Merchant Innovation

Data Dive: Amex’s Advantage, J.Crew’s Falter, First Data’s Hiccup

There are any number of reasons to come into the work week a little hazy on what exactly went on in the seven days immediately prior. Usually it is because there is just an unusually high volume of news floating around the atmosphere. Sometimes, as was the case last week, it’s simply because one thing so big happens, that it’s hard to remember anything else that might have occurred.  

Walmart pulled off that spectacular mic drop on payments and commerce last week when it announced that it was taking its thousands of retail locations, massive customer base and tens of millions of digital users and leveraging them into their own payments platform — unsurprisingly called Walmart Pay.  

Honestly, with news that big and sort of surprising — since, wasn’t that supposed to be MCX — who can focus on anything else?  

PYMNTS of course. And so we bring you this week’s version of the Data Dive, with Apple Amex being accused of being unfair, J.Crew looking very much on life support and a little glitch turning into a big headache for First Data.

Apple, Amex And The Magic Of A Three-Party System!  

Apple and Amex got a pile of press earlier this year with the announcement that they were working together to get Apple Pay’s international expansion kicked into higher gear.  

In late October, American Express announced that it would make Apple Pay available to Amex users in new markets, including Canada and Australia by the end of 2015 (both have since gone online) with further expansion planned for Spain, Singapore and Hong Kong in 2016.

“With our global reach, we are able to bring Apple Pay to cardmembers quickly in these important countries,” said American Express’s Vice President of mobile products and payments Tony Prentice in a statement. “We believe it is critical to be on the forefront of seamless and innovative payment solutions for our cardmembers and we are pleased to be able to deliver on that with Apple Pay.”

Less excited by this prospect?

MasterCard, who has stated that its banking partners have “been hamstrung over Apple Pay while American Express is free to share its uncapped fees.”

MasterCard notes that unlike themselves and Visa, Amex doesn’t face the same regulation that has their fees capped.

The power of a three-party system!

Eddie Grobler, division president of MasterCard Australasia, has noted that he is happy to see Australia’s central bank seek to regulate Amex companion cards such that their rates are capped at the same rate as has been seen with MasterCard.

“Regulation of American Express companion cards is a small step in the right direction, but it leaves enormous regulatory holes that mean retailers and businesses, and consumers will continue to see distorted costs for payments schemes, including American Express [proprietary], China Union Pay and PayPal,” Grobler told The Age.

Grobler maintained that in Australia at least, Amex is able to charge higher fees (1.7 percent) per transaction than Visa or MasterCard (capped at .5 percent), giving them greater margin to share with Apple.  

Some outlets have noted that despite their complaints, both Visa and MasterCard have premium card offerings with allowed fees of 2.2 percent in Australia.

J.Crew’s Continuing Troubles

It is not fashionable to be J.Crew these days — and some are starting to wonder if a change at the top is necessary to keep the iconic brand alive.

Recent reports indicate Q3 sales have fallen 11 percent quarter-to-quarter, which a 2 percent decrease in year-over-year sales. That means in Q3 J.Crew actually managed to lose more money than Sears — and columnists have been writing Sears’ obituary for at least a year.

The Street is now reporting that J.Crew’s the numbers are so grim, the brand’s ownership situation is officially in doubt.

“We said on the last call, 2015 would be difficult, and we’re doing the best we can do to get the business moving forward,” Mickey Drexler, CEO of J.Crew, said on an earnings call last quarter, as quoted by Business Insider. “I did say to the team, ‘The only one who really matters here in terms of judgment is the customer.’”

Or perhaps the judgement that really matters here might be that of either Coach or Fast Retailing, two firms not considered serious contenders to pick up the mantel at J.Crew.

Coach could use J.Crew’s products to round out its stores’ current offerings and leverage its own brand presence to boost traffic. Fast Retailing could theoretically piggyback on name recognition to help the spread of owner Tadashi Yanai’s expanding network of Uniqlo locations in the U.S.

“If you’re in [this] business, you have a DNA that’s optimistic, but I think you’ll see a lot of positive changes that have gone on now. But until we have a call that speaks to numbers that make all of us happy, we’re not happy,” Drexler noted.

Nor are his stockholders — and it remains to be seen how much unhappiness they can stand before it is time to for a radical makeover.

First Data: Little Glitches, Big Headaches

First Data suffered an outage that held up the processing of certain credit and debit transactions for five hours on Dec. 4, reportedly brought on by malfunctioning hardware that affected its payments processing platforms.

Between 6:45 AM and 7:30 AM (eastern) something happened that caused players like Iowa-based Dupaco Community Credit Union, SunTrust and PNC to be affected for nearly five hours.  

“Our phones were flooded,” said Dupaco’s Todd Link, senior VP for risk management and remote delivery, speaking of the snafu at the morning rush hour. These kind of failures are “very rare,” he added.

The rage went where all rage goes: Twitter, where frustrated PNC customers complained about being forced to withdraw cash to pay for things.

TGIC (Thank Goodness For Cash – and ATMS!)  

Though PNC and SunTrust reportedly said the issues affecting transaction processing were a result of a First Data outage, some of the other small lenders said that the issues were caused by an “unnamed third party.”

First Data’s technical support teams identified and contained the issue, and card authorizations have now been fully restored,” the company said in a statement, adding that the issues weren’t a result of any cyberattack or any kind of unauthorized transactions.

The company’s stock was trading at $17.25 per share on Friday afternoon, though it took a pretty sharp hit post-glitch. As of the writing of this article, First Data stock was at $15.90 — slightly below its $16 per share IPO value.

First Data was the year’s biggest IPO, valued at $40 billion.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.