I just read Bloomberg’s article about AMEX after spotting the cover story with this image and the words: “Sorry, there seems to be a problem with your American Express card”:
It’s a fascinating article, but a few choice highlights include the story of Costco who had been a key corporate partner for AMEX since 1999.
When Kenneth Chenault, the chairman and chief executive officer of American Express, visited Costco’s offices, AMEX would send “‘an advance team to our office before he visited,’ says Paul Latham, Costco’s vice president for membership and marketing. ‘They planned everything—where he would enter the building, the route to the boardroom, where he’d sit at the table.’ After breakfast, Chenault would often give an elaborate presentation about the performance of Amex’s Costco affinity card, using PowerPoint decks that looked like they took weeks, maybe months, to prepare. The AMEX people, most of whom had MBAs, sometimes found it amusing to deal with Costco veterans who spoke about starting out stocking warehouse shelves. Less endearing was the habit Costco executives had of referring to AMEX as a ‘vendor.’ That made the AMEX people seethe.”
There was a tender to renew the card partnership in late 2014 and “AMEX wasn’t happy about competing with global banks such as Citigroup and JPMorgan Chase and its archrivals Visa and MasterCard. But Chenault fought for the deal—even though his company might actually lose money in some cases when Costco customers swiped the card. As the negotiations dragged into January 2015, however, he became agitated and called his counterpart to remind him that AMEX hadn’t only furnished Costco with its prestigious card; it had been Costco’s ‘trusted partner’. Jelinek (Costco’s CEO) interrupted, according to people who were briefed by Chenault about the call, and told him that as far as he was concerned, AMEX was another vendor, just like the one that sold Costco ketchup. ‘If I can get cheaper ketchup somewhere else, I will,’ he said.”
Oh dear. AMEX decided to pull out of the deal, “but AMEX is in a situation that’s becoming increasingly familiar to companies with formerly impervious brands, such as Procter & Gamble, Coca-Cola, and McDonald’s. For decades, they would charge extra for their products. Today their toothpaste, sodas, and burgers no longer have the same cachet. Worse for American Express and other credit card companies, technology is making the physical manifestation of their brand invisible. Who cares what card you have if you’re paying for your expensive meal through your smartphone’s digital wallet?”
The article is well worth a read, so I recommend it to you.