AmEx launches its first debit card, competing for small-business customers

• Business checking accounts to come with a $300 cash bonus and an annual yield of 1.1% 

• Fintechs are competing to tap the small businesses which ‘have come out of the pandemic strong’

American Express Co launched its first-ever debit card on Thursday to tap the small and medium-sized businesses as competition heats up.

The AmEx-issued debit card will be part of its new digital business checking account, the New York-based payment services provider said in a statement.

While other banks have long used AmEx’s network for their own debit cards, this marks the first time the company is issuing a debit card itself.

“Our small-business customers have come out of the pandemic strong,” Anna Marrs, AmEx’s group president of global commercial services, told Bloomberg. “The debit card is also an opportunity for us to deepen our relationship with customers and get another product in their wallet.”

The payment giant will provide a cash bonus of $300 for the new users of the checking account and an annual percentage yield of 1.1%. AmEx said in early 2022, customers of the product would also be able to earn membership rewards points and redeem them for deposits into their accounts.

Also Read: AmEx reports Q3 2021 earnings

Why SMEs?

Throughout the pandemic, spending on small and medium-sized (SME) businesses have surged, with overall volumes on the payment network has increased amid travel restrictions, as these businesses, such as construction, professional services and healthcare, mostly come under industries that have thrived during the COVID-19 pandemic.

Businesses with less than $300 million in annual revenue are categorized under small and mid-sized businesses.

AmEx, which is already the largest provider of small-business credit cards in the U.S., has been looking to capture a more significant share of those customers’ businesses in the hopes of becoming a one-stop shop for all their financial needs.

In June, the payment giant launched its first-ever checking account and said it would start offering lines of credit of about $150,000 to existing small-business customers.

AmEx, earlier this month, said that it would add new rewards to its Platinum card for business owners, including extra points for spending on items such as cloud services, construction materials, and shipping.

“Given the strength of our brand and our customers’ affinity with AmEx, they’ve told us over the years that we have permission to do more,” Marrs said. “Small businesses were very clear about what they wanted from their existing checking accounts. They wanted more.” 

Competition in the segment

Many startups like Ramp, Brex, and Divvy have raised huge capital from venture-capital firms with high valuations, is looking to capture a significant share of small enterprises’ banking business.

Also Read: Stripe and Klarna strike partnership on ‘buy now, pay later’ as competition heats up

Last year, even AmEx got in on the fintech frenzy and bought the online small-business lender Kabbage to compete in the segment.

“I’m not going to discount any of those -- Ramp or Brex or Divvy. We never discount anybody,” AmEx Chief Executive Officer Steve Squeri said on a conference call with analysts last week. But with AmEx’s balance sheet and some of its new capabilities, he said, the firm believes it’s in a “very good position to continue to compete in this space and continue to grow and continue to win.”

Picture Credit: Forbes