AmEx’s Third-Party Issuance Program Picks Up Speed With U.S. Bank And Wells on Board

The recent announcement that U.S. Bancorp would issue American Express-branded credit cards brings yet another big domestic bank into American Express Co.’s network of third-party issuers under a strategy AmEx uses to build transaction volume.

AmEx had 77 so-called Network Card License (NCL) arrangements with banks worldwide at the end of 2012. Minneapolis-based U.S. Bank said in November that it will begin issuing AmEx cards next year. The bank will join another sizable new member of the AmEx club, San Francisco-based Wells Fargo & Co., which announced in August that it would issue AmEx-branded cards beginning in 2014’s first half.

AmEx now has 10 U.S. issuers that also include Bank of America Corp., Citigroup Inc., Barclaycard U.S., USAA, GE Capital, First National Bank of Omaha, Pentagon Federal Credit Union, and Bank of Hawaii.

Harvey Golub, then AmEx’s chief executive, first announced the third-party issuer program to great fanfare back in 1996—much to the displeasure of Visa and MasterCard, which at the time were bank-owned associations. AmEx pitched the program as a way for issuers to supplement their current card offerings and reach consumers receptive to AmEx’s upscale brand and card perks.

It took some time for AmEx to bring large U.S. banks into its fold, but the addition of U.S. Bank and Wells means four of the nation’s top five commercial banks, all but JPMorgan Chase & Co., are now AmEx issuers. AmEx says it’s pleased with the NCL program.

“We think we have been making strong progress in the U.S., and we are building on a global strategy that formally began in 1997,” Suzanne Fee, vice president of business development, tells Digital Transactions News by email. “When we enter into these types of partnerships—on both sides—we want to make sure we have a common vision when it comes to the product, quality and service standards that will be offered under our brands. We think our partners choose to work with American Express because they know they will get personalized support, and they know that we can bring our unique expertise, benefits and services to help them enhance their customer relationships and further differentiate their products in the marketplace.”

While each agreement is different, the issuer typically handles cardholder underwriting, customer service, billing, and marketing, and sets the pricing. AmEx gets merchant fees because purchase transactions are routed over the AmEx network, as well as issuer-paid fees.

U.S. Bank to some degree is a competitor of American Express in that it is a major issuer of corporate cards and travel-oriented consumer cards, most under the Visa brand. Neither AmEx nor U.S. Bank would discuss specific features of U.S. Bank’s upcoming AmEx cards, but they’ll be positioned as products to round out the bank’s current consumer card lineup.

“The agreement allows U.S. Bank to expand its portfolio of card products by offering consumer customers an American Express-branded card issued by the bank, which will contribute to our solid track record of growth,” says Cliff Cook, chief marketing officer at U.S. Bank Retail Payment Solutions, in an email message. “The agreement strengthens our already-compelling set of credit card products.”

Payment card industry analyst Madeline K. Aufseeser, a senior analyst at Boston-based Aite Group LLC, says AmEx “is going like gangbusters” to expand beyond its traditional travel-and-entertainment base with the NCL program and its Bluebird and Serve prepaid card products.

“They are doing everything they can to build their business,” she says. “One way they’re doing that is by utilizing third-party issuance.” AmEx’s attraction to banks, she adds, is “definitely the brand cachet,” and its rewards and travel-protection features not typically found on bank cards.