Roughly 1.3 million more businesses accepted Visa and Mastercard than American Express in 2018, and Wall Street Journal reporter AnnaMaria Andriotis writes about the steps that the upscale credit card company is taking to close the gap.
Facing investor pressure to close the gap, American Express has offered merchants incentives up to $450,000 to begin accepting its credit cards. Company documents reviewed by the Journal show that AmEx sales reps are authorized to pay sign-up bonuses of $20,000, while regional vice presidents can authorize as much as $100,000.
In an email to Business Insider, a spokesperson for AmEx said, "The purpose of these sign-on incentives was to defray set-up costs, a common industry practice for payment enablement. Overall, our five-year strategy is working and we expect to reach virtual parity in the U.S. by the end of the year."
The Journal spoke with small business owners who received $7,500 and $15,000 to begin using AmEx's payment system. Each had long accepted Visa and Mastercard, but balked at AmEx's once-higher fees. AmEx has lowered its fees, while its competitors have raised theirs, according to the latest Nilson Report figures.
AmEx is increasingly considering other factors beyond a merchant's annual charge volume, like its proximity to other businesses that use AmEx cards. This could benefit more small businesses that serve a lot of corporate employees.
Coupled with other incentives, the bonus payments help offset the cost of direct payment processing with AmEx, as opposed to using a third-party service. That means small businesses can offer their customers a payment option that comes with AmEx's well-regarded buyer protections and reward programs.
As enticing as these bonus payments may sound, they only represent a small fraction of the new business AmEx has added to its network since 2017. Roughly 3 million merchants have signed up for the company's OptBlue program, just 133 (or less than 1%) received bonuses, the company said.
Each of those 133 businesses had to sign a contract committing them to enable the processing system in order to receive the incentive. The spokesperson described the incentive program as "targeted" to "strategic, priority holdout merchants."
And if your business uses a platform like Square or PayPal, credit card processing fees are typically rolled into the transaction costs charged by that service. Businesses in the OptBlue program are able to continue using their preferred payment processing service, which sets the cost of a transaction, not AmEx.
This post has been updated to reflect information from a spokesperson for American Express.
