AmEx’s New Debit Card Is Part of a Big Thrust Commercial Banks Should ‘Watch Closely’

With its launch on Thursday of a digital checking account for business and an associated debit card, American Express Co. could be poised to shake up the payments business in ways not seen before, observers say. “This announcement represents the greatest threat to financial institutions who are competing for the core transaction account,” notes Sarah Grotta, director of the debit advisory service at Mercator Advisory Group, in an email message.

Indeed, the new product thrusts AmEx into a fresh arena, with ripple effects that could spread broadly, cxperts say. “If I were a commercial bank, I would watch this closely since it is not a fintech-on-a-bank service, but AmEx operating as a full-service commercial bank for the first time.  It’s the golden ring of becoming one’s primary financial institution,” says Patricia Hewitt, principal at Savannah, Ga.-based consultancy PG Research & Advisory Services.

Though the product just launched, AmEx has added benefits to the account designed to attract firms in the prized small-to-medium size segment, including a 1.1% interest rate for deposits up to $500,000 and the ability to link to existing AmEx charge cards.

The associated debit card is a first for the New York City-based financial titan and thrusts it into a hotly competitive segment of the payments business. On the consumer side of the business, debit card volumes have soared as users turned to the plastic to help manage finances in the face of the pandemic. Visa Inc. reported this month debit volume on its U.S. network jumped 15% year-over-year in the quarter ended Sept. 30, to $738 billion, handily exceeding credit card volume.

Business use is likely to follow suit, observers say. “Consumer debit transactions have expanded immensely over the last two years, and often small-business payment trends are very similar to consumer use patterns,” Grotta says.

Experts say the new initiative could yield far better results for AmEx than a similar banking initiative the company tried several years ago in the consumer market. “There is potentially a lot more juice in this segment because it aligns so closely to their core business and for that reason, makes a lot more sense,” notes Hewitt.

The new accounts, which are issued by Utah-based American Express National Bank, are streamlined to appeal to busy entrepreneurs, who can manage them on an iOS app. AmEx promises a decision as quickly as 10 minutes after receiving an application. Bonuses and rewards on the new account include a $300 deposit upon approval, as well as no monthly fees or minimum deposits. Starting next year, customers will be able to convert AmEx loyalty points into deposits in the account, the company says.