Its Not Easy Being Green in Credit Cards

by Brian Riley 0

As Ken Chenault prepares for his well-deserved retirement from American Express, his successor has a tough road ahead to return the credit card and charge card company to its original glory.  Chenault has been a rock star in credit cards, and although American Express hit some bumps along the way, the business is still solid.  A challenge is that many former executives from Amex are now working at competing card companies.  The secret sauce of Amex, the cache from its “don’t leave home without it” has been displaced by new card products such as the Chase Sapphire Reserve.

  • Kenneth Chenault, American Express’s chief executive for 16 years, accomplished a feat rare in the upper reaches of American finance: to stand down without an obvious helping shove.

  • No grandstanding senators hounded him out (see Wells Fargo). No boardroom coup hastened the end (Citigroup).

  • The financial crisis left him untouched (take your pick).

  • His successor, Stephen Squeri, promoted from within and apparently groomed for the job, takes over in February.

When I was at Citi back in 1990, I almost left to go to work at Amex, a common strategy for New York bankers looking for a career advancement.  The position was for the American Express Optima card, an early test by Amex to shift from a charge business to a credit card business.  Chase was more nimble and hired me before I got an Amex offer but the Amex position was interesting because it was an early example of broadening their reach.  There have been several successes and a few notable failures (Blue Bird/Wal-Mart Prepaid, Sub-700 FICO score lending, Revolution card), but the company has typically known when to cut their losses and move on.

There is a huge void, however.  Consider this:

  • According to Nilson, an industry bible, in 1974 the amount of money for purchases channelled through American Express was equivalent to 50% of what went through MasterCard and 70% of what went through Visa.

  • By 2016, those ratios had shrunk to 30% and 14%.

Now, we’re talking about trillions of volume, not billions as in the old days.

Good luck to Amex and Mr. Squeri.  Competition drives payments and forces efficiencies.  There is plenty of room for expansion across the globe.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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