How does amex justify there higher fees?

[Imperfectfuture]

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@Anonymous wrote:

I still like amex but I do worry a little about merchants dropping them due to the fees. I think and this is just theory but amex may have to change the business model slightly. Probably strive to gain more cardholders(which they seem to have done over the years) while lowering merchant fees somewhat in certain cases. The one thing that really keeps me with them are the high credit lines and without a doubt amex lets me charge more than any other card bar none. Ive charged over my credit line on the everyday card without a problem so it definitely has some nice spending power. 

I view it as any business that needs tweaking to stay as competitve as possible. If I was amex I would cater to the rich and also cater to the average joe cardholder and I would even have a couple lower credit products to cover all bases. The catch 22 is if they take lower fees the rewards could get cut drastically and that can alienate long term customers. Should be interesting to see what amex does in 2015

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Actually, they already do (the ED and BC line are designed for average joe, while the Serve line is designed for the lower end, (as the analysts put it, the under naked).

But, some analysts are worried this divestures in portfolio of clients degrades the brand, and then put an equalweight or underperform rating on the company.  In this case, damned if you do, and damned if you don't.

[Imperfectfuture]

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@Anonymous wrote:

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@Open123 wrote:

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@Anonymous wrote:

Well I think the credit card model will pretty much have to support all types, rich and poor and that includes amex and any other issuer if they want the most business possible. There are too many options for amex to cater to just the rich in my opinion. 

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Since electronic payments have become mainstream, all prices of goods already have CC fees factored into them.  

Anyone who relies solely on cash is overpaying for their goods and thereby subsidizing (transfer of wealth) those who earn CC rewards and CC company coffers.  Unless or until we have a system to reflect an across the board cash discount, CC issuers should be as inclusive as possible.  Of course, there are minimum requirements and not everyone is entitled to the highest tiered cards, but acceptance should be broad and as inclusive as possible.

I sense Amex and other issuers realize and have product offerings catered to include a wider demographic now than ever before.  This is a good thing; because, in the end, everyone benefits from inclusion.

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That is a really interesting thought. Personally, I don't use cash at all. If I have cash, I avoid using it until I can hit up a cash machine to deposit. I like keeping track of my budgets too much to screw it up with random 20's lying around. I see cash as more of a novelty now. Like CD's. The industry has completely gone digital and if my iphone can not preform its funtion I don't have room for it. 

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Agree with all these sentiments.  I only take out cash, because my apartment laundry is card machines.  So I stock up for awhile, and sock the monthly budget for laundry in savings.  The only things I don't use cards for are this laundry and rent.  I also paid a small business by check, since they weren't set up for processing.  But most everyone I know takes cards (some small businesses around here are just so tiny, they only accept cash, and cater to a demographic that usually pays in cash.  This demographic usually doesn't understand credit at all.  That is where the small stash of cash comes in handy).

[Open123]

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@Imperfectfuture wrote:

But, some analysts are worried this divestures in portfolio of clients degrades the brand, and then put an equalweight or underperform rating on the company.  In this case, damned if you do, and damned if you don't.

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In my view, this is where Wall Street has it all wrong.

Amex's existing clientelle are aging and the company has no idea how to replenish them, since the younger generation clearly doesn't view Amex with the same poshness as mine and my father's generation once had.  For long term viability, Amex must find a way to appeal to younger generation and be more inclusive of membership.  Exclusivity is great and all, but it doesn't pay the bills when something becomes mainstream, such as electronic payments.

I see Serve and entry level cards as essential.  As a society here, we're never going back to cash, and everyone must use electronic payments in some form or another.  Though it hasn't been successful, Amex has rightly, in my estimation, introduced Serve and implemented more inclusive policies for cardmembership.  Though some of these cardmembers may not fit their spendcentric model now, they may in the future.  

If Amex hopes to surive and maintain their preeminent status as a CC issuer, they had better hope they appeal to (1) the younger generation, and (2) that some of these will turn into to tomorrow's drivers for their spendcentric business model.

*Edited*  PS - With the recent Costco sell-off, I'm starting to warm to Amex's valuation.  There are no absolutes, but, all things equal, if there is one I've learned over the years, it is this:  when analysts all recommend buy, sell; when they recommend sell, buy.  

[Anonymous]

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@Open123 wrote:

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I see Serve and entry level cards as essential.  As a society here, we're never going back to cash, and everyone must use electronic payments in some form or another.  Though it hasn't been successful, Amex has rightly, in my estimation, introduced Serve and implemented more inclusive policies for cardmembership.  Though some of these cardmembers may not fit their spendcentric model now, they may in the future.  

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While serve/bluebird (and to a lesser extent Redbird, which probably is viewed as Target to most) might increase brand awareness, do we know that Amex has a model to move users to charge/credit cards?   As prepaid cards, theey are not really exposing the users to "real" credit, and there is no payment history type stuff, just usage.    I assume Amex will be mining this data, just don't know how useful it will be for upsell!

[Open123]

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@Anonymous wrote:

While serve/bluebird (and to a lesser extent Redbird, which probably is viewed as Target to most) might increase brand awareness, do we know that Amex has a model to move users to charge/credit cards?   As prepaid cards, theey are not really exposing the users to "real" credit, and there is no payment history type stuff, just usage.    I assume Amex will be mining this data, just don't know how useful it will be for upsell!

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At this point, I think Amex isn't sure exactly how they'd like to monetize the current Serve customer base.  However, I'd imagine there's a struggle to balance maitaining brand inegrity, brand awareness, and potential brand erosion.  I would imagine that Amex must have plans to integrate and monetize those Serve cardmembers whose spending patterns begin to become a better fit for their spendcentric model.

Thus far, Amex's efforts to woo the newer generation has been met with abysmal failure.  The Insyc and Zync efforts clearly missed the mark.  Our, or mine, generation are more or less set in our ways; marketing efforts to win a mature user base is rarely successful, since we focus primarily on the value proposition, rather than the more intangible "touchy feely" customer service and experience stuff.  

So, the battleground is for the Millenials.  This is where I think Amex is signficantly behind Visa/MC, whose value proposition is much clearer and simpler to understand.  Eventually, while painful, I think Amex will have endure some brand erosion to implement some efforts to harvest their current crop of Serve users to transition to their mainstream cards.  This could be in the form of targetted invites, mailings, or some Serve users who become more open to an Amex because of their prior experiences.

I suspect Amex is either forming a plan, or have ideas of what kind of plan they'd like to implement, since I really don't see how they could win over the younger generation from Visa/MC without a newer and bolder marketing approach.

[CarbonCard]

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@Open123 wrote:

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@Imperfectfuture wrote:

But, some analysts are worried this divestures in portfolio of clients degrades the brand, and then put an equalweight or underperform rating on the company.  In this case, damned if you do, and damned if you don't.

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In my view, this is where Wall Street has it all wrong.

Amex's existing clientelle are aging and the company has no idea how to replenish them, since the younger generation clearly doesn't view Amex with the same poshness as mine and my father's generation once had.  For long term viability, Amex must find a way to appeal to younger generation and be more inclusive of membership.  Exclusivity is great and all, but it doesn't pay the bills when something becomes mainstream, such as electronic payments.

I see Serve and entry level cards as essential.  As a society here, we're never going back to cash, and everyone must use electronic payments in some form or another.  Though it hasn't been successful, Amex has rightly, in my estimation, introduced Serve and implemented more inclusive policies for cardmembership.  Though some of these cardmembers may not fit their spendcentric model now, they may in the future.  

If Amex hopes to surive and maintain their preeminent status as a CC issuer, they had better hope they appeal to (1) the younger generation, and (2) that some of these will turn into to tomorrow's drivers for their spendcentric business model.

*Edited*  PS - With the recent Costco sell-off, I'm starting to warm to Amex's valuation.  There are no absolutes, but, all things equal, if there is one I've learned over the years, it is this:  when analysts all recommend buy, sell; when they recommend sell, buy.  

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I'm 24 (my peers are around the same age and they see Amex as luxury or high end brand) I think Amex still have that brand integrity. The problem is that since most of them are not informed about credit, they think they won't qualify for Amex because it is "prestige" luxury or high end and that Amex have really strict income or credit requirements. I think Amex's prestigiousness is what will kill them in the long run; their name is a double-edge sword.

[Open123]

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@CarbonCard wrote:

I'm 24 (my peers are around the same age and they see Amex as luxury or high end brand) I think Amex still have that brand integrity. The problem is that since most of them are not informed about credit, they think they won't qualify for Amex because it is "prestige" luxury or high end and that Amex have really strict income or credit requirements. I think Amex's prestigiousness is what will kill them in the long run; their name is a double-edge sword.

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An insight that I've never considered.  Too often, I've fallen into the trap of assuming everyone is as credit savvy as all of us here, which has lead to too many wrong assumptions over the past several years.

[Anonymous]

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@Open123 wrote:

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@CarbonCard wrote:

I'm 24 (my peers are around the same age and they see Amex as luxury or high end brand) I think Amex still have that brand integrity. The problem is that since most of them are not informed about credit, they think they won't qualify for Amex because it is "prestige" luxury or high end and that Amex have really strict income or credit requirements. I think Amex's prestigiousness is what will kill them in the long run; their name is a double-edge sword.

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An insight that I've never considered.  Too often, I've fallen into the trap of assuming everyone is as credit savvy as all of us here, which has lead to too many wrong assumptions over the past several years.

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But what gets me is those who still consider Amex prestigious but "manage" to get say the Amex Plat, despite shortish history and fairly low scores.   They then post saying how great their credit journey is going (and to be fair, it might be going well) that there are able to get such a prestigious card, without making the connection "If I can get it now, maybe it;s not so prestigious"!