American Express has introduced a digital checking account with debit card rewards for all small business owners, extending the availability of a product that had been offered only to cardholders since October 2021.
This, combined with the digital cash flow hub it launched in the first quarter, could strengthen the card company's ability to compete for small businesses. But experts say that Amex should continue adding features to attract proprietors with more complex needs.
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The cash flow hub lets small business-owners see each of their card balances, bank accounts and loans, including those at other providers, through data aggregation provided by Yodlee.
"Small-business owners want to understand, say, their travel expenses, but some of those could be on a debit card, some could be on a credit card, some could be in checks," Sussman said. "So we're trying to bring … all these payment types together."
Most small businesses are looking for simplicity and convenience, and this product seems to scratch that itch, said consultant Alex Jimenez.
"Any proposition that will give them that should be a winning combination. Banks have tried, but their lack of sustained focus on the small business segment has been an issue," he said.
Facilitating a cash flow hub that aggregates all of a small-business client's accounts gives American Express itself a clear view of the client's financial picture, which has value when it comes to cross-selling and trying to make a relationship stickier.
"Every bank talks about growing share-of-wallet and using their data," Jimenez said. "This move could put Amex in a better position versus banks."
The cash flow hub will help American Express cross-sell cards and loans and enable it to see opportunities for other offerings, said Nick Miller, president of consultancy Clarity Advantage.
It's up to Amex to make the best use of those insights to flesh out its offering, Miller said.
"The question is, what is their strategy, how broadly into payments and protection products and services do they really want to go and to what extent will small businesses move more money or more accounts to Amex without offering traditional banking products and services," Miller said.
American Express should have made these moves a long time ago, Jimenez said.
"They are a trusted brand that has had a long history of serving small businesses and business owners," he said. "I'm confident that they will take business away from banks."
According to Sussman, Amex is focused right now on an immediate need that its clients have requested: more guidance on cash-flow management as they've come out of the pandemic.
"In a recent survey, we saw that 40% of small-business owners are passing on growth opportunities because they weren't aware if they can afford it," he said. "And this is often due to that mismatch: You have to spend a lot of money upfront on materials, and then you deliver the materials and then you'll eventually get paid."
A federal court extended an injunction that halts the Consumer Financial Protection Bureau's rule until the Supreme Court rules on the bureau's constitutionality.
The business checking account announced Tuesday offers a 1.3% annual percentage yield on up to $500,000 in deposits. Users will receive one membership reward point for every $2 they spend on their debit card. The points can be redeemed as deposits into the checking account or as travel benefits at airline and hotel membership reward partners.
While many fintechs have come out with low-cost loans, payroll services and cross-border payments for small businesses, they're often not interoperable with other financial services the small businesses have, Sussman said.
But the company might still need to do more to pull small businesses away from other banks, according to Miller.
"While Amex's strong brand is attractive and will earn Amex consideration, I'm not clear that Amex's offer will lead to significant numbers of 'jumbo shrimp' small businesses moving their primary operating accounts, payroll accounts and tax accounts to Amex unless Amex offers the products that would support those functions, such as positive pay and payroll services," Miller said.
