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Valued Contributor
navigatethis12
Posts: 1,952
Registered: ‎01-24-2012
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Re: Why do Amex-processed, non Amex-issued cards exist?


takeshi74 wrote:



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.


I don't exactly understand the confusion with American Express or Discover either. It's pretty clear who the issuing bank is on the application and the paperwork when you get something.

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Open123
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Re: Why do Amex-processed, non Amex-issued cards exist?


takeshi74 wrote:Due diligence is each person's responsibility.

+1

 

Right, ideally, everyone (including businesses) should have as many options as the free market will bear.  Each person (or, organization) can choose an option most commensurate based on their respective needs, requirements, and resources.

 

Simplifying things for the lowest denominator serves only to discourage independent thinking.  

 

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Open123
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Re: Why do Amex-processed, non Amex-issued cards exist?


navigatethis12 wrote:

I don't exactly understand the confusion with American Express or Discover either. It's pretty clear who the issuing bank is on the application and the paperwork when you get something.


It certainly aint rocket science.

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injustifiiable
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Registered: ‎03-30-2012
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Re: Why do Amex-processed, non Amex-issued cards exist?

[ Edited ]

navigatethis12 wrote:

takeshi74 wrote:



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.


I don't exactly understand the confusion with American Express or Discover either. It's pretty clear who the issuing bank is on the application and the paperwork when you get something.


+100.

 

Wasn't MasterCard and Visa the reason other banks couldn't issue AMEX branded cards in the first place? I remember reading about when that whole anti-trust litigation business when it went down back in 2004 or so...

 

Most AMEX branded cards are pretty clearly noted...USAA American Express card or Citibank AAdvantage American Express. If you're too blind to see that, then there's not much that can be done for ya..lol.

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Open123
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Re: Why do Amex-processed, non Amex-issued cards exist?


injustifiiable wrote:

Wasn't MasterCard and Visa the reason other banks couldn't issue AMEX branded cards in the first place? I remember reading about when that whole anti-trust litigation business when it went down back in 2004 or so...


The Supreme court in 04 ruled that Visa and MasterCard violated antitrust laws when they barred banks that issued their cards from also issuing cards bearing competing brands.

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enharu
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Registered: ‎02-27-2013
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Re: Why do Amex-processed, non Amex-issued cards exist?

[ Edited ]

Open123 wrote:

injustifiiable wrote:

Wasn't MasterCard and Visa the reason other banks couldn't issue AMEX branded cards in the first place? I remember reading about when that whole anti-trust litigation business when it went down back in 2004 or so...


The Supreme court in 04 ruled that Visa and MasterCard violated antitrust laws when they barred banks that issued their cards from also issuing cards bearing competing brands.


+1.

To add:

Visa and MasterCard were pretty much trying to destroy American Express and Discover back in the day.

There have been numerous antitrust lawsuits brought forth against Visa and Mastercard in many different countries, including allegedly colluding together to drive the competition out of business. In several Asian countries, retailers were pressured to not accept American Express and Discover in order to get lower swipe fees in return. That in turn made those 2 networks a lot less popular amongst consumers since the cards were not accepted in most places.

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HiLine
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Re: Why do Amex-processed, non Amex-issued cards exist?

The argument that using the Amex network helps create more products doesn't sound right to me. You could've easily created the exact same product that offers the exact same benefits and features that runs on the Visa or Mastercard network which would give the card more usability. There must be something else...

 

The Amex brand marketing factor is a great argument - whether this makes sense to us or not, people do mistakenly conflate Amex-processed cards with Amex-issued cards, a consumer mistake that helps banks attract customers.

 

Do we know for sure if Amex charges issuing banks a higher or lower swipe fee? Are there other advantages to the Amex payment processing network? 

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ForumPheen
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Registered: ‎05-07-2013
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Re: Why do Amex-processed, non Amex-issued cards exist?

[ Edited ]

 I suspect the same regarding the studies Amex has probably done to lull merchants on their cardmembers and spending habits compared to others, otherwise how can you and do you justify why Amex exists when there are others (Visa and MC) that are universally used?


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enharu
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Registered: ‎02-27-2013
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Re: Why do Amex-processed, non Amex-issued cards exist?

[ Edited ]

HiLine wrote:

The argument that using the Amex network helps create more products doesn't sound right to me. You could've easily created the exact same product that offers the exact same benefits and features that runs on the Visa or Mastercard network which would give the card more usability. There must be something else...

 

The Amex brand marketing factor is a great argument - whether this makes sense to us or not, people do mistakenly conflate Amex-processed cards with Amex-issued cards, a consumer mistake that helps banks attract customers.

 

Do we know for sure if Amex charges issuing banks a higher or lower swipe fee? Are there other advantages to the Amex payment processing network? 


If you look from the company's perspective, it's actually pretty reasonable.

 

As a company you want to diversify and lower your dependency on 1 company / source. If for some reason relationship becomes sour one day, or if that company experiences some kind of major screw-up, you are not dragged down as well. Just look at Apple as an example. They're diversifying their supply chain to minimize on risks. For instance if their relationship with Samsung for some reason come to an end, they're not entirely screwed because they can still depend on TSMC. Like the saying goes, never put all your eggs into one basket. They could be using several networks just so they do not become overly dependent upon 1 network. For example, If some day MasterCard becomes a lot more popular than Visa because of a new MasterCard tier / product / benefits, the company, which offers only visa cards, is forced to take a backseat to their competitors just because they are stuck with Visa.

 

Another reason to create more products is entirely plausible too. By creating lots of products, they literally bombard customers with all kinds of products and attempt to distract them from their competitors. This is a marketing strategy that is heavily used especially for grocery products. Just look at the different flavors of coke, potato chips, toothpaste, etc. Their purpose is to bombard shelf space as much as possible to make their products stand out more, while at the same time providing customers with more choices, and thereby allowing them to capture a wider group of audience.

 

 

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Open123
Posts: 4,194
Registered: ‎02-23-2011
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Re: Why do Amex-processed, non Amex-issued cards exist?

[ Edited ]

HiLine wrote:

Do we know for sure if Amex charges issuing banks a higher or lower swipe fee? Are there other advantages to the Amex payment processing network? 


I'm speculating that since the avg merchant swipe fee is higher on Amex, they'd pass on some of this to the issuing Bank.  So, it's possible for a Bank to earn a higher revenue per swipe with Amex, even if they were to pay them a higher tithe than is charged by Visa/MC.

 

I've never cared nor given a thought to the "payment processing network" that handles the transaction.  As far as I'm concerned, they're all homogenous, whether it's Visa, MC, Amex, Discover or JCB.  The user experience has more to do with the issuing bank than who processes the payment.  The Amex experience isn't their payment processing network, but they're "closed" loop system giving them complete control over the user experience from beginning to end; unlike Banks who have less control, since they must work with and often compromise with Visa or MC's terms.

 

By nature, compromise equates to a less than ideal or optimal experience.  Here, since Amex has full control over the entire user experience, they aren't restricted by having to compromise their product with an intemediary between them and the end user.  

 

It's never occurred to me before, but some may assume having a Bank issued Amex to have the same "user experience" benefits as the "closed" loop one offered directly by Amex.   This must have some appeal, since we don't see BofA or Citi Discovers.

 

 


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