American Express Losing Its Luster With Unassuming Millennials

For decades, the American Express credit card signaled affluence, success and something to aspire to. But a funny thing happened along the way: Millennials started shunning the flashy, snobby impression associated with the Amex card, favoring the less assuming Chase Sapphire Reserve card. That preference has gotten Amex worried, creating an atmosphere of paranoia among its executives.

That’s according to a report in The New York Times, which cited current and former American Express employees saying executives at the company have become increasingly paranoid about Chase and the Sapphire Reserve card it rolled out in August with a jaw dropping 100,000 points sign-up bonus and a slew of benefits.

The generous rewards and benefits prompted a slew of applications on the part of millennials, who have grown accustomed to taking out credit cards that will reap them a lot of rewards. The credit card was an instant hit, increasing the coolness factor for Chase among millennials to the dismay of American Express, which had long expected everyone would want its credit cards as a symbol of success.

The company’s concerns over the Chase Sapphire Reserve card were evident in recent months when it rolled out more generous rewards to counter Sapphire’s, but seven current and former executives at American Express says it runs deeper than just trying to one-up a competitor’s rewards, as it realizes it is losing its luster with millennials.

To be sure the New York Times pointed out that in 2016 the number of Amex cards in use fell 18 percent, while Amex revenue in 2016 was down more than $2 billion from two years earlier and its relationships with both Costco and JetBlue ended with the two retailers tapping other credit card companies. The report noted one of the reasons for all of Amex’s bad times in recent years is that other financial companies, namely Chase and Citibank, have been beating Amex at its own game, partly by poaching executives who built Amex into what it is.

For example, the newspaper pointed out that the head of Citibank’s credit card division, its branded cards, global rewards, customer acquisition, proprietary products and analytics all are from Amex, while the woman credited with creating Chase’s Sapphire Reserve is an Amex alum as well. Same goes for her boss and two of her top coworkers, noted the report.

There’s also a shift in demographics and their desires, which is forcing Amex to focus on millennials.

“Traditionally, American Express succeeds because of its customer service,” said David Robertson, publisher of the industry newsletter The Nilson Report. “They can book travel for you; they have concierges to recommend the best restaurants. If you leave your reading glasses inside a hotel room in Budapest, Amex will get them mailed back to you. No one else does that.”

Millennials, however, don’t value those services and thus the lack of interest in Amex.