AmEx Is Likely To Become The Second Largest U.S. Card Processing Company This Year
This post is from the Forbes the link is at the bottom:
The U.S. card processing industry is likely to see a shakeup among the four incumbents for the first time in decades, as American Express looks poised to nudge ahead of MasterCard to become the second largest processor of credit card purchases in the country later this year. While Visaremains the undisputed market leader with a market share of almost 53% in Q1 2018, MasterCard and American Express both captured a nearly identical market share of 22% each. However, while MasterCard’s market share has fallen marginally compared to Q1 2017, American Express has done well to report a slight improvement year-on-year.
This is impressive progress for American Express since its loss of the lucrative Costco card partnership in 2016 – an event that had a notable impact on the company’s card balances as well as purchase volumes over several quarters. And as we detail in our interactive model for American Express, the company’s revamped business model should lead to accelerated growth in its card purchase volumes over coming years – something that will help cement its claim to the #2 spot going forward.
What To Watch For Going Forward
The payments industry is seasonal, with purchase volumes peaking in the fourth quarter of the year due to the impact of holiday season shopping, before falling sharply in the first quarter. The figure then increases steadily over the second and third quarters. This trend is seen clearly in the table below, which captures the changes in credit card purchase volumes for these companies over the last five quarters.
Visa’s dominance in the industry is also evident from the table above, as the company continues to process more credit card payments than its three rivals combined. While MasterCard and Discover have not been able to match Visa’s higher growth rate (which regularly exceeds 10% year-on-year), American Express came very close this time around. This has helped the company nearly close the gap with rival MasterCard.
It should be noted that American Express’s card purchase volumes fell sharply from a peak level of $185 billion in Q2 2016 due to the company’s sale of its Costco and JetBlue co-branded card portfolio (and the impact of the partnerships ending). But the company’s focused efforts on regaining lost ground in its core affluent segment of cardholders, coupled with its ongoing drive to attract more merchants on its payment platform by slashing fees, have boosted Amex card usage – in turn driving purchase volumes. As American Express’s new CEO Stephen Squeri intends to stick to a more merchant-focused business model, we expect this to positively impact purchase volumes going forward.