Amazon Becomes Credit Card King Maker

By Douglas A. McIntyre Updated Jan 11, 10:00PM EST · Published Jun 23, 8:30AM EDT

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Amazon Becomes Credit Card King Maker — © Thinkstock

It is a simple offer. Make an order from Amazon Prime Now, its food and restaurant service, pay with an American Express Card and get $20 off. The same deal does not apply to those who use a Visa or MasterCard piece of plastic. Through some financial partnership the consumer cannot see, Amazon.com Inc. (NASDAQ: AMZN), the largest online retailer, is helping American Express Co. (NYSE: AXP), which, based on recent earnings, needs the business.

Amazon almost certainly gets a cut of what Amex would receive in a traditional transaction. Amex further builds its relationship with customers and takes a minuscule piece of business from its rivals. Maybe Amazon Prime members, who count above 100 million, will use their American Express cards for another and another purchase. The card may even become the default way the pay Amazon for every transaction.

The importance of the arrangement is boosted by industry numbers that show American Express has been blitzed by MasterCard and Visa in a market in which vendors get special deals to favor one card over others.

The partnership benefits Amazon even more. The main offer with the American Express promotion is Amazon’s grocery and restaurant delivery service. It is, however, only available in a few cities. Some Prime members will click on the promotion and be disappointed.

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The most critical part of the transaction is that it is an early stage of its food delivery rivalry with Kroger and Walmart. Newly released quarterly numbers from Kroger Co. (NYSE: KR) show impressive online sales growth. Many experts thought Amazon’s grocery efforts, which include the purchase of Whole Foods, would leave the huge grocery chain flat-footed. It has not turned out that way. Amazon, not used to big competition in some of its most critical markets, has not been so fortunate in the food business.

The Amazon $20 discount for people who use American Express may be a better chess move for Amazon than Amex. However, in a credit card war in which it has fallen behind, it is a slim advantage.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.