With the launch of a digital checking account for businesses and associated debit card on Thursday, American Express Co. could be poised to shake up the payments industry in ways never seen before, observers say. “This announcement poses the greatest threat to financial institutions competing for the core transaction account,” said Sarah Grotta, director of debit advisory services at Mercator Advisory Group, in an email message.
Indeed, the new product grows AmEx in a new arena, with ripple effects that could spread widely, experts say. âIf I were a commercial bank I would watch this closely because it is not a fintech service on a bank, but AmEx operating for the first time as a full service commercial bank. It’s the golden ring to become its premier financial institution, âsaid Patricia Hewitt, director of the Savannah, Georgia-based consultancy firm PG Research & Advisory Services.
Although the product has just been launched, AmEx has added benefits to the account designed to attract businesses in the popular small and medium-sized segment, including a 1.1% interest rate for deposits up to 500,000. $ and the ability to connect to existing AmEx payment cards.
The associated debit card is a first for the New York-based financial titan and propels it into a highly competitive segment of the payments industry. On the consumer side, debit card volumes have skyrocketed as users have turned to plastic to help manage their finances in the face of the pandemic. Visa Inc. announced this month that debit volume on its U.S. network jumped 15% year-on-year in the quarter ended Sept. 30 to $ 738 billion, significantly outpacing credit card volume.
Commercial use is expected to follow, observers say. âConsumer debit transactions have grown significantly over the past two years, and small business payment trends are often very similar to consumer usage patterns,â Grotta said.
Experts say the new initiative could perform much better for AmEx than a similar banking initiative the company tried several years ago in the consumer market. âThere is potentially a lot more juice in this segment because it aligns so closely with their core business and for that reason, makes a lot more sense,â Hewitt notes.
The new accounts, which are issued by Utah-based American Express National Bank, are streamlined to appeal to busy entrepreneurs, who can manage them on an iOS app. AmEx promises a decision as quickly as 10 minutes after receiving a request. Bonuses and rewards on the new account include a deposit of $ 300 upon approval, plus no monthly fees or minimum deposit. Starting next year, customers will be able to convert AmEx loyalty points into account deposits, according to the company.