Credit War May Follow If Amex Cuts Fees
Sydney Morning Herald
Tuesday March 3, 1992
A credit card war could be looming in Australia in the wake of recent moves by American Express to placate merchant unrest over its high fee scale.
American Express is in the throes of "renegotiating" fees with merchants in specific industry sectors. In some cases this has resulted in fees being reduced by as much as 50 per cent.
An American Express spokeswoman, Ms Di Collins, said the reduction of fees in some areas had been made possible by the introduction of new processing technology. She rejected suggestions that the group had buckled to pressure from business.
Merchants have complained long and hard about the inflexibility of American Express's high fee structure, which the big US group always has justified by claiming that it provided better marketing support than its competitors.
The problems were highlighted earlier this year when Laura Ashley dropped American Express in the US after a very public dispute about commissions.
Although American Express will not comment on its fee scale, industry sources say that it ranges between 3.75 per cent and 5 per cent. This compares with a range of about 1.75 per cent to 2.7 per cent for the major bank-backed credit cards.
The disenchantment of a growing number of merchants with the fees charged by American Express is reflected in the fact that more than two-thirds of Amex card holders in Australia also have either a Visa card or a MasterCard.
There have been isolated incidents in Australia of merchants offering customers a discount not to use Amex cards for payment.
This practice is prevalent in cities such as Singapore, Hong Kong and Bangkok.
In a speech last week, American Express's president, Mr Harvey Golub, conceded that the company's fees had caused problems and said that they would be cut "selectively".
American Express is spending $15 million in Australia to install about 10,000 electronic processing terminals with merchants, which it claims will greatly enhance the speed of processing transactions and reduce the time for payment.
Under the present system it is often at least one or two weeks before merchants are paid by Amex whereas Bankcard, MasterCard and Visa can offer same day payment.
American Express also hopes that by the end of this year a further 10,000-15,000 terminals owned by the major banks will be processing American Express transactions.
© 1992 Sydney Morning Herald
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