Credit Card Companies Court Small Businesses

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amex bizAmerican Express has announced that there will be no charge to small businesses for using a service that creates discount offers for delivery to its cardmembers when they use a new smartphone feature or other platforms. The goal is to increase acceptance by these merchants of the company’s high-end credit cards.

Why this happened

Small businesses are considered to be the “final touch” for credit card companies, and they want virtually every retailer to accept their cards as a means of increasing their transaction volume. American Express is widely accepted by major retailers, including Target, Wal-Mart and Best Buy, but small businesses are often stymied by the various fees they have to pay whenever a customer uses a credit card to make a purchase.

Ed Gilligan, vice chairman of American Express, explains that they are aware of the situation and have decided to give small businesses this advantage to ease the situation. By way of contrast, a larger company is entitled to one free offer, but they will have to pay for any additional offers, and the charge will depend on customer use.

What small businesses can do

Along with delivering offers to cardmembers via mobile phone, any merchant who makes use of the American Express Go Social program will be able to present deals with Facebook and Foursquare, and both are partners with that credit card lender. Amex has also introduced a similar service by using Twitter that allows shoppers to load their cards with deals when they “tweet” special messages.

Retailers can only use the service if they accept American Express cards, and the offers made to cardholders are based on businesses they have “liked” and various commercial web sites they have visited.

Other offers consumers can use

American Express’ most recent proposal for consumers is a service presenting similar offers with the company’s current mobile app. Cardholders will be able to see what offers are available to them, based on their spending history and where they are located when the app is open on their phone. Gilligan explained that this feature has also been added to their iPhone app, and they anticipate adding it to the Android app as well in the near future.

To accept an offer, a cardholder can simply click a button, which will synchronize it with their Amex card, and proceed to use that card at a participating retailer. The related discount will appear as a credit in the cardmember’s statement in approximately three to five days.

Luke Gebb, American Express’ vice president of global marketing, explains that they are coordinating the vast amount of information they receive from cardholders and merchants, and the many transactions that take place between them.

Why this is being done

Gilligan noted that American Express is able to generate income when they charge various merchant fees for loading offers and encouraging customers to use their credit cards. He stated that when a cardmember and a merchant are connected and a transaction is completed, their sales volume automatically increases.

Along with being America’s largest credit-card lender in regard to spending, Amex runs a processing network that handles merchant-cardholder transactions from start to finish. Although MasterCard and Visa also operate processing networks, they depend on banks for lending and issuing credit cards to consumers.

Other lenders are considering similar offers

Visa is currently testing a service through which cardmembers can be notified about offers through text messages and email, depending on their location. MasterCard has also partnered with Local Office Network, a company through which banks provide access for their cardmembers to the “daily deals” they have listed.