Interesting info on Amex

Tuscani — Wed, 05 Feb 2020 02:43:17 GMT

Read this in the Hustle.. thought some would find it interesting.

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American Express pays businesses to accept its cards in a bid to catch Visa and others

American Express is paying businesses as much as $450k to accept its cards, according to a report from The Wall Street Journal.

The credit card collosus launched the initiative in an effort to catch up to Visa and Mastercard, which were both accepted in 1.3m more locations than American Express as of last year.

How did AmEx fall so far behind in the first place?

It’s a tale of 2 business models.

American Express’ cards are “closed-loop” systems, which means that AmEx issues credit to –– and also processes payments for –– its cardholders.

Visa and Mastercard, on the other hand, are “open-loop” systems, which means they process payments only for their cardholders –– and rely on banks and other institutions to issue credit.

· Closed-loop systems –– like AmEx’s –– earn money based on the number of dollars cardholders spend, which is why AmEx focuses on big spenders.

· Open-loop systems –– like Visa’s or Mastercard’s –– earn money based on the number of transactions cardholders complete, which is why Visa and Mastercard have always prioritized being accepted at all stores to maximize transaction volume.

As a result of these different models, AmEx can bring in more revenue than Visa or Mastercard despite having fewer cards in circulation.

In 2014, for example, AmEx had 53m cards in circulation and made $36B in revenue. Visa and Mastercard, meanwhile, had 285m and 178m respective cards in circulation –– but only brought in $22B in revenue combined.

Now, AmEx wants to charge its cards and expand them, too

In the past few years, Visa and Mastercard’s dominant scale has started to challenge AmEx’s high-rolling business model –– especially as premium cards like the Chase Sapphire card (a Visa partnership) have caused some of AmEx’s high rollers to jump ship.

So, by paying businesses and expanding the number of places where AmEx cards are accepted, the company hopes to kick its cards’ convenience up a notch –– and, in the process, win back some big spenders.

Re: Interesting info on Amex

M_Smart007 — Thu, 06 Feb 2020 00:06:55 GMT

Interesting read ..Thank you

Re: Interesting info on Amex

Anonymous — Thu, 06 Feb 2020 15:13:53 GMT

Yes, very interesting. Thanks for posting.

Re: Interesting info on Amex

NimbusIII — Fri, 07 Feb 2020 02:40:48 GMT

Same reasons they added in Pay Over Time as a feature to certain members with charge cards. I love my Amex Platinum card but always get a little nervous with the spending on it because of the PIF requirement. Never had a problem, but just knowing you never know what life will throw at you has always kept me cautious with its use. Both good and bad I guess.

Re: Interesting info on Amex

pizza1 — Mon, 10 Feb 2020 19:30:23 GMT

@Tuscani, mmmm, very interesting read!! Amex too me really isn't a big deal anymore. Thanks for posting!

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