Amex reward card monopoly

Ben8282

I am curious as to why this situation of Amex being permitted to charge higher fees to merchants and therefore gain a virtual monopoly on rewards cards has been allowed to come about

Traditionally Amex (and Diners Club) have always charged merchants higher fees. But in the beginning they offered exclusively charge card products which were regarded as 'up market'.

Over the last several years, Amex have started to move away from their charge cards and into credit cards. I would imagine that they currently issue more personal credit cards in the UK than personal charge cards.

Unlike Visa and Mastercard who are exclusively payment systems (sorry if this is an incorrect term but the meaning will be understood), Amex are both a payment system and a card issuer. They have now gone as far as to revoke their licences allowing banks to issue cards linked to their payment system giving themselves a monopoly on issuing such cards.

This strikes me as a case of unfair competition and an unfair monopoly.

- Why have Amex been allowed to continue to charge higher fees to merchants in respect of their credit cards? If it were only in respect of charge cards that would be understandable as it could be argued that charge cards, credit cards and debit cards are different products and therefore could attract different fees.

-.Why have Amex been allowed to revoke the long standing licences thereby giving themselves a monopoly over issuing cards using their payment system?

IvanDP

Interesting post.

Unfortunately, I cannot provide an answer or opinion as i am not knowledgeable enough, but I look forward to reading the responses.

Weybridge78

While they may have a large market share in terms of rewards cards, I think a few factors need to be taken into consideration, which reduce their monopoly power:

1. The mere fact that they charge a higher interchange fee reduces their monopoly power. A vast number of retailers do not accept Amex as a result, and surely this gives more power to Visa & MC, who are accepted everywhere?
   
   
2. Quite a few of the very rewarding Amex cards have very high annual fees; the British Airways Premium Plus, Nectar and Platinum ones come into mind. Clearly the cards with higher annual fees are targeted more towards a certain demographic than others. I haven't seen many MasterCard and Visa cards with annual fees are high. Again, surely the high annual fees immediately exclude a significant number of people?
   
   
3. With regards to the arrangement that previously allowed issuers such as Lloyds, MBNA and TSB to issue Amex cards, would Amex not have every right to revoke the right of others to issue their cards?
   
   
4. From what I understand, if retailers do not want to pay the higher interchange fee, then I think they don't need to accept Amex, so nothing is really being forced upon them.

I'm not completely sure of your questions but considering that banks can only issue Visa and MasterCard, their market share must exceed that of Amex significantly?

boo_star

I think it's a antitrust issue, based upon https://europa.eu/rapid/press-release_IP-19-2311_en.htm

There's not really an antitrust if everything is kept in-house?

And I think the difference is that AMEX don't offer a network, they just offer cards, even the "affinity" cards are technically owned to AMEX?

phillw

Ben8282 wrote: »

I am curious as to why this situation of Amex being permitted to charge higher fees to merchants and therefore gain a virtual monopoly on rewards cards has been allowed to come about

The law of unintended consequences.

At the time the EU law was passed banks still issued Amex cards, so the EU probably thought Amex would back down on intercharge fees. Instead of pulling Amex cards from banks, so that they could continue charging the retailers high fees.

System

phillw wrote: »

The law of unintended consequences.

At the time the EU law was passed banks still issued Amex cards, so the EU probably thought Amex would back down on intercharge fees. Instead of pulling Amex cards from banks, so that they could continue charging the retailers high fees.

I doubt (either way) it was large consideration - this was an action for the whole EU/EEA not just Little Britain.

Just like when Westminster makes UK decisions and some have disadvantages for specific parts/nations of the UK.

PixelPound

It's not a monopoly - maybe you need to look the term up. It's like saying why do Ryanair have a monopoly on cheap flights (yes I know there are other budget airlines but in terms of them vs big operators).

Their business model is to charge higher fees. Amex has been around a long time and for many years retailers resisted accepting them but as time has gone on more and more have accepted them. Amex credit cards are not new, I had an Amex Blue (I think that was what it was called) that gave cashback 20 years ago but the retailers accepting them was a lot more limited than now. There have been many visa/mastercard reward credit cards up until fairly recently but the financial market as it is has meant they have been reduced or withdrawn where as Amex higher fees meant they could keep theirs going.

At some point I'm sure the market will change again.