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.
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.
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. Instead of driving forward as a high growth company, they’ve talked about cutting costs.
All of this adds up to trouble. Now the company’s CEO may be walking a tight rope and the board may decide to sell.
Chenault’s increasingly tense relations with the company’s board –and possible departure–is now fueling speculation among bankers that the company may seek a deal with an outside suitor that would settle the succession issue and give a boost to the company’s sagging stock, which has lost 27% over the past year.
Speculation is that Wells Fargo could be a bidder, though American Express says the business “is not for sale.”
Any deal first has to be made. Then it has to clear regulators and be approved by shareholders. Then the task of merging begins. Any company buying American Express would do so for the credit card business, and affluent clients. It could be worth more to a bank looking to leverage that customer base to build their wealth management business. And in the case of Wells Fargo, an opportunity to a strong portfolio of new financial products to their already robust customer base.
In all likelihood in the near term the status quo prevails. Although in any deal your favorite features and benefits become open to question. My own sacred cows would be Membership Rewards points transfers to miles and the Centurion Lounge program.