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American Express is launching a debit card in the United States, the first-ever in its domestic market. Accompanying it will be a new current account aimed at SMEs, with no minimum balance required and no monthly fees applied. Among household names in credit cards, the cratering of travel and expense (T&E) spending at the height of the pandemic hit American Express hard, particularly unfortunate in its case as it had just reached what it described as "virtual parity" with Visa and Mastercard when it came to card acceptance across the US. (However, one silver lining of the Covid period has been that expenses for the company fell too as cardmembers were unable to avail of T&E-related rewards.)
The long-established firm has taken care to diversify in recent times through its BNPL offering, Plan It, and products aimed at small businesses via its lending subsidiary Kabbage, which relies on Big Data for determining creditworthiness. The commercial imperatives are all the more pressing now as the premium segment is of renewed interest to both challengers and established issuers, leading American Express to look at other revenue sources; the debit card has also gained in importance, not least because of its association with two growth areas in American payments: e-commerce and BNPL.It should not be forgotten too that Amex has a head start on its Western rivals in China through its pioneering joint venture there. For now, the challenge is to navigate the choppy waters of a post-pandemic world, which is why the new debit card offering doesn't offer or redeem rewards points before next year: every bit of breathing space counts in the final quarter of another game-changing year.
In London, the Payment Systems Regulator (PSR) released its report on the state of British card acquiring this week, the fruit of a multi-year review. The independent body found that the market, principally as a result of the five largest acquirers' pricing but also because of merchant inertia, fails to work as well as it should for all but the largest of merchants, from SMEs up to those with a turnover of £50 million ($68m). The biggest problem is that merchants are not seeing the benefits of savings that the PSR had expected to flow from the interchange fee reform that was implemented in the United Kingdom several years ago now. A decision on remedies is timetabled for next year.
The regulator also expressed its intention to address the post-Brexit raising of cross-border transaction fees for merchants in the country by the two leading global schemes, noting that the only commercially justifiable rationale would be a rise in costs. However, according to the review, that element appears to be lacking in their pricing calculation. "To address these behaviours", said the agency in a statement, "the PSR set out in its strategy its plans to unlock the potential of account-to-account payments to offer a viable alternative to card payments".
Three of Australia's major card issuers – Westpac, Commonwealth Bank and National Australia Bank – have brought no-interest cards to market in a bid to satisfy younger customers seeking credit lines without paying APRs. The cards, the most recent of which is Westpac's soon-to-be-launched 'Flex', also do not charge fees for late payment. In its coverage, the Sydney Morning Herald notes that interest-averse consumers who might be drawn to such a product should be careful to see if it actually meets their needs, cautioning that "on a card with a monthly fee of $12 and a debt of $500, the cardholder could end up paying a cost equal to an interest rate of almost 29 per cent".Although the dramatic rise of BNPL might foster the contrary impression, credit card usage has been, on average, continuing its upward growth over the last five years. Recent history in the Australian market shows that consumers, in unsecured lending as in everything else, want a wide array of choices.
Other stories of interest this week...
Asia-Pacific: Citi prepares for retail retreat
China: 140m people using digital yuan per central bank
US: Law enforcement raids Chinese POS equipment supplier
US: Walmart shoppers can now buy bitcoin at kiosks in some stores
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