The Post-Costco AmEx Launches a New Rewards Program and Developer Portal

By Jim Daly
@DTPaymentNews

With American Express Co. set to report its third-quarter financials Wednesday, the payments industry and Wall Street will be watching for signs from the beleaguered travel-and-entertainment giant about how it will recover from the loss of its cobranded card and acceptance relationship with Costco Wholesale Corp. AmEx on Monday gave some clues when it announced a new rewards program for spending at small businesses, and a new portal for third-party software developers.

The third quarter was the first full three-month period for AmEx without the 16-year Costco relationship, which had generated about $80 billion in annual charge volume. Instead, Citigroup Inc. is now Costco’s card-issuing partner, and Visa is the only general-purpose credit card brand accepted in Costco’s approximately 475 U.S. stores.

AmEx says its new “Shop Small for 2X Rewards” program is meant to build purchase volume at small merchants by giving holders of more than 50 different AmEx consumer and small-business payment cards twice the rewards their particular card offers, be they points in AmEx’s Membership Rewards program to cash back. The program, which runs through Dec. 31, requires cardholder enrollment through AmEx’s Shop Small Web site.

American Express will support the 2X program with what it calls “a major, national advertising and marketing campaign focused on driving more business to America’s small-business owners,” according to a news release. AmEx is also providing promotional materials to merchants.

A long-time lender to small businesses, AmEx says it has added more than 1.6 million small-business merchant locations in the past two years. In that time, AmEx has recruited bank card merchant acquirers to sell AmEx acceptance through its OptBlue program. And in 2010, AmEx launched “Small Business Saturday,” a Saturday in the holiday shopping season focused on getting consumers to shop at local businesses.

“This year, we’re going all out to support the expanding network of small businesses who accept American Express by giving our card members yet another reason to Shop Small throughout the holiday season—including on Small Business Saturday,” Howard Grosfield, executive vice president of U.S. consumer marketing services at AmEx. This campaign also helps deliver the one thing small businesses need most … more business.”

More business also happens to be what AmEx needs for its post-Costco recovery and at a time of heavy pressure on its discount rates, traditionally the highest among the brand card brands. But AmEx may need more than the 2X program, according to Henry J. Coffey Jr., an analyst who covers finance companies at Los Angeles-based Wedbush Securities.

“Nothing compelling or life changing here,” Coffey tells Digital Transactions News by email.”

AmEx’s strategy of pursuing more volume from small merchants is sound, however. “Small business is the most sought-after customer and rewards giveaways’ the number-one way of drawing in customers,” says Coffey.

Also on Monday, American Express unveiled “AmEx for Developers” Portal a portal for third-party software developers to create applications linked to AmEx’s application programming interfaces (APIs). AmEx said it has granted “selected merchant partners” access to its APIs for some time—including Facebook, Twitter, and Best Buy—but the new program will open up its closed-loop network to a wider range of developers.

“With the launch of AmEx for Developers, we are expanding access to our APIs to additional partners, creating new opportunities for business growth, both for our partners and for American Express,” Marc Gordon, executive vice president and chief information officer, said in a statement.

The developers could create new payments, data-intelligence, fraud-prevention, and other applications for use with AmEx APIs. The service includes a “sandbox” for developers to test the products before going line.

Both Visa Inc. and MasterCard Inc. already offer similar services to third-party developers. PayPal Holdings Inc., then a part of eBay Inc., in 2009 became the first major payments company to open its APIs to outsiders.