topic Re: Is Amex in decline? in Credit Cards

Is Amex in decline?

CreditScholar — Wed, 07 Mar 2012 04:42:53 GMT

After reading some of the posts about overseas call centres, poor CS and the like, it got me thinking... Is Amex in decline, even if it's a very slow one?

They used to be undisputed when it came to being at the top of the pile. Now it's not so clear-cut anymore. Lately I hear more and more about them "cutting corners", see them taking people with lower FICOs, etc.

Anyone have any ideas on this?

Re: Is Amex in decline?

Jake0215 — Wed, 07 Mar 2012 04:49:28 GMT

@CreditScholar wrote:
After reading some of the posts about overseas call centres, poor CS and the like, it got me thinking... Is Amex in decline, even if it's a very slow one?

They used to be undisputed when it came to being at the top of the pile. Now it's not so clear-cut anymore. Lately I hear more and more about them "cutting corners", see them taking people with lower FICOs, etc.

Anyone have any ideas on this?

I'm pretty new to Amex but so far chase and their csp reps blow Amex out of the water. So nice to call and have a human answer. I'm sure Amex has this on their higher end cards but for us with a zync it's the usual Peggy.

Re: Is Amex in decline?

mmduluth — Wed, 07 Mar 2012 04:50:51 GMT

@Jake0215 wrote:
@CreditScholar wrote:
After reading some of the posts about overseas call centres, poor CS and the like, it got me thinking... Is Amex in decline, even if it's a very slow one?

They used to be undisputed when it came to being at the top of the pile. Now it's not so clear-cut anymore. Lately I hear more and more about them "cutting corners", see them taking people with lower FICOs, etc.

Anyone have any ideas on this?
I'm pretty new to Amex but so far chase and their csp reps blow Amex out of the water. So nice to call and have a human answer. I'm sure Amex has this on their higher end cards but for us with a zync it's the usual Peggy.

+1 Chase CS is amazing! I call in and someone answers the phone in the U.S.

Re: Is Amex in decline?

Anonymous — Wed, 07 Mar 2012 05:00:35 GMT

@CreditScholar wrote:
After reading some of the posts about overseas call centres, poor CS and the like, it got me thinking... Is Amex in decline, even if it's a very slow one?

They used to be undisputed when it came to being at the top of the pile. Now it's not so clear-cut anymore. Lately I hear more and more about them "cutting corners", see them taking people with lower FICOs, etc.

Anyone have any ideas on this?

Edit: I guess I should reword my original post since we are all in preschool and aren't allowed to voice our true opinion if it is controversial.

I don't think the fact that AMEX has maybe started accepting lower FICO scores takes away from how desirable they are or how prestigious certain cards/programs are. The fact that they (maybe) have created new cards and extended their service to those of us on the lower end of "good" FICO scores is a good business move. If Ferrari started making a car that could be bought for $50k would you think they are in a decline? No, of course not. They still have all the high end models they've always have.

That's like saying the NBA is declining as the greatest professional basketball league because teams are drafting younger and less-proven players in early rounds.

Re: Is Amex in decline?

drsmith — Wed, 07 Mar 2012 05:07:01 GMT

@Anonymous wrote:
If Ferrari started making a car that could be bought for $50k would you think they are in a decline?

Actually, yes. I would think exactly that.

Re: Is Amex in decline?

Anonymous — Wed, 07 Mar 2012 05:12:29 GMT

@drsmith wrote:
@Anonymous wrote:
If Ferrari started making a car that could be bought for $50k would you think they are in a decline?

Actually, yes. I would think exactly that.

So product quality and overall customer satisfaction mean nothing to you. All that matters is how exclusive and elitist a company is?

Porsche makes a few affordable cars, but they are not considered to be a lesser manufacturer than other luxury brands that do not produce affordable models.

Re: Is Amex in decline?

drsmith — Wed, 07 Mar 2012 05:12:29 GMT

Obviously product quality means something to me. That's why if Ferrari cut their prices by hundreds of thousands I would suspect they are in a hole, and are trying to cash in on their brand for people who couldn't afford the real thing.

Re: Is Amex in decline?

Anonymous — Wed, 07 Mar 2012 05:13:31 GMT

@drsmith wrote:
Obviously product quality means something to me. That's why if Ferrari cut their prices by hundreds of thousands I would suspect they are in a hole, and are trying to cash in on their brand for people who couldn't afford the real thing.

I wasn't suggesting that they cut their prices. I was talking about production of an entirely new model, one that isn't currently in existence. Something to compete in the ~$50k market.

Re: Is Amex in decline?

mmduluth — Wed, 07 Mar 2012 05:14:05 GMT

@Anonymous wrote:
@CreditScholar wrote:
After reading some of the posts about overseas call centres, poor CS and the like, it got me thinking... Is Amex in decline, even if it's a very slow one?

They used to be undisputed when it came to being at the top of the pile. Now it's not so clear-cut anymore. Lately I hear more and more about them "cutting corners", see them taking people with lower FICOs, etc.

Anyone have any ideas on this?

Edit: I guess I should reword my original post since we are all in preschool and aren't allowed to voice our true opinion if it is controversial.

I don't think the fact that AMEX has maybe started accepting lower FICO scores takes away from how desirable they are or how prestigious certain cards/programs are. The fact that they (maybe) have created new cards and extended their service to those of us on the lower end of "good" FICO scores is a good business move. If Ferrari started making a car that could be bought for $50k would you think they are in a decline? No, of course not. They still have all the high end models they've always have.

That's like saying the NBA is declining as the greatest professional basketball league because teams are drafting younger and less-proven players in early rounds.

I would think they were cornering a market that could earn them a lot of money. Let's be real here. If they built an "affordable" car it would probably be around 65-75k. I think that kind of price for a car still has some of its exclusivity. Sure the higher earners could afford a car like that but a majority of the population probably couldn't afford it (like myself.) They would make money of the higher earners as well as the super rich.

Re: Is Amex in decline?

Anonymous — Wed, 07 Mar 2012 05:20:18 GMT

It's true that Amex is not what it used to be. Amex used to be the card to have. Amex has slipped in some ways, like foreign customer service, but I think it is primarily that other companies have caught up. More cards have rewards programs and come with more benefits. American Express just doesn't stand out like it did, particularly last century, because so many companies now offer comparable products.

Re: Is Amex in decline?

drsmith — Wed, 07 Mar 2012 05:22:12 GMT

@Anonymous wrote:
@drsmith wrote:
Obviously product quality means something to me. That's why if Ferrari cut their prices by hundreds of thousands I would suspect they are in a hole, and are trying to cash in on their brand for people who couldn't afford the real thing.

I wasn't suggesting that they cut their prices. I was talking about production of an entirely new model, one that isn't currently in existence. Something to compete in the ~$50k market.

You're missing the point.

What makes Ferrari what it is, is exlcusivity and rarity. Making one for the average consumer takes away from the higher end ones. Lots of people can afford a $50k, not many can spend 6 figures. The stallion logo would be everywhere, and thus, less exclusive and impressive.

Re: Is Amex in decline?

Anonymous — Wed, 07 Mar 2012 05:29:23 GMT

@Anonymous wrote:
It's true that Amex is not what it used to be. Amex used to be the card to have. Amex has slipped in some ways, like foreign customer service, but I think it is primarily that other companies have caught up. More cards have rewards programs and come with more benefits. American Express just doesn't stand out like it did, particularly last century, because so many companies now offer comparable products.

+1. When Amex launched MR it was hailed as a revolutionary rewards program. Now it is average at best b/c so many banks have upped their game and have equal or better programs. Chase UR comes to mind. Same kind of redemption options (1:1 transfer to FF miles/hotel loyalty programs and cash rewards that are superior in value to MR).

I don't like that my Blue revolvers have their CS outsourced but I can't really complain since I don't pay an AF. But for someone who pays $95 for Green or $175 for PR Gold, etc. I expect those people to at least get knowledgeable stateside service for the premium they're paying.

Re: Is Amex in decline?

Open123 — Wed, 07 Mar 2012 05:33:03 GMT

@CreditScholar wrote:

Anyone have any ideas on this?

I do, but it's pure conjecture.

Currently, the biggest risk to AmEx's business model is the lawsuit filed by the DOJ alleging Amex has an anti-competitive effect on the market. Namely, the agreement where a merchant cannot openly offer a discount on the sale price to a customer for paying cash or using another card, if they have the "welcome" Amex sign on their front door.

This lawsuit is detrimental to Amex's spend-centric business model should the DOJ prevail where a court ruling would mandate merchants be allowed to offer discounts to customers for using other forms of non-Amex payments while also having the "welcome Amex" sign to draw in affluent spenders.

In my view, part of the fight for Amex in court will also take place in the court of public opinion. The DOJ is essentially implying Amex is an organization that redistributes wealth from the lesser spenders to the higher ones. The rewards structure increases the cost of goods for those paying with cash and non Amex while transferring them to Amex cardholders purely because they have or are in the position to spend more money. Amex's defense is their higher costs actually helps merchants and small businesses drive sales thereby allowing them to hire more people--think trickle down theory and Laffer curve.

Aside from the court battle, Amex is also waging the fight in the court of public opinion. Until then, Amex needs to show they are not the company of "elites," but provide valuable fuel to the engine of the small business owner, and is the card of choice of "everyman," and not just Mr. Affluent Corp, or Mr. Big Money Centurion. Part of that effort necessitates taking on the younger generation, and many cardholders whom they may not have in the past. They need to diversify their customer base, and have data to support their argument that cardholders range from ever spectrum of life, ethnicity, income, and age group.

The efforts of the prepaid I believe is for them to argue they're even making strides to offering services to the under and unbanked. Surely, no institution providing card services to such a wide varied group of people could be considered elitist or anti-competitive.

In my view, all of this is part of their strategy to fight the DOJ's allegations both in Federal Court and the Court of Public Opinion. Take the hard $200 limit on the Zync. The Amex of old would close your card if you didn't spend more than $200/month, let alone making it where you can't even spend more.

These efforts have diverted and stretched thin some of Amex's resources. I think it shows most vividly on some of the less than professional experiences some have encountered when calling into the CR department, which has historically been an Amex strength.

This is just conjecture and not factual based, so please take it with a healthy grain or two of salt!

Re: Is Amex in decline?

CreditScholar — Wed, 07 Mar 2012 06:08:32 GMT

@Open123 wrote:
@CreditScholar wrote:

Anyone have any ideas on this?
I do, but it's pure conjecture.

Currently, the biggest risk to AmEx's business model is the lawsuit filed by the DOJ alleging Amex has an anti-competitive effect on the market. Namely, the agreement where a merchant cannot openly offer a discount on the sale price to a customer for paying cash or using another card, if they have the "welcome" Amex sign on their front door.

This lawsuit is detrimental to Amex's spend-centric business model should the DOJ prevail where a court ruling would mandate merchants be allowed to offer discounts to customers for using other forms of non-Amex payments while also having the "welcome Amex" sign to draw in affluent spenders.

In my view, part of the fight for Amex in court will also take place in the court of public opinion. The DOJ is essentially implying Amex is an organization that redistributes wealth from the lesser spenders to the higher ones. The rewards structure increases the cost of goods for those paying with cash and non Amex while transferring them to Amex cardholders purely because they have or are in the position to spend more money. Amex's defense is their higher costs actually helps merchants and small businesses drive sales thereby allowing them to hire more people--think trickle down theory and Laffer curve.

Aside from the court battle, Amex is also waging the fight in the court of public opinion. Until then, Amex needs to show they are not the company of "elites," but provide valuable fuel to the engine of the small business owner, and is the card of choice of "everyman," and not just Mr. Affluent Corp, or Mr. Big Money Centurion. Part of that effort necessitates taking on the younger generation, and many cardholders whom they may not have in the past. They need to diversify their customer base, and have data to support their argument that cardholders range from ever spectrum of life, ethnicity, income, and age group.

The efforts of the prepaid I believe is for them to argue they're even making strides to offering services to the under and unbanked. Surely, no institution providing card services to such a wide varied group of people could be considered elitist or anti-competitive.

In my view, all of this is part of their strategy to fight the DOJ's allegations both in Federal Court and the Court of Public Opinion. Take the hard $200 limit on the Zync. The Amex of old would close your card if you didn't spend more than $200/month, let alone making it where you can't even spend more.

These efforts have diverted and stretched thin some of Amex's resources. I think it shows most vividly on some of the less than professional experiences some have encountered when calling into the CR department, which has historically been an Amex strength.

This is just conjecture and not factual based, so please take it with a healthy grain or two of salt

**FOREWARNING - ELITEST ARGUMENT INCOMING**

I understand that they need to diversify their customer base, as do many businesses. Without doing this, many of the younger generation will simply be lost to Amex in the future, especially when their earning power will be much greater than it is today.

However I have a huge problem with the "elitest" viewpoint. I see nothing wrong with an elitest company in that it is what it is.

Some companies are able to be more selective than others, and this isn't unique to credit cards. Colleges are the same way, as are other high-end luxury products. Exclusivity is part of the draw, and by definition being exclusive means to exclude. I highly doubt Amex will exclude the rich, so yes they are at least somewhat "elitest" in that way.

I'm really frustrated with classist arguments seen in the media lately, because it shows just how financially clueless the public is. The middle class in America is shrinking and has been for quite awhile. "Middle class" these days often means being 1-2 paychecks short of financial disaster. How many people would be in trouble if they suddenly had their income completely cutoff for a month or more? As a company that caters to the affluent, why would Amex want to include the "middle class" audience that is both shrinking in size and increasing in risk? Because public opinion says so?

Wealth moves from the poor to the rich, and it will continue to happen regardless of whether Amex exists or not. This is just how things work. People need to understand this isn't changing. If Amex wanted to truly become a more egalitarian company and act accordingly, that's fine. However it seems like they're trying to portray themselves as something they were never intended to be. In the meantime the things they used to do very well have been watered down in the process.

If I was Amex and wanted to guard against risk while maintaining a decent profit, I'd concentrate on the upper-middle and above. This is exactly what Amex has historically done and it has served them quite well.

Re: Is Amex in decline?

Anonymous — Wed, 07 Mar 2012 06:29:41 GMT

I love Amex CS, very nice and friendly. Quick with email responses. I also think Chase Sapphire CS is good too. Equally good. Big difference when I chatted to Citi bank person. Of course it could also be the one CS person who wasnt great to deal with

Re: Is Amex in decline?

Open123 — Wed, 07 Mar 2012 06:43:48 GMT

@CreditScholar wrote:
Wealth moves from the poor to the rich, and it will continue to happen regardless of whether Amex exists or not. This is just how things work. People need to understand this isn't changing. If Amex wanted to truly become a more egalitarian company and act accordingly, that's fine. However it seems like they're trying to portray themselves as something they were never intended to be. In the meantime the things they used to do very well have been watered down in the process.

For now, until November, no one is really sure what the politcal climate will be the next four years. I can understand AmEx feeling the need to hedge their bets here, especially since the DOJ has them in their target hairs.

You make a very salient point, and I know that many in AmEx's old guard feels as you do regarding how to run their business. In the last few years, there is no question the quality of their credit portfolio has eroded considerably when compared to what it was a decade ago. For instance, they understand the need to offer revolving credit no fee cards to mainstream credit card user, and do a wonderful job of marketing the Blue lines, but the moment a cardholder carries a balance making minimum payments, they lack the inestinal fortitude stick it out and instead conduct FRs and credit limit chasing.

I'm not sure what the future of Amex will be, but I'm sure if and when they win this battle with the DOJ, I suspect you'll see Amex return to how they've always operated in the past, where their ideal cardholder spends money and PIF every month, a la the charge card.

Of course, depending on what happens this November, you can either have a DOJ that will pursue aggressively to legislate how Amex runs their business, have the suit dropped entirely, or be disbanded along with the IRS should Ron Paul win!

Re: Is Amex in decline?

CreditScholar — Wed, 07 Mar 2012 06:59:57 GMT

@Open123 wrote:
@CreditScholar wrote:
Wealth moves from the poor to the rich, and it will continue to happen regardless of whether Amex exists or not. This is just how things work. People need to understand this isn't changing. If Amex wanted to truly become a more egalitarian company and act accordingly, that's fine. However it seems like they're trying to portray themselves as something they were never intended to be. In the meantime the things they used to do very well have been watered down in the process.

For now, until November, no one is really sure what the politcal climate will be the next four years. I can understand AmEx feeling the need to hedge their bets here, especially since the DOJ has them in their target hairs.

You make a very salient point, and I know that many in AmEx's old guard feels as you do regarding how to run their business. In the last few years, there is no question the quality of their credit portfolio has eroded considerably when compared to what it was a decade ago. For instance, they understand the need to offer revolving credit no fee cards to mainstream credit card user, and do a wonderful job of marketing the Blue lines, but the moment a cardholder carries a balance making minimum payments, they lack the inestinal fortitude stick it out and instead conduct FRs and credit limit chasing.

I'm not sure what the future of Amex will be, but I'm sure if and when they win this battle with the DOJ, I suspect you'll see Amex return to how they've always operated in the past, where their ideal cardholder spends money and PIF every month, a la the charge card.

Of course, depending on what happens this November, you can either have a DOJ that will pursue aggressively to legislate how Amex runs their business, have the suit dropped entirely, or be disbanded along with the IRS should Ron Paul win!

I think reality is that economics will trump politics. It won't matter who gets elected really. Politicians can say what they like, but I do believe that economics is the strongest driving force in the world. When there is money to be made, someone will find a way to circumvent the political system and the desires of politicians.

Re: Is Amex in decline?

Open123 — Wed, 07 Mar 2012 07:07:18 GMT

@CreditScholar wrote:
I think reality is that economics will trump politics. It won't matter who gets elected really. Politicians can say what they like, but I do believe that economics is the strongest driving force in the world. When there is money to be made, someone will find a way to circumvent the political system and the desires of politicians.

I certainly can't disagree with anything you've said here. I've always felt that Politicians were the ones I remembered in Kindergarten who excelled at "playground."

Re: Is Amex in decline?

pipeguy — Wed, 07 Mar 2012 07:24:05 GMT

Good thread !

Based on the growth of swipe fees (4th Qtr, AE ranks 2nd in over all swipe fees volume vs MC/V & Dis) and in member growth both international and US based of the number of card holders (about 98 million), American Express is doing very well and not at all in decline. Do I think the brand is being diluted, yes especially with the Platinum card, but I think that is based on the marketing of this card "prestige for only $450 a year" by design.

You can read a lot about what AmEx is up to and where their profit centers are by reading the latest AXP Annual Report (note "discount" = swipe fees):

http://ir.americanexpress.com/phoenix.zhtml?c=64467&p=irol-reportsAnnual

From the report:

The Company’s products and services generate the following types of revenue for the Company

Discount revenue, which is the Company’s largest revenue source, represents fees charged to merchants when cardmembers use their cards to purchase goods and services at merchants on the Company’s network; Net card fees, which represent revenue earned for annual charge card memberships; Travel commissions and fees, which are earned by charging a transaction or management fee for airline or other travelrelated transactions; Other commissions and fees, which are earned on foreign

exchange conversions and card-related fees and assessments; Other revenue, which represents insurance premiums earned from cardmember travel and other insurance programs, revenues arising from contracts with Global Network Services’ (GNS) partners (including royalties and signing fees), publishing revenues and other miscellaneous revenue and fees; and Interest and fees on loans, which principally represents interest income earned on outstanding balances, and card fees related to the cardmember loans portfolio.

Re: Is Amex in decline?

LS2982 — Wed, 07 Mar 2012 11:35:56 GMT

@CreditScholar wrote:
After reading some of the posts about overseas call centres, poor CS and the like, it got me thinking... Is Amex in decline, even if it's a very slow one?

They used to be undisputed when it came to being at the top of the pile. Now it's not so clear-cut anymore. Lately I hear more and more about them "cutting corners", see them taking people with lower FICOs, etc.

Anyone have any ideas on this?

I wouldn't say this is putting them on the decline, in fact it should be making themmore positive to the consumers. You have to give someone a chance eventually if they are showing they are being more responsible and taking care of their finances.