American Express: Card Business in India
AMERICAN EXPRESS
INTRODUCTION
In the middle of 1996, American Express (AMEX) Travel Related Services (TRS), India was concerned about the course of action it should follow to protect and consolidate its card business in India. The heat from the fiercely competitive card market had finally begun to tell on American Express. Since its entry into the Indian market in 1973, American Express had carefully shielded itself from the battle by nurturing a small niche at the top-end of the market. So if the leader, Citibank and the late entrant Standard Chartered had followed the traditional low-margin, high-volume route to market leadership, American Express chose to swim against the tide by cultivating its exclusive niche at the super-premium end of the card market by offering its charge card. For American Express, the first indication of a crisis appeared in 1995, when its card spends began to stagnate. In 1996, the average card spends hovered around Rs. 35,000 to 40,000 per annum band and did not show any signs of increasing. Should AMEX have been concerned? After all, its average card spends were still two-and-a-half times that of the industry average.
THE BACKGROUND
Robert McNamara set up Diners’ Club in 1950 which issued charge cards to its members. This unique idea of extending charge privileges on the mere flourish of a signature caught on like a wildfire. Soon worldwide networks came into existence. Diners’ Club made its entry into India ten years later when Mr. Kali Modi bought over the franchise. But the real impetus came when Mr. Shyam Sunder Agrawal took it over in 1976 and the membership shot up from 9,000 to 65,000 in the next 14 years. For a decade and a half, Diners was the only card in the field. But soon banks realized the immense need for credit facilities in the fast growing consumer society of India and entered the fray.
INDIAN CARD MARKET
The three most common types of cards available in the Indian card market in
INTRODUCTION
In the middle of 1996, American Express (AMEX) Travel Related Services (TRS), India was concerned about the course of action it should follow to protect and consolidate its card business in India. The heat from the fiercely competitive card market had finally begun to tell on American Express. Since its entry into the Indian market in 1973, American Express had carefully shielded itself from the battle by nurturing a small niche at the top-end of the market. So if the leader, Citibank and the late entrant Standard Chartered had followed the traditional low-margin, high-volume route to market leadership, American Express chose to swim against the tide by cultivating its exclusive niche at the super-premium end of the card market by offering its charge card. For American Express, the first indication of a crisis appeared in 1995, when its card spends began to stagnate. In 1996, the average card spends hovered around Rs. 35,000 to 40,000 per annum band and did not show any signs of increasing. Should AMEX have been concerned? After all, its average card spends were still two-and-a-half times that of the industry average.
THE BACKGROUND
Robert McNamara set up Diners’ Club in 1950 which issued charge cards to its members. This unique idea of extending charge privileges on the mere flourish of a signature caught on like a wildfire. Soon worldwide networks came into existence. Diners’ Club made its entry into India ten years later when Mr. Kali Modi bought over the franchise. But the real impetus came when Mr. Shyam Sunder Agrawal took it over in 1976 and the membership shot up from 9,000 to 65,000 in the next 14 years. For a decade and a half, Diners was the only card in the field. But soon banks realized the immense need for credit facilities in the fast growing consumer society of India and entered the fray.
INDIAN CARD MARKET
The three most common types of cards available in the Indian card market in