Practical Ecommerce

American Express OptBlue Program May Reduce Processing Cost

American Express recently came out with a new program called OptBlue, where the final processing rates and fees paid by the merchant are set by the merchant account provider, not American Express. This is similar to the way providers set the rates and fees for Visa, MasterCard, and Discover.

OptBlue may lower the American Express processing cost, especially for ecommerce and general retail merchants. In fact, small businesses that do not currently accept American Express may want to revisit American Express acceptance under this new program.

American Express has done a good job of designing the OptBlue program to be a win for the merchant, a win for the provider, and a win for American Express. But as straightforward as American Express has tried to make the program, there will likely be some merchant account providers or their salespeople that will mislead merchants or not include all the facts, just as some currently do for Visa, MasterCard, and Discover processing services.

American Express has done a good job of designing the OptBlue program to be a win for the merchant, a win for the provider, and a win for American Express.

In fact, there will likely be salespeople telling ecommerce merchants that they can reduce the American Express processing rate from, say, 3.50 percent to 2.25 percent, as an example. But, unfortunately, a merchant may never see a single transaction at the lower rate because of the merchant’s ticket size, or because the salesperson conveniently left out some additional fees.

I also expect some providers will inform their existing merchants that they have a new program with American Express and offer to include the merchants at a predetermined rate, which will likely not be as competitive as it should be.

Some Important Facts about OptBlue

There are limitations and important aspects that merchants need to understand about OptBlue. Below are some of the important things to know about the program. In next month’s article, I’ll address more specific items plus provide a template so merchants can ask pertinent questions to salespeople and providers.

  • The OptBlue program is available to most merchants who process less than $1,000,000 a year in American Express.
  • There may be an additional fee to merchants who process more than $500,000 of American Express sales per year.
  • Merchant account providers receive wholesale rates from American Express, in a similar fashion to the Visa, MasterCard, and Discover interchange rates. However, the American Express wholesale rates are more simplistic and mainly a function of the merchant’s industry and sale amount.
  • The wholesale rate to the provider is basically broken down into three tiers based on the sale amount. For the average ecommerce merchant, a sale less than $150 is at the lowest rate, a sale of $150.01 and $3,000 will be at a higher rate, and sales above $3,000 will be at the highest rate. The rates and tiers vary by industry.
  • American Express charges a network fee in addition to the main wholesale rates, just as the other card companies have assessment and access fees in addition to the interchange rates.
  • Additional fees may apply for international cards or card-not-present transactions, similar to Visa, MasterCard, and Discover.
  • The final rate paid by the merchant is a combination of the provider’s mark-up, the wholesale rate, additional American Express fees, plus any other fees the provider may include. Just like with the other card companies, it’s the provider’s mark-ups and extra fees that are negotiable.
  • The provider essentially owns the merchant relationship. Therefore, underwriting, chargebacks, and general support will be handled by the merchant account provider.
  • The provider funds the American Express transactions and those transactions are stated on the same monthly statement you receive for your Visa and MasterCard transactions.

American Express Processing Cost Is Negotiable with OptBlue

I want to stress this point. Don’t let a salesperson or provider tell you what your rate should be under the OptBlue program. I’ve already negotiated lower mark-ups for American Express than for the other card companies with merchants. American Express rates are negotiable under OptBlue and should be part of your overall processing negotiations.

OptBlue is relatively new. Not all providers currently offer it. There is an investment to be made by any provider to incorporate this program. In addition, providers have to prioritize this program against other needs. I am not advocating changing providers just because your existing provider does not currently offer it. Instead, you may want to reach out and ask your current provider when they will have OptBlue. I expect that the vast majority of major providers will offer OptBlue in the coming months.

Summary

American Express has done a good job of designing OptBlue. I’m sure American Express wants providers and their salespeople to present the OptBlue program with honesty and integrity. I also believe that many small retail and ecommerce merchants can see a cost reduction under OptBlue. Lastly, small merchants who do not currently accept American Express may want to revisit the benefits under the OptBlue program.

See the next installment in our OptBlue series, at “American Express OptBlue: Understanding Processing Rates.”

Phil Hinke

Phil Hinke

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  1. Carlos Rivera July 17, 2014 Reply

    I will forward this article to the boss. He’d be happy to know about this! Thank you for sharing!

  2. Sun July 24, 2014 Reply

    I think AmEx was able to differentiate themselves by offering better customer service than the other credit card providers. It is concerning that AmEx is offloading the customer service and chargebacks to the merchant provider. This could tarnish their brand a bit depending on who they partner with. AmEx has in the past worked with BofA for an AmEx serviced by BofA. That relationship worked okay I thought. Working with more underwriters could be risky if they are not careful about standards.

  3. samuel burrell June 17, 2015 Reply

    will merchants be able to receive a business American express card of their own?