they've really gained recently is Schwab, and that's really a niche market kind of card; it's not like anyone can sign up for it. But the Schwab cash back card, again, offers nothing you can't find elsewhere, so why put up with potential acceptance issues? Amex is taken at most major places, but some smaller places still don't, and why run the risk for no greater of a reward system?

I think the "prestige" is entirely rooted in their history, and I don't know how much consumers really care at this point. They just want cards that work and give them benefits.

[Anonymous]

Count me in as someone who doesn't care about prestige. Chase blows Amex out of the water and Citi is catching up. I've always done what works for me and will continue to do so. Not that I won't get an Amex card because I have one currently and I did have the Costco but for me it's all about rewards.

[creditguy]

Interesting post, I too am curious to see what becomes of Amex. There was a time when their prestige and cache were sought after for simply being Amex. Carrying an Amex meant you somehow arrived in the world and you still see people to this day grateful to have an in with Amex because the mythical credit heavens have opened and a centurion warrior has bestowed upon them a $1k Delta.

To each their own. An Amex card approval does not affect me that way. I look at Amex cards as any other card and that is; how can it benefit me and what rewards can I reap from it. Amex's arrogance cost it the Costco deal if you ask me and it's going to be hard for them to recover that loss. So where do they go now? Who knows. But Amex will probably get off that high horse and when they get some new leadership at the top and then we may see a more competitive company.

All in all Amex has great cards that fit a lot of people's needs and desires, they just can't simply exist on past reputation though. They will need to get down and dirty and start getting aggressive. They blew it in some areas but hopefully learned some big lessons. They aren't going anywhere soon and personally I expect that they will get bigger and be in a lot more wallets in the future, but we shall see, it will definitely be interesting to watch.

[Open123]

All things being equal, here's what I think Amex should do.

1.  Get new blood.  It's time for new management.  Rather than promoting from within (the usual corporate tradition of promoting the person a little dumber), find the brightest, boldest and the most willing to disrupt the status quo to bring about a new ideas.  Time to throw away the PC stuff and run it like a hybrid Financial/tech company based purely on a meritocracy.

2.  Focus more on higher profit margin customers, whether it's transactions, low rewards, or interest.  

3.  Utilize data analytics to reduce rewards abuse and reward the right cardmembers.

Amex can take a cue from Vegas.  I'll use a gaming analogy here.  Vegas rewards slot players because it has the highest profit margin, while cutting down immensely those who play blackjack or video poker.  With big data, the gaming industry has found a reliable metric to reward the right customers, while reducing or eliminating perk abuse by those seeking only to game the system.

In other words, Amex should focus on high spending unsophisticated rewards customers, like the slot players.  Anyone has a system to locate and market to these folks should be Amex's new CEO.

[IgnatiusReilly]

"they just can't simply exist on past reputation though"

Exactly right.

I look at the leadership: Ken Chennault has been there forever and whom I assume to be his likely successor, Ed Gilligan, has been there essentially his whole career as well.  I wonder if the executive team still thinks that prestige still carries some weight because I really doubt it does.  Also, there has been an AMAZING amount of what I will call "card inflation".  20 years ago, one had to be invited for the Platinum Card and it was based on significant spend requirements.  Now, if you want to pony up $450 a year and meet minimum underwriting requirements, Welcome to Platinum!

That has to degrade the prestige of the card from the merchant end...   Platinum Card holders used to spend money and lots of it.  Now, who knows?  I would love to know what the annual spend per Platinum card has done in the last 25 years. I am sure it has dropped substantially.   And the gulf beween a Plat and Centurion is a mile wide so there is no 'tweener card for someone putting $75 or $100k a year on their card and who wants serious perks above Platinum.  Centurion is still a minimum of $250k a year in spend, isn't it?   

[IgnatiusReilly]

Open123: Bravo.

I was writing my last post while you were writing yours.  You see a lot of the same issues I do and your ideas are good.  

[Open123]

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IgnatiusReilly wrote: 

That has to degrade the prestige of the card from the merchant end...   Platinum Card holders used to spend money and lots of it.  Now, who knows?  I would love to know what the annual spend per Platinum card has done in the last 25 years. I am sure it has dropped substantially.   And the gulf beween a Plat and Centurion is a mile wide so there is no 'tweener card for someone putting $75 or $100k a year on their card and who wants serious perks above Platinum.  Centurion is still a minimum of $250k a year in spend, isn't it?   

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Unlike other Issuers, Amex has a significiant number of affluent cardmembers they need to be mindful of and balance the speed of change.

In my view, inclusion is beneficial for everyone in the long haul, Amex does need to temper the speed of this adoption in a way that it doesn't alienate their top tier customers, who as a group spend more the other 80% of their cardmembers.  By nature of by invitation only (like the MGM Noir card, based on gaming and not points accrual), there is no reliable way to "cheese" the highest status.  This should allow Amex, as it does with the gaming industry, to systematically recognize and reward their "best" customers, while simultaneously adopting a more inclusive policy that will ultimately benefit all cardmembers.

With the advent visualization in big data where decisions can be immediately actionable, I'd like to see Amex empower a small group of highly qualified and trained CSRs to handle their top (highest revenue/profit) cardmembers during the transition to a wider and more inclusive cardmembership.

[Anonymous]

If I had to pick one thing that keeps me with amex is the spend power. None of my other cards match it. I dont have one to impress or act like ive made it, its simply a tool for me. Out of all of the issuers amex is the only one that basically said they would let me spend whatever my profile allows (and meant it). If I could prove I could afford to spend a million dollars and was looking for a card I would turn to amex.

Other cards are great but the spend power of an amex is my favorite feature now

[RonM21]

Just in reading the info in your post OP, you mentioned about them losing some money, 82 billion in charge volume. If I had to guess, them loosening the requirements and standards for approval on their cards alone, is one way they could be trying to cut into that number. At least, to me, it appears that way, not knowing much about their past, other than thinking it was supposed to be tough to get in the door with them.