Feeling “Blue” From American Express “Opt Blue”?

About five years ago American Express introduced a great program that went by the name of American Express One Point.  This program allowed credit card processors to deposit American Express transactions and bill a discount fee.  The program was win for most merchants because it allowed your processor to fund for all card types as opposed to receiving Visa, MasterCard, and Discover from your processor and then a separate (and usually one day delayed) deposit from American Express. 

Additionally, the American Express One Point program provided a lower cost of acceptance for many merchants as their pricing dropped from 3.29% to 2.89% in most cases that we observed.   Lower cost and a single source for all card funding, what is there not to like?   It was a good program in general, however, not all processors participated in it and there were limits on the amount of American Express volume that a merchant could process to be eligible. 

Fast forward to about a year and a half ago and American Express along with many partner merchant processors rolled out a new program generally referred to as “American Express Opt Blue” which was touted as an even better program.    The program still provides for processors to be the single source for funding, and it allows for higher American Express volume merchants to participate, but the major difference is a more complex discount rate structure more similar to Visa and MasterCard Interchange. 

At first glance it looks like merchants overall will realize a substantial reduction in the cost of American Express acceptance with the lower rates. However, when the smoke settles and dust clears and you add in the more flexible processor margin, the Acquirer Fee, the Network Fee, and the Card Not Present Fee, the costs for acceptance have actually increased in nearly every case we review. 

What is interesting is that processors are “opting in” their merchants in masse to this program without their explicit consent.  Many processors are using the seemingly low rates of the new program as a conversation starter to switch merchants over to their processing.  However, upon close scrutiny afterwards, these merchants learn the hard way that their “change” ended up costing more.   Basically this program allows more complexity and thus confusion to merchants and autonomy to processors in how they bill for it. The result is increased profits for processors at an increased cost to merchants. 

 What to do?   At this point most businesses reading this have been opted into this program.  Take a look at your American Express net sales, add up the cost of all your American Express related fees including the American Express Interchange/Discount fees, the Acquirer Fee, the Network Fee, the Card Not Present Fee and the Processor Margin.   If these fees add up to over 2.89% of your net sales then I recommend finding out who your regional American Express Merchant Acquisition, Business Development Manager is and calling them to find out what options you have and how much you stand to gain by moving your American Express back to them.  

I have found that the regional representatives are eager to put together a better program whereas the American Express Merchant Acquisition help line is apathetic at best.   Of course, your best option would be to leave it to the professionals at Lost & Found Corp; it costs you nothing, takes far less time and since this is what we do day in and day out you are sure to realize the absolute deepest savings. 

Adam Pflaumer is the EVP of the Electronic Payment Audit Division at Lost & Found Corp.  Mr. Pflaumer has over 20 years in the Merchant Acquiring industry and has held senior management positions with the most well-known players including First Data, Global Payments, Union Bank of California, and CMPS.  Mr. Pflaumer is the author of “The Smart Merchant Guide To Reducing Credit Card Processing Fees”.