American Express edges out MasterCard for 2nd place in credit card volume

By , CardRatings contributor
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For the first time in five decades, American Express surpassed MasterCard in annual transaction volume. According to financial trade publication The Nilson Report, American Express processed $540 billion in purchases during 2011, a 13.4 percent increase from the previous year. MasterCard's own 6.1 percent increase couldn't keep pace, resulting in just $508 billion in transactions.

In a statement to reporters, Nilson Report publisher David Robertson stated that American Express hasn't posted such a gain over its rival in almost five decades. "This is the first time since MasterCard was known as MasterCharge back in the 1960s, that American Express has experienced more purchase volume," said Robertson. He added that all four major credit card brands, including Visa and Discover, posted an average gain of 10.4 percent. Visa remained the most active debit and credit card processing network.

American Express expansion fueled transaction growth

Although American Express issues most of the charge and credit cards that bear its logo, partnerships with other financial institutions helped the company earn its second place ranking. For instance, Bank of America and Pentagon Federal Credit Union both offer rewards credit cards that use the American Express processing network, but rely on the funds and customer service teams of their issuers.

AmEx's move into prepaid debit cards also accounts for some of the company's growth. Partnerships with retailers and mall operators helped put American Express gift cards into shoppers' hands throughout the holiday season. AmEx also launched its own line of reloadable prepaid cards in 2011, offering unprecedented purchase protection benefits with no service fees.

Consumers' growing acceptance of debit cards contributes to the industry's overall growth, according to The Nilson Report. Although networked payments grew by over 10 percent, the amount of outstanding balances owed to issuing banks grew by just 0.3 percent. Nevertheless, with over $800 billion on Americans' collective credit card statements in December 2011 according to the Federal Reserve, this small increase translates to big dollars and marks the first gain since 2008.


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