American Express is paying merchants sign-on bonuses for
accepting its credit cards, the Wall Street Journal reported, in a bid
to increase the network's global acceptance footprint, which is much smaller
than that of rivals Mastercard and Visa. The payments, which range from $10,000
to around $450,000, are intended to help businesses offset technical and
marketing costs connected with accepting Amex, the card network told the
newspaper.
The network hopes the bonuses will entice more merchants to
sign on with Amex, shrinking the acceptance gap between Amex and its rivals, a
stated goal of the company since 2016. As of 2018, around 10.3 million U.S.
merchant locations accepted Amex, trailing Mastercard and Visa by about 1.3
million locations, according to the Nilson Report, as cited by the Journal.
Many businesses that opt not to accept Amex—especially
smaller merchants—cite the network's higher swipe fees compared with other
networks. Amex long relied upon its base of higher-spending cardholders, such
as business travelers, to counteract its smaller footprint and persuade merchants
to accept its higher swipe rates. But as Mastercard and Visa have bolstered
their incentive programs in recent years with enhanced travel and other
rewards, Amex has faced pressure to increase its acceptance base. In 2016, the
network announced a bid to significantly grow its merchant network.
Since then, Amex aggressively has ramped up marketing
efforts to win over holdouts by offering bonuses even to small merchants and in
some cases offering to waive swipe fees for six months, the Journal report
said, citing sources close to the matter. The company has given signing bonuses
to about 133 merchants since 2018, according to the report.
Amex's landmark 2018 Supreme
Court victory in a long-running legal battle over "anti-steering"
language in its merchant contracts presumably would aid the sign-on bonus
program. The ruling upholding the legality of Amex's anti-steering rules enables
the network to prohibit its merchant clients from "steering"
customers to use a card with lower swipe fees to pay by offering a discount,
for example. Keeping the anti-steering language in place prevents merchants
from simply pocketing the bonuses and subsequently encouraging customers to
continue to pay via cards with lower swipe fees.
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