Word: mastercard
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Dates: during 1990-1999
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...minutes later a woman approaches his desk, searching for ID among a multitude of credit cards. "We take Visa, Mastercard..." Prim tells...
...latest shock is the poor performance of one of Amex's youngest and most vaunted products: the Optima card. Launched four years ago as Amex's response to Visa and MasterCard, the revolving-charge card was perceived as a winner. But the company announced earlier this month that Optima (total card members: more than 3 million) had suffered much higher defaults than expected. The result: $155 million in Optima write-offs during the third quarter, which will produce a loss -- the first one ever -- of $50 million to $75 million for the company's Travel Related Services division...
With Optima, Amex had planned to cash in on a part of the card business the company had always disdained: revolving credit. Amex had issued only charge cards, which had to be paid in full each month. But Visa and MasterCard had successfully turned credit cards into a consumer lending vehicle, and were gaining a huge share of the total charge volume at the expense of Amex's green, gold and platinum cards. (Visa has 257 million cards worldwide vs. 163 million for MasterCard and 37 million for Amex.) So American Express decided to counterattack with a credit card...
...managers lacked the subtle nuances of knowing when to close bad accounts and start collecting. As a result, in the second quarter Optima's charge-off rate on accounts unpaid after 180 days was 8%, or about twice the average for similar cards. Says Alex (Pete) Hart, president of MasterCard: "American Express painfully ; discovered that the revolving-credit business is a different animal...
Adding to the card division's headaches have been a series of revolts by disgruntled merchants demanding that the company lower the rate it imposes for handling customer transactions. Traditionally, American Express has charged merchants a premium -- as high as 4.25% for most retailers, about twice what Visa and MasterCard charge. In justifying its rate, Amex contends that its customers tend to be bigger spenders than bank-card holders. But as Visa and MasterCard have become more competitive in the prestige-card market, merchants have lost patience with Amex's higher premium...