- American Express is offering businesses $10,000 to $450,000 sign-on bonuses to begin accepting its payment cards, The Wall Street Journal reported Monday.
- Fewer merchants accept American Express because it charges higher interchange fees than Mastercard or Visa.
- AmEx is in the midst of a multiyear effort to narrow the gap between it and market-leading payment networks. The company said in 2016 it could catch up by the end of this year. Chief Executive Stephen Squeri has said AmEx is on track to hit that goal. The company added 1.5 million merchant locations in 2018, according to its most recent annual report.
The number of businesses to which American Express has given sign-on bonuses is slight in the grand scheme — 133 since last year, the company said. Still, bonuses without strings attached are atypical. The incentives are meant to offset technical and marketing costs, said Anré Williams, head of AmEx's global merchant and network services. Mastercard and Visa also has paid businesses to start accepting cards, but that amount is usually meant to offset upgrades to payment technology.
Visa and Mastercard were accepted at 1.3 million more locations in 2018 than AmEx, the Journal reported, citing the Nilson report. However, American Express has steadily added merchant customers over the past two years — 3 million in 2017 and 2018, said Melanie Backs, the company’s vice president of public affairs.
Many of the additions are third-party payment processors that participate in AmEx's OptBlue program, but Williams said the company has also strategically targeted a number of merchants that have held out.
Merchants often don't accept American Express over its interchange fees, which are higher because AmEx doesn’t make as much in interest off of its customers. Many of AmEx's products are charge cards whose balance must be paid off each month, whereas credit cards allow for rolling balances and pass double-digit interest rates on to customers.
Merchants that accept AmEx often do so on the idea that the company's typically wealthier clientele typically spends more. And, according to Forbes, that's largely true. AmEx customers spend an average of $14,000 a year on their cards, more than three times the rate of non-AmEx customers, the publication reported, citing the Nilson report. Similarly, an Amex customer's average transaction is nearly double that of a non-card member.
In recent years, Visa and Mastercard and its issuers have blurred any market advantages American Express offered. AmEx sold itself on the perks it could give its customers. But issuers and networks are increasingly partnering to offer rich cash-back and travel rewards. Additionally, the gap between AmEx's swipe fees and those of other payment networks is shrinking. Visa and Mastercard swipe fees had a weighted average of 2.12%, compared with AmEx's 2.36%, according to U.S. News & World Report, which cited the 2017 Nilson report.
Former American Express CEO Kenneth Chenault pushed salespeople to expand the company's merchant base, saying it would "translate into higher billings, improved perception of coverage and greater scale and relevance."
Salespeople were given "parity lists" of businesses that weren't accepting AmEx cards, sources told The Wall Street Journal. Commissions were tied to purchase-volume targets. But some salespeople were reluctant to chase small companies with low charge volume, the Journal's sources said. AmEx doubled down on the lists in 2018 and again this year, tying bonuses even closer to them. On a call to discuss the changes, a former vice president told unhappy salespeople they were welcome to find new jobs, the Journal's sources said.
AmEx also cleared salespeople to sweeten the pot for merchants — paying up to $10,000 without manager approval to businesses it expected to generate less than $3 million in annual AmEx charges. "We realize we are getting into the tougher holdouts and we want you to have every tool at your disposal to try to close these out," the former vice president wrote in an email to salespeople reviewed by The Wall Street Journal.
That figure was later doubled to $20,000, regardless of the merchant's size, according to an internal document reviewed by the Journal. A regional vice president could approve sign-on bonuses of up to $100,000, it added.
A limited number of big merchants have received payments of $450,000 since last year, according to the Journal's sources. AmEx also offered to waive swipe fees for some businesses for six months, according to an internal document.