Amex’s Rewards Battle To Stay Competitive

American Express is falling short in the ongoing struggle amongst credit lenders for dominance in the industry if it does not step up its rewards offerings, reported Bloomberg yesterday (June 4), citing a report from Nomura analysts.

In a note to clients, Nomura analysts, led by Bill Carcache, said American Express currently offers the lowest-value rewards cards in comparison to Visa and MasterCard. The company’s iconic brand and customer service have allowed it to retain a reputation for offering sought after perks, but this perception may not last much longer, they added.

“It’s just a matter of time before AXP is forced to take its rewards expense higher, particularly in an Internet era in which transparency is rising as savvy consumers gain increased visibility into the value of their rewards and are intolerant of subpar economics,” the analysts said.

In its analysis of 23 credit cards from six issuers, Nomura found that American Express will need to invest more in its rewards program in order to keep up with competitors.

According to Nomura, “with credit benign and loan growth accelerating, we believe we’re still in the early stages of the rewards war and expect competition to continue to intensify before it abates.”

American Express confirmed that many of its cards offering high-value rewards are partnerships with hotels and airlines. Recently, the card network and Starwood Hotels & Resorts Worldwide announced benefits of their co-branded card. American Express also recently expanded it co-branded deal with Delta.

“The report is focused narrowly on rewards, and this is not the only way in which consumers evaluate products,” Elizabeth Crosta, an American Express spokeswoman, said in an emailed statement to Bloomberg. “Customers evaluate products across multiple dimensions, including rewards, benefits and services,” she added.

Although the Nomura analysis may not have taken this into account, the major credit card lender has taken steps to prevent “perk abuse” in the past.

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