American Express Plans to Issue Bank Cards

A three-judge panel of the U.S. Court of Appeals for the Second Circuit issued a ruling in mid-September that upheld an October 2001 decision that Visa and MasterCard can no longer bar member banks from offering cards with other brands, including Discover and American Express. However, in the short run nothing will change until Visa and MasterCard have exhausted their rights to further appeal. The associations have until November of this year to file the next round of appeals, and have indicated they intend to do so.

That hasn't stopped American Express from continuing talks with banks about issuing their cards. Kenneth I. Chenault, American Express CEO, said in a press release "We expect to have the first of our U.S. bank agreements signed no later than the second half of 2004." He observed, "There is a strong interest among banks to partner with us in the U.S., just as they have internationally."

Morgan Stanley analyst Kenneth A. Posner (whose employer owns the Discover brand, which is also interested in partnering with banks), told the American Banker that "American Express will probably sign up three of the top 10 issuers and a number of smaller banks for a total of 5 more percentage points in market share. But major issuers are not likely to convert large sections of their portfolios." Seeming to confirm this assessment, in a separate interview Capital One CEO Richard D. Fairbank told the American Banker "My gut feeling is that this issue is dramatically overrated relative to its true market opportunity."