I learned to respect the American Express business decades ago when I started to see many friends from Citi migrate to “the green card” and just as many American Express folks joining Citi. I almost joined American Express in 1990 when they were launching a revolving card in Newark, DE but I ended up with Chase, with a promise of keeping me in the sunny Southeast.
As an analyst, I watch the American Express business like a hawk. I have seen their ups and downs, and always expect to see an excellent market reaction or business strategy, whether it be the loss of Costco, the unexpected death of Ed Gilligan (a highly respected business leader), or the retirement of Ken Chennault, a person I previously mentioned should be in the Credit Card Hall of Fame (if there ever is to be one).
If you are looking for a case study in successful business succession, take a look at the transition from Mr. Chenault to Stephen Squeri. Into his second quarter, there are indications that he is standing well on his own with solid gains and a bright outlook. Now, here comes a terrific new trophy partner: Amazon.
American Express’ recent capture of the Amazon Small Business Card is a notable win.
Mercator Advisory Group covered the small business card in this research report and commercial cards here. American Express is right on top with a few other U.S. players. Their new product is at least as good as anything on the market, and for Amazon, it is a real win.
Product features are:
- 5% Back or 90-Day Interest Free Payment Terms for eligible Prime members on U.S. purchases at Amazon Business, Amazon Web Services, Amazon.com, and Whole Foods Market.
- 3% Back or 60-Day Interest Free Payment Terms for non-Prime customers on U.S. purchases at Amazon Business, Amazon Web Services, Amazon.com, and Whole Foods Market.
- 2% Back on purchases at U.S. restaurants and gas stations, and on wireless telephone services purchased directly from U.S. service providers.
- 1% Back on other eligible purchases.
- Access to line-item details on purchases made on Amazon Business (U.S.) such as cost per item and quantity, giving businesses more visibility into their business buying.
Many others also follow American Express’ movement. Here is what MarketWatch says:
- Key to the card’s appeal is its somewhat unusual rewards structure. Card-holders have two options for rewards on the purchases they make through these Amazon-owned businesses. They can either choose to get cash back or they can instantly qualify for an interest-free payment term.
- The cash-back percentage and length of the deferred interest period depends on whether or not the small business owner is an Amazon Prime Member:
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- Amazon Prime members can choose between 5% back or a 90-day interest free period
- Non-Prime customers can choose between 3% back or a 60-day interest free period
- Here’s how the benefit works: If small business owners choose the deferred interest option, they will not need to make payments on purchases for that time period (either 90 or 60 days). Only after that time has elapsed will they accrue interest on the balance from that purchase — if they do make payments during the interest-free period they will only owe interest on whatever balance (if any) is remaining at the end. The purchase can be of any size, up to the credit limit on the card.
On the Amazon side, it is easy to see how they broke down the card market. They have a PLCC with Synchrony, which has received mixed reviews, but is with a significant player that is agile enough to respond. Amazon also has the Chase Amazon Visa (a card I have and love as a consumer). Now everything rounds out with the American Express Amazon Small Business Card.
You can be certain Amazon will use this to their advantage to bring value and most likely torque competition. There will be much more to follow here going forward.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group