Business

AmEx Troubles: Some Cardholders Can Leave Home Without It

Published

9 years ago

March 24, 2015

In this Jan. 20, 2010 file photo, American Express cards are posed for a photograph in Phoenix. Amex’s stock is down 11 percent this year, making it the second-biggest decliner on the Dow Jones industrial average. (AP Photo/Ross D. Franklin, File)

KEN SWEET, AP Business Writer

NEW YORK (AP) — For decades, American Express was the undisputed credit card of choice among corporate road warriors, the wealthy and the well-traveled, who lived by the company’s slogan, “Don’t leave home without it.”

But changing consumer habits, extremely aggressive competition and increased pushback from its merchants are putting heavy pressure on AmEx.

Rivals are trying to steal away business and are succeeding in some cases. Costco, for example, is ending its 15-year relationship with AmEx and defecting to Citigroup and Visa starting next March. And airlines that used to give VIP lounge access to AmEx cardholders have been switching in recent years to other credit card companies.

Compounding its troubles, AmEx recently lost a major government antitrust lawsuit, a verdict that could damage its ability to compete.

“The competitive environment for AmEx is very challenging,” said Jason Arnold, a Wall Street analyst who covers AmEx for RBS Securities. “Major competitors have all directed their efforts to take chunks away from their business. They’ve got serious problems.”

As a result, American Express stock is down 12 percent this year. Analysts, on average, have cut their 2015 profit forecast from $6.2 billion to $5.6 billion. AmEx recently announced 4,000 layoffs, or about 6 percent of its workforce. And CEO Kenneth Chenault will face a skeptical Wall Street audience Wednesday at the company’s annual investor day.

One of the biggest threats to AmEx is the slew of competing cards aimed at the well-to-do, sometimes with lower annual fees. Card issuers have energetically courted merchants who used to accept only American Express. Merchants who once coveted AmEx’s high-net-worth cardholders are discovering they can find the same customers elsewhere.

Citigroup, in particular, has been going after AmEx’s core customer. Citigroup has hired executives away from AmEx over the past few years to help it overhaul its credit cards and revamp its loyalty program, known as ThankYou. Citi Cards CEO Jud Linville, for example, worked at AmEx for nearly 20 years.

The capture of Costco by Citigroup and Visa was the biggest blow to AmEx. The warehouse-club chain accounted for $80 billion of spending on AmEx’s network last year and 10 percent of AmEx’s cards.

“Costco was a real punch in the gut,” said David Robertson, publisher of the Nilson Report, a major trade journal for the credit card industry.

Citi also recently created a card called Citi Prestige, a high-annual-fee card aimed at AmEx Platinum Card holders.

“Citi’s ThankYou program, a year and a half ago, was pretty much worthless,” said Brian Kelly, editor in chief of thepointsguy.com, a travel and credit card rewards tracking website. “But over the past year Citi has really started to get into the game. They are not at a Chase or AmEx level yet, but based on where they have gone in a short amount of time, they’re becoming quite formidable.”

JPMorgan Chase introduced its own reward cards in 2009 with a program similar to AmEx’s. It is called Chase Ultimate Rewards.

Airport lounge access was once a perk basically guaranteed by AmEx. But American Airlines switched allegiance last year, turning over exclusive access to lounges to Citi cardholders. AmEx cardholders lost access to United Continental’s lounges in 2011 and lost the ability to transfer their points to United in 2012.

Even Discover Financial has gotten into the game. Last month, it introduced a credit card focused on building up miles that can be redeemed for travel.

AmEx hasn’t sat idle. To generate revenue, it has raised annual fees and interest rates on some products. It has also added perks for its customers, such as waiving foreign transaction fees and giving a $100 credit for incidental airline expenses for Gold Card members.

And when AmEx parted ways with United Continental, it went ahead and opened its own airport lounges. It has 13 worldwide so far, with plans to open more this year.

“American Express is still the gold standard when it comes to their rewards program, but lately it seems like all they’re doing is playing catch-up,” Kelly said.

While competitors have been moving upmarket, AmEx in response has been moving in the opposite direction. It now has two pre-paid debit cards, one of them with Wal-Mart. Pre-paid debit cards are typically aimed at low-income consumers who may not have checking accounts. The company also launched a no-annual-fee credit card last year aimed at “everyday” purchases — not the travel-heavy, corporate-expense-account business AmEx is known for.

AmEx isn’t going to let Citi walk away with its Costco card customers without a fight, either. It plans to spend aggressively to try to keep some of them because roughly 70 percent of spending on those cards was done outside the stores, according to AmEx.

“I don’t think there’s anything structurally wrong at AmEx,” said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods. “They’re going to get in front of the revenue they are going to lose next year when the Costco relationship ends.”

Along with increased competition, AmEx is facing heavier regulatory pressure. Last month, the Justice Department won an antitrust lawsuit against American Express over its practice of making merchants sign agreements not to express a preference for one card over another.

If AmEx loses on appeal, merchants will be free to express their preferences, and that could force the company to lower the percent it charges them to process cards. That would be a drastic hit to AmEx’s bottom line, and company executives have acknowledged as much.

During the trial last summer, AmEx’s Chenault said the company would be “fighting for our survival” if it lost the case.

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State Controller Malia Cohen Keynote Speaker at S.F. Wealth Conference

California State Controller Malia Cohen delivered the keynote speech to over 50 business women at the Black Wealth Brunch held on March 28 at the War Memorial and Performing Arts Center at 301 Van Ness Ave. in San Francisco. The Enterprising Women Networking SF Chapter of the American Business Women’s Association (ABWA) hosted the Green Room event to launch its platform designed to close the racial wealth gap in Black and Brown communities.

Published

3 days ago

April 20, 2024

Oakland Post

American Business Women’s Association Vice President Velma Landers, left, with California State Controller Malia Cohen (center), and ABWA President LaRonda Smith at the Enterprising Women Networking SF Chapter of the ABWA at the Black Wealth Brunch.

By Carla Thomas

The Enterprising Women Networking SF Chapter of the American Business Women’s Association (ABWA) hosted the Green Room event to launch its platform designed to close the racial wealth gap in Black and Brown communities.

“Our goal is to educate Black and Brown families in the masses about financial wellness, wealth building, and how to protect and preserve wealth,” said ABWA San Francisco Chapter President LaRonda Smith.

ABWA’s mission is to bring together businesswomen of diverse occupations and provide opportunities for them to help themselves and others grow personally and professionally through leadership, education, networking support, and national recognition.

“This day is about recognizing influential women, hearing from an accomplished woman as our keynote speaker and allowing women to come together as powerful people,” said ABWA SF Chapter Vice President Velma Landers.

More than 60 attendees dined on the culinary delights of Chef Sharon Lee of The Spot catering, which included a full soul food brunch of skewered shrimp, chicken, blackened salmon, and mac and cheese.

Cohen discussed the many economic disparities women and people of color face. From pay equity to financial literacy, Cohen shared not only statistics, but was excited about a new solution in motion which entailed partnering with Californians for Financial Education.

“I want everyone to reach their full potential,” she said. “Just a few weeks ago in Sacramento, I partnered with an organization, Californians for Financial Education.

“We gathered 990 signatures and submitted it to the [California] Secretary of State to get an initiative on the ballot that guarantees personal finance courses for every public school kid in the state of California.

“Every California student deserves an equal opportunity to learn about filing taxes, interest rates, budgets, and understanding the impact of credit scores. The way we begin to do that is to teach it,” Cohen said.

By equipping students with information, Cohen hopes to close the financial wealth gap, and give everyone an opportunity to reach their full financial potential. “They have to first be equipped with the information and education is the key. Then all we need are opportunities to step into spaces and places of power.”

Cohen went on to share that in her own upbringing, she was not guided on financial principles that could jump start her finances. “Communities of color don’t have the same information and I don’t know about you, but I did not grow up listening to my parents discussing their assets, their investments, and diversifying their portfolio. This is the kind of nomenclature and language we are trying to introduce to our future generations so we can pivot from a life of poverty so we can pivot away and never return to poverty.”

Cohen urged audience members to pass the initiative on the November 2024 ballot.

“When we come together as women, uplift women, and support women, we all win. By networking and learning together, we can continue to build generational wealth,” said Landers. “Passing a powerful initiative will ensure the next generation of California students will be empowered to make more informed financial decisions, decisions that will last them a lifetime.”

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Business

Black Business Summit Focuses on Equity, Access and Data

The California African American Chamber of Commerce hosted its second annual “State of the California African American Economy Summit,” with the aim of bolstering Black economic influence through education and fellowship. Held Jan. 24 to Jan. 25 at the Westin Los Angeles Airport Hotel, the convention brought together some of the most influential Black business leaders, policy makers and economic thinkers in the state. The discussions focused on a wide range of economic topics pertinent to California’s African American business community, including policy, government contracts, and equity, and more.

Published

3 days ago

April 20, 2024

Oakland Post

Toks Omishakin, Secretary of the California State Transportation Agency (CALSTA), answers questions from concerned entrepreneurs frustrated with a lack of follow-up from the state. January 24, 2024 at the Westin Los Angeles Airport Hotel, Lost Angeles, Calif. Photo by Solomon O. Smith

By Solomon O. Smith, California Black Media

The California African American Chamber of Commerce hosted its second annual “State of the California African American Economy Summit,” with the aim of bolstering Black economic influence through education and fellowship.

Held Jan. 24 to Jan. 25 at the Westin Los Angeles Airport Hotel, the convention brought together some of the most influential Black business leaders, policy makers and economic thinkers in the state. The discussions focused on a wide range of economic topics pertinent to California’s African American business community, including policy, government contracts, and equity, and more.

Toks Omishakin, Secretary of the California State Transportation Agency (CALSTA) was a guest at the event. He told attendees about his department’s efforts to increase access for Black business owners.

“One thing I’m taking away from this for sure is we’re going to have to do a better job of connecting through your chambers of all these opportunities of billions of dollars that are coming down the pike. I’m honestly disappointed that people don’t know, so we’ll do better,” said Omishakin.

Lueathel Seawood, the president of the African American Chamber of Commerce of San Joaquin County, expressed frustration with obtaining federal contracts for small businesses, and completing the process. She observed that once a small business was certified as DBE, a Disadvantaged Business Enterprises, there was little help getting to the next step.

Omishakin admitted there is more work to be done to help them complete the process and include them in upcoming projects. However, the high-speed rail system expansion by the California High-Speed Rail Authority has set a goal of 30% participation from small businesses — only 10 percent is set aside for DBE.

The importance of Diversity, Equity and Inclusion (DEI) in economics was reinforced during the “State of the California Economy” talk led by author and economist Julianne Malveaux, and Anthony Asadullah Samad, Executive Director of the Mervyn Dymally African American Political and Economic Institute (MDAAPEI) at California State University, Dominguez Hills.

Assaults on DEI disproportionately affect women of color and Black women, according to Malveaux. When asked what role the loss of DEI might serve in economics, she suggested a more sinister purpose.

“The genesis of all this is anti-blackness. So, your question about how this fits into the economy is economic exclusion, that essentially has been promoted as public policy,” said Malveaux.

The most anticipated speaker at the event was Janice Bryant Howroyd known affectionately to her peers as “JBH.” She is one of the first Black women to run and own a multi-billion-dollar company. Her company ActOne Group, is one of the largest, and most recognized, hiring, staffing and human resources firms in the world. She is the author of “Acting Up” and has a profile on Forbes.

Chairman of the board of directors of the California African American Chamber of Commerce, Timothy Alan Simon, a lawyer and the first Black Appointments Secretary in the Office of the Governor of California, moderated. They discussed the state of Black entrepreneurship in the country and Howroyd gave advice to other business owners.

“We look to inspire and educate,” said Howroyd. “Inspiration is great but when I’ve got people’s attention, I want to teach them something.”