AmEx's Next Conquest: Bank-Issued Cards
06/26/08 - 01:01 PM EDT
Laurie Kulikowski
In the meantime, American Express had been growing its Global Network Services business -- the arm that acts like a payment processor like Visa and MasterCard -- by building partnerships with banks domestically and abroad.
One big partnership win for American Express back in early 2004 was with credit card giant MBNA, which was subsequently bought by Bank of America(BAC Quote - Cramer on BAC - Stock Picks) two years ago. American Express also has bank issued card partnerships with Citigroup(C Quote - Cramer on C - Stock Picks), General Electric's(GE Quote - Cramer on GE - Stock Picks) GE Money, HSBC(HBC Quote - Cramer on HBC - Stock Picks) and Barclays(BCS Quote - Cramer on BCS - Stock Picks), among others. Total cards in force from its global network services rose 35% to 20.3 million cards last year, while spending on those cards rose 49% to $52.9 billion, "reflecting continued growth in spending on cards issued by bank partners," the company said in January. Another interested observer of the settlement between American Express and MasterCard is Discover, whose own antitrust suit vs. Visa and MasterCard is expected to go to court in September, according to a Discover spokeswoman. "We remain confident in the strength of our claims against Visa and MasterCard," Discover said in an emailed statement. "We can't comment about the amount of MasterCard's settlement with American Express or how it was arrived upon. However, the damages we are seeking are representative of the harm their anticompetitive practices have caused Discover." The Riverwoods, Ill.-based company that was spun-off from Morgan Stanley(MS Quote - Cramer on MS - Stock Picks) last year, reported decent second-quarter earnings Thursday. For its part, American Express is confident in the growth of its bank-issued card business. As part of the settlement with MasterCard, the company must meet certain quarterly performance metrics within its domestic network services business to justify the damages being paid by MasterCard and Visa reflect significant lost business. "Given the strong growth momentum within that business," American Express said Wednesday, "the company is highly optimistic about its ability to meet those performance requirements."
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