"Simply pay with your good name." The over 50s generation immediately knows whose slogan it is. But the credit card provider American Express (Amex), which in the 1970s and 1980s sought to conquer the German market with exclusivity and an upper-class image, has since reconsidered its strategy in Germany.

The shift came with the acquisition of the Payback bonus program, acquired 13 years ago, as Germany CEO Fabiana Mingrone tells Börsen-Zeitung. Since 2015, there has been a free Payback credit card issued by Amex. "A free product and American Express are word combinations that didn't match in Germany before," candidly admits the Italian-born manager. But since Payback became part of the corporation, Amex has been managing a delicate balancing act in the German market.

"We now have both mass and premium, and they fit together wonderfully because even premium customers want to shop at discount stores with the card," explains Mingrone. "Points are collected when using the card at all Amex merchants, even outside of the Payback partners," Mingrone says about the free Payback credit card.

Since Payback now counts 31 million participants in the bonus program in Germany, Amex is now also able to negotiate with retailers. "Since we started working closely with Payback and issuing the fee-free card, we have connected retailers like Aldi, Lidl, or Obi," Mingrone recounts and is pleased with the awakened interest on the retailer side: "I don't know if Aldi would have wanted to talk to us so urgently ten years ago."

For the manager, the idea that the expansion into the mass market could come at the expense of the premium segment is not a concern: "We can handle premium; no one can beat us at that," Mingrone emphasizes, explaining that American Express was marketed for a long time primarily as a card for travel and entertainment. Accordingly, acceptance points were sought mainly where the card is used for travel, especially at airports. That has now changed.

Meanwhile the manager is very sparing with hard figures about the business in Germany. Just this much: "In 2022, we gained 28,000 acceptance points." However, the number is not very informative, as each individual branch is counted as an acceptance point. Connecting a retail chain can therefore significantly increase the number of acceptance points.

According to data from the VuMa (Arbeitsgemeinschaft Verbrauchs- und Medienanalyse – Consumer and Media Analysis Association), the incumbents Visa and Mastercard are engaged in a head-to-head race with market shares exceeding the 40% threshold. Amex has indeed held onto 3rd place for years but with a market share of 6.6% (2020) ranks far behind. However, Amex has increased its share in the market by almost 19% compared to 2011, while Mastercard lost more than a fifth during the same period. Visa though, with over 26%, achieved the largest increase.

To increase acceptance in retail, Amex has adjusted the conditions to match the competition here in Germany. "We have significantly lowered the hurdle. For our small retailers, the fee starts at 1.5%, depending on the industry and turnover. That puts us at a very competitive price level," says Mingrone.
In addition, Amex is accommodating small retailers by promising to settle the invoice within three days. The goal is to connect local retailers like the corner bakery. "I live in Bad Soden, and almost all retailers there now accept the American Express card. This is not just because I live there," emphasizes Mingrone.

Germany has always been a challenging market when it comes to payment innovations. Germans still heavily favor cash. However, the pandemic has shifted the balance. According to figures from the EHI Retail Institute, the share of cash payments in stationary retail has now reduced to 37.5% (2022), while card payments have reached almost 60%. Mingrone estimates the portion of credit card payments within this to be between 8% and 10%.

However, not only in brick-and-mortar retail is the credit card provider growing, which, unlike its competitors, appears as the card issuer as well. In contrast to that Visa and Mastercard license banks to act as card issuers. According to its own statements, Amex is also at the forefront in online retail. As one of the first card providers, American Express introduced Apple Pay and is present in the Android Wallet, making Google Pay work as well, explains the manager, who has been working for the credit card provider for 25 years.

The Bundesbank distinguishes in its statistics between credit cards with and without credit functionality. "In Germany, we only issue charge cards, meaning the full amount is settled at the end of the month. In return, the card does not have a predetermined spending limit. The card can be used within one's own financial means," explains Mingrone.

Nevertheless, thanks to a partnership with Solarisbank, German Amex customers also have the option of installment payments. In these cases, Solarisbank settles the outstanding amount with the credit card provider and arranges an installment loan with the original Amex customer. In times of rising interest rates, this is a profitable business, which has also prompted Amex to consider broadening its business in Germany, especially since Mingrone wants to diversify the business.

The fact that installment loans are generally becoming more attractive is also due to the fact that Germans are increasingly moving away from overdraft facilities, i.e., expensive overdrafts of their checking accounts. At the same time, there is an increasing demand for consumer loans – think "buy now, pay later." If the business can be set up on a relevant scale, American Express will surely do it, Mingrone is convinced and points out that the credit card provider in its home market also issues cards with credit functionality.

Another component of business diversification is the Small Business Card, aimed at self-employed entrepreneurs with few employees. "We offer small business cardholders benefits such as extended payment terms, the use of bonus points for business expenses, and administrative support," says Mingrone. Unlike with installment loans, the Small Business Card has already left the starting block.