Why do Amex-processed, non Amex-issued cards exist?

[HiLine]

As far as I know, Amex cards are less accepted than Visa and Mastercard cards just about everywhere in the world. So why do creditors ever choose Amex for payment processing network? Is there any benefit to having a card processed through American Express, from both the bank's and the consumers' points of view?

[zyzzus]

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@HiLine wrote:

As far as I know, Amex cards are less accepted than Visa and Mastercard cards just about everywhere in the world. So why do creditors ever choose Amex for payment processing network? Is there any benefit to having a card processed through American Express, from both the bank's and the consumers' points of view?

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I believe that it would have a higher swipe fee.  I could very well be wrong though.  That is my assuption though.

[enharu]

From my understanding cards using American Express and discover payment networks have higher swipe fees

[HiLine]

Do those swipe fees go back to Amex/Discover or to issuing banks? 

[Revelate]

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@enharu wrote:
From my understanding cards using American Express and discover payment networks have higher swipe fees

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This, the swipe fee is shared between lender and transactional network, and for all we know the split could be identical or even better in Amex's case for the institution.

Also, like it or not, Amex does have it's fungable prestiege, and even on this forum recently we have several members who in general are in the top 5% of the credit-knowledgeable folk in the consumer space, and they were getting the cards from various other institutions that authorize on the Amex transactional network, mixed up with the Amex co-brands.

It seems silly to some of us, but the little logo on the corner of the restaurant bill fold plays just as well with any Amex transactional card instead of just the mainline Amex charge or revolvers.  I'm fairly confident Amex's markleting has slipped in here as well, and if you can keep customers Amex would like to have in house in your lending institution, that's a small price to pay for even a possibly slighly decreased cut of swipe fee even... something of something being better than nothing of nothing.

[HiLine]

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@Revelate wrote:

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@enharu wrote:
From my understanding cards using American Express and discover payment networks have higher swipe fees

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This, the swipe fee is shared between lender and transactional network, and for all we know the split could be identical or even better in Amex's case for the institution.

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Interesting point. Do you have any documents on this by chance? I've been under the impression that the higher swipe fee is completely due to Amex's charge on the issuing bank, i.e., the bank doesn't have anything to gain from a higher swipe fee.

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@Revelate wrote:

Also, like it or not, Amex does have it's fungable prestiege, and even on this forum recently we have several members who in general are in the top 5% of the credit-knowledgeable folk in the consumer space, and they were getting the cards from various other institutions that authorize on the Amex transactional network, mixed up with the Amex co-brands.

It seems silly to some of us, but the little logo on the corner of the restaurant bill fold plays just as well with any Amex transactional card instead of just the mainline Amex charge or revolvers.  I'm fairly confident Amex's markleting has slipped in here as well, and if you can keep customers Amex would like to have in house in your lending institution, that's a small price to pay for even a possibly slighly decreased cut of swipe fee even... something of something being better than nothing of nothing.

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I completely agree with you. As we've discussed in another thread, the fact that every single Amex-processed card in the market contains "American Express" in the name doesn't help alleviate the confusion.

[enharu]

Well to those companies utilizing Amex networks, they are doing so most probably with the intention of riding on Amex's reputation, and also possibly for the higher swipe fees, though it comes at the cost of lower acceptance at places in general.

As for Amex, its a good risk free stream of income, since they are doing what visa and MasterCard are doing pretty much, not having to take up any additional debt during the process. It's not exactly harming Amex's reputation technically, since its not like those companies are going around committing fraud and what not under Amex's name. People just regard those cards as basic tiers and all Amex has to do is to solidify the reputation of their higher tier cards to show the distinction.

[john398]

I am pretty sure that American Express has done studies where they tell merchants people who use there cards will spend more than a Visa or MC holder, not sure that is the case but American Express uses that to get merchants to accept there cards.....

[Open123]

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@HiLine wrote:

As far as I know, Amex cards are less accepted than Visa and Mastercard cards just about everywhere in the world. So why do creditors ever choose Amex for payment processing network? 

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For issuers, the main reason would be for vendor diversification.  

I recall in the 80s and 90s, VISA had so much market share, they were becoming increasingly arrogant with their pricing and handling of their clients.  At one point, Citi's relationship with Visa had soured to the point where they refused to offer cards using the Visa network.  For a long time, Citibank debits and credit cards were MC only.

[takeshi74]

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@HiLine wrote:

As far as I know, Amex cards are less accepted than Visa and Mastercard cards just about everywhere in the world. So why do creditors ever choose Amex for payment processing network?

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By that reasoning Discover processed cards shouldn't exist either.  More choices means more options and more money making opportunties.

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@HiLine wrote:

Is there any benefit to having a card processed through American Express, from both the bank's and the consumers' points of view?

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Again, more options from both perspectives.  If USAA didn't offer their American Express card I'd have one less card.  It's mostly a sock drawer card at this point but when I signed up it offered me a decent credit line and decent benefits with no AF for my credit (which was not great back then) in addition to my other USAA cards.

Why do you seem to think that less options benefits anyone?  Speaking very generically, even if you don't get an option (no matter what the topic) that doesn't mean that no one does and that no one could possibly benefit from the option.  One size never fits all.

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@HiLine wrote:

I completely agree with you. As we've discussed in another thread, the fact that every single Amex-processed card in the market contains "American Express" in the name doesn't help alleviate the confusion.

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Any confusion is the fault of the confused.  It takes very little effort to clarify.  I was never under the impression that my USAA AmEx was issued by American Express and I wasn't even frequenting credit-related sites at the time so I wasn't any sort of credit expert by any stretch.  Due diligence is each person's responsibility.