American Express Acquires Card Portfolio

Issuers with smaller credit card portfolios have a tough time competing with the large national issuers. In large part this is because of what economists call "economies of scale" in managing credit card portfolios. Large portfolios have lower operating costs per account than do small portfolios. In addition, profit margins for many issuers are narrowing as competition has forced prices down and acquisition costs up.

These economic pressures are reflected in the recent purchase by American Express Co. of the credit card portfolio of the Bank of Hawaii. The portfolio consists of 148,000 accounts with outstandings of $226 million. The card will continue to be marketed under the Bank of Hawaii name but will also display a small American Express logo. However, American Express will handle the issuing, processing, billing, and accounting for card transactions. Alfred F. Kelly, Group President at American Express is quoted in The Wall Street Journal as saying; "We have hung out a new shingle to regional and local banks. It says we would be very happy to buy their business, manage it as the owner, and have a marketing alliance that allows us to help them grow their business."