American Express hasn’t even lost Costco charges yet, and it’s reeling. Here’s the inside story on how Amex lost the Costco deal. Delta is their second largest co-brand, but with Marriott buying Starwood they presumably lose the ability to issue Starwood co-brands at some point when the programs are expected to merge. Although American Express wants to find a way to keep the Starwood card post-merger.
Starwood’s Al Maha Desert Resort
American Express lost the JetBlue co-brand to Barclays though it’s small. Their network is no longer used for Fidelity card transactions.
Prepaid products aren’t driving the hoped-for growth. And American Express Plenti, a coalition rewards program that lets you earn points for doing business with a variety of merchants, hasn’t picked up many new participants since it launched.
American Express Centurion Lounge Dallas
Long term credit card interchange fees will be competed down by new technologies. Businesses which make their money on high margins processing credit transactions need to innovate, because those income streams will come under pressure.
American Express revenue is down and earnings are down. Their problem is lack of growth and paradoxically their strategy is cutting costs. They may have unnecessary expenses, and if they’re going to be a slow growth company for the foreseeable future they need a sustainable cost base. But the cuts won’t return them to growth. So the cuts aren’t a winning strategy unless the idea is to sell the company.
“There were some announcements this week that advised which roles were being eliminated as part of the larger restructuring plan.”
[American Express spokesperson Marina] Norville did not elaborate on the number of employees that would be impacted. She added, “There will be restructuring changes throughout the year, reflecting our previously announced actions to take $1 billion out of our cost base by 2017.”
It had been previously reported that American Express would shed 6% of the company’s workforce or about 4000 jobs.
American Express needs a strategy to grow, not to conserve as much cash as it can in a static revenue environment. They made need to make cuts, although major cost-cutting rarely cuts fat and not bone (see: United’s ironically-named “Project Quality”). My thoughts in the meantime are with the many sharp employees of American Express who may be learning their positions are no longer available.