AXP American Express Company

By AnnaMaria Andriotis 

American Express Co. is launching another salvo in the reward-card wars.

The credit-card company plans to announce Thursday that it is significantly increasing benefits on its Platinum charge card for the second time since October. The changes, which don't affect other AmEx cards, will go into effect March 30 and will also increase the annual fee for the Platinum consumer card by 22%, to $550 from $450. It is the first increase in the fee since 2007.

The moves could help AmEx better compete with J.P. Morgan Chase & Co.'s popular new Sapphire Reserve card, while also boosting revenue. Analysts, however, worry that rewards programs in general are becoming too costly for card issuers.

Both cards are targeted to consumers who spend enough that the rewards can offset the annual fees, in Sapphire Reserve's case $450. Under the latest changes, AmEx is boosting the rewards offered to Platinum customers who use their cards at hotels booked through its travel agency and giving them $200 worth of Uber rides a year.

New York-based AmEx, led since 2001 by Chairman and CEO Kenneth Chenault, faces an increasingly tough competitive environment. The battle is especially bruising because it is playing out in the affluent card market -- the area in which AmEx has specialized for decades.

After the financial crisis, banks increased their investments in the credit-card business to make up for weakness in once-strong units such as bond trading and issuing mortgages to indebted Americans.

Citigroup Inc. has made a big push, winning the Costco Wholesale Corp. co-branded card from AmEx in 2015 and rolling out its Prestige rewards card in 2013. J.P. Morgan has followed up its Sapphire Reserve launch in August -- a card in such strong demand that the bank had trouble keeping them in stock -- with a loyalty card for Amazon Prime customers rolled out in January.

Rewards programs have been fueling much of the growth in the credit-card sector. To keep increasing card issuance and usage, large banks have been going head to head over which can provide the most generous rewards program that will appeal most to creditworthy consumers.

The banks' efforts have put AmEx on the defensive. AmEx's market share of total U.S. credit-card purchase volume fell to 22.9% last year, according to Nomura Instinet, from 25.4% in 2015. The brokerage firm's research showed AmEx's market share had held at about 26% of total purchase volume between the four networks from 2011 through 2014.

Visa Inc. has picked up most of the share lost by AmEx, a lift that is partly due to Costco switching from the AmEx network. Visa has also benefited from joining with fast-growing issuers like J.P. Morgan, including on the Sapphire Reserve card.

AmEx is "in a very difficult position here," said Mark DeVries, a card analyst at Barclays PLC. "If they want to truly match what the competitors are doing...it would be almost prohibitively expensive."

Indeed, the company hit a record $1.4 billion of marketing spending and promotional expenses in the fourth quarter. Additional increases in the rewards it pays out will likely add to its total expenses. At the same time, AmEx needs to hold on to its customers and defend its market share.

AmEx officials said the vast majority of the recent share loss is due to the end of the Costco relationship. Adjusted for Costco, "we are gaining share in U.S. loans and internationally we are growing faster than the industry in most of our major markets," said a spokeswoman for the company.

The AmEx Platinum card, which enjoyed a record number of new customers last year, launched in 1984 and at the time offered personalized travel services. In the early 1990s, the card added points that could be redeemed for certain purchases, then boosted the value of some of those points in 2005 and again last year.

Consumers are increasingly attuned to picking point programs that give them the most value, analysts said. Janey Whiteside, general manager of AmEx's global charge products, benefits and services, said that Platinum card members are often more interested in experiences and service over just reward points. For example, she said the card members often cite perks like access to front-row tickets at Beyoncé concerts and points out that the new benefits will give cardholders exclusive access to reservations at high-end restaurants and events like the Grand Prix de Monaco.

AmEx is also adding an annual $200 credit for Uber rides regardless of how much Platinum users spend, in addition to continuing an annual $200 reimbursement for certain airline incidentals. Sapphire Reserve offers cardholders up to $300 in reimbursements, on a dollar for dollar basis, for travel purchases charged on the card, ranging from cabs to airfare.

(END) Dow Jones Newswires

March 02, 2017 00:15 ET (05:15 GMT)

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