American Express (NYSE:AXP)
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American Express Co. (AXP) won't charge small businesses to use a service for creating discount offers that are delivered to Amex cardholders via a new smartphone feature and other platforms as it looks to expand merchant acceptance of its high-end cards.
Small merchants represent the last mile for credit-card companies, which want as many retailers as possible to accept their plastic to increase transaction volume. American Express enjoys mass acceptance among major merchants such as Best Buy Co. (BBY), Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), but has been less present among small businesses, which often scoff at the fees they must pay each time a customer swipes a card.
"With small merchants we believe particularly now it's a...cluttered space [for merchant offers], and we don't want to charge small merchants for this," said Ed Gilligan, vice chairman of American Express.
Large merchants can load one offer for free but must pay for additional offers based on customer use.
In addition to having offers delivered to cardholders' mobile phones, all merchants who use American Express' Go Social platform can have deals presented via social-networking services Foursquare and Facebook, which have partnerships with the credit-card lender. Merchants must accept its cards to use the service.
The latest proposition for consumers from American Express is a service that presents similar offers inside of American Express' existing mobile app. Cardholders can click a tab to see all the offers available to them, ranked by their past spending and their location when they have the app open on their phones.
The feature will be added to the company's iPhone app in an update Monday and is expected to be added to its Android app in the future, Gilligan said.
Cardholders can redeem an offer by clicking a button to sync it to their card account and then using their card at the participating merchant. The discount is applied to a cardholder's account as a statement credit in about three to five days.
"Essentially we're bringing to bear all the data that we have from cardmembers and from merchants, and from the transactions that happen in between," said Luke Gebb, vice president of global marketing for American Express.
American Express has the ability to generate revenue by charging other merchants fees to load offers and by increasing customers' use of their cards, Gilligan said.
"Every time a transaction is consummated where we connect the cardmember and merchant, we're getting more spend on our network," Gilligan said.
In addition to being the largest U.S. credit-card lender by spending, American Express also operates a processing network that handles transactions between merchants and cardholders. That model differs from Visa Inc. (V) and MasterCard Inc. (MA), which operate processing networks but rely on banks to lend and issue cards to consumers.
They also have been getting into merchant offers.
Visa is testing a service that lets cardholders receive offer notifications via email and text message based on their location. MasterCard announced last month it was partnering with a company called Local Offer Network to allow banks to give their cardholders access to "daily deals" content.
American Express has been particularly aggressive, announcing partnerships last year with Foursquare and Facebook that let cardholders receive offers based on locations they have checked into and companies they have "liked." Earlier this year it rolled out a similar service with Twitter, allowing customers to load deals to their cards by tweeting special messages.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; firstname.lastname@example.org