KBW: New American Express / Amazon Co-Branded Card Good News for American Express

July 2, 2018         By: Steven Anderson

Ever since March, Amazon has been talking about getting into a credit card for small businesses. It had been talking to various bank issuers, and now, the latest reports note that Amazon found its partner in no less than American Express. New reports out from Keefe, Bruyette & Woods (KBW) sent our way talk up this deal, and suggest that Amazon—and American Express—have made a sound deal here.

KBW currently rates American Express Company as “outperform”, with a target price of $119 per share, likely due in at least some part to this development. Given that American Express’ current share price is $97 as of this writing, reaching $119 will be no mean feat.

The agreement itself is a multi-year agreement, which also represents the first connection between American Express and Amazon to date, reports note. It’s also the first time Amazon has released a small business credit card. Plus, Amazon will likely end up benefiting here from a new data stream into small business purchase activities.

While the exact terms of the card offering haven’t been released yet, including things like “when it’s available” as well as anything about the rewards program, we do know that this dovetails well with earlier American Express efforts to better connect to small business, mainly new loan programs.

KBW notes that the move “…speaks positively about AXP’s competitive position within the market, particularly in the small business space, as evidenced by the company being able to win it from large bank issuer competitors.”

Amazon probably could have taken this to Visa or Mastercard without a second thought, but why American Express? Was Amazon taking note of American Express’ push on small business with those aforementioned earlier efforts? What was it that made it the platform of choice for Amazon to make a whole new push into mobile payments? Maybe it was a comparative dearth of used capacity; Visa and Mastercard might well have been too busy for Amazon’s tastes.

Whatever the motive was, it’s clear American Express had something going for it, and that makes KBW’s valuation of American Express at $119 seem just a little more plausible than before. Only time will tell how it all works out, but this might be the start of something big.