The new, more competitive federal charge card business arena has apparently become too cutthroat for American Express. The company, citing profitability concerns, has announced that it will no longer compete for contracts with agencies to issue charge cards.
Just two months ago, the General Services Administration selected American Express and five other card issuers to compete against each other to provide card services to agencies. Previously, single vendors had been chosen to provide travel, fleet, and purchase cards governmentwide. American Express is currently the travel card provider, under an agreement that ends Nov. 30.
The new multiple-contractor pacts are slated to run for five years, with five additional one-year options. They could cover charges totaling $100 billion over 10 years, GSA estimates. GSA officials say the new system will save the government money by forcing the six companies to compete with each other to offer federal agencies the best bargains.
That process is working all too well, AmEx officials indicated.
"As one of the incumbent card issuers, we understand the investment that is needed to meet the unique service and technology requirements of individual agencies and operate at a profit," said Ed Gilligan, president of American Express Corporate Services. "Our government business has been modestly profitable for the past few years, but based on the initial rounds of bidding, it is clear the returns will deteriote significantly, and we're not willing to pursue this business at any cost."
American Express says its activities under the current travel card contract will not be affected by its decision.