The American Express is a global financial company that dominates the credit card segment. The company generates revenue by interest charges and other fee. It issues cards independently and not as intermediaries; thereby bearing the total financial risk. The main competitors of AmEx in the Credit Card Processing & Money Transferring industry are Visa Inc., MasterCard, PayPal and KKR & Co. Visa and MasterCard are main arch rivals of AmEx in the “Credit Card Processing & Money Transferring” industry. Each of them has its credit card network; however, they use different ways to issue cards.
Visa and MasterCard are not financiers which issue credit or debit cards. Their cards are issued by the financial institutions licensed by them. But AmEx mainly issues cards by itself. Rather than getting interest charged or late fees, Visa and MasterCard earn revenue from individual transactions and card issuers licensing. But they spread the business risk to their partners and gain more market share. On the contrary, as a lender to cardholders, AmEx can obtain more revenue from card services. However, the company has greater risk bearing than the other intermediaries.
All these five companies including AmEx account for more than 80% of the market share in the US. A detailed competitor analysis is presented below to gain better understanding of the magnanimous credit card segment.
Visa Inc.
Visa Inc. is the biggest player and has a different business model as compared to AmEx. It is an intermediary in the credit card segment. Visa cards are most universal and have a global electronic payment system; its credit card network is also the largest in the world. However, Visa Inc. does not issue any Visa cards directly. It licenses its brand to financial institutions to issue Visa-branded payment products. In fiscal 2015, the total operating revenue of Visa was $13.9 billion (increased 9.27%) with $7.4 billion in the US. Its success can be gauged by its whooping profit margin of 64.8% in 2015.
As a worldwide payment corporation, MasterCard Inc. operates the second-largest electronic payments network in the world. This company is also not an issuer of credit cards. Instead, financial institutions are allowed to participate in its networks and issue co-branded cards. Its partnerships include 25,000 financial institutions which issue MasterCard. In 2015, its operating revenue grew to $9.7 billion ($4.2 billion associated with US operations), increased over 2.4%. And its profit margin was 51.3%. Being an intermediary has its drawbacks as well; Mastercard is unable to provide its customers with lesser benefits as compared to AmEx.
PayPal.
PayPal is an upcoming financial service provider and is a popular online payment provider. It’s a safe, easy and highly compatible mode of online transfers and payments’. PayPal Holdings Inc. provides worldwide technology platform for digital and mobile payments. Its revenue comes from charging fees to merchants. By 2014, there were 169 million active PayPal accounts in the world and more than 10 million purchase transactions were finished in PayPal’s platform. In 2015, PayPal’s profit margin is 16.1% and operating revenue reached $9.3 billion from $8.0 billion. For U.S. segment, its revenue is around $4.6 billion. To compete with AmEx its needs to improvise its documentation process and keep its library updated.
KKR & Co.
Kohlberg Kravis Roberts and Co. L.P. (KKR) is a multinational alternative asset management firm headquartered in New York. It’s a First Data Corporation (FDC), which provides E-commerce and payment solutions service and operates in 34 countries, is its wholly-owned subsidiary. Its operating revenue of 2015 is $1.0 billion. Basically into the equity segment KKR & Co is soon gaining a strong hold in the credit card segment as well.
The American Express was initially replaced by Citi in producing co-branded Visa credit cards with Costco. AmEx charges merchants higher fees. AmEx uses the fees to reward cardholders. Meanwhile, AmEx limits merchants from promoting other cards or offering certain discounts. While benefiting from its business model, the company also loses some partners like Costco. American express through its varied communication channels has maintained a personal rapport with its credit card holders. AmEx also offers greater benefits to its customers. In comparison to its competitors AmEx has a very strong brand image; it is viewed as a customer centric and proactive company.
