by Daniel Pelegero, @dangerpele

American Express wants to position itself as the American version of Alipay.

During an Investor Call, new American Express leadership announced that they are lowering their average global fee by 5 or 6 basis points to 2.37%.  The logic makes sense, cut prices to increase sales and net revenue should out-gain any losses. The Financial Times estimates this rate drop will cost Amex USD$585 million. This is part of the “conscious trade-offs” Amex will make to grow their merchant coverage. But while sporting the largest price cut in twenty years makes for good press, does this actually help grow the Amex brand?

Amex says its growth plan goes far beyond expanding its merchant base to include cobranded cards, enhanced cardholder rewards and an emphasis on digital offerings, more focus on commercial payments. So merchant coverage isn’t the end goal. The Mezi acquisition (an Ai-powered travel assistant) and the in-app location based marketing of small merchants indicates as much. But it’s doubtful that Amex will be able to make an impact in a social network dominated space for a consumer’s continued attention.

As pointed out in the Investor Call, American Express is the #1 Commercial Issuer globally and one of the leading consumer credit card issuers. As an Issuer, that’s a great position, but ‘Amex the network’ is what will drive their digital offerings. And as a network, Amex’s high discount rates and consumer preference for local payment methods get in the way of Amex realizing growth beyond their exclusive membership. Outside of a one-off agreement, Amex is still one of the priciest forms of payment available. Even these price cuts do not change Amex’s position as the most expensive card for payment acceptance.

For a global eCommerce merchant, there are better ways of converting shopping carts. Consumer focused Merchant payment operations are focused on growing globally quickly so that they can provide a strong localized user experience or, they’re focused on cost management. Amex provides little of either.

Small businesses are another story. Amex has identified North America, Japan, India, Mexico, Australia, Japan, India, France, Germany, and Hong Kong as key international countries for growth. But their market share of card in issuance are almost insignificant outside of the US and UK

Based off of the eCommerce acceptance numbers I’ve seen, non-U.S. merchants won’t be expanding their local customer bases with the card scheme. In APAC, where Amex discount rates typically rank highest, it’s hard to see additional merchants accept the brand for anything beyond commercial payments. Consumers are already latching onto local schemes that have a vastly different payment experience. In the E.U., SEPA and other local payment methods are already preferred to cards for eCommerce and mCommerce B2C transactions. Mexico still remains a cash-heavy market with low card penetration. There’s little evidence that these will soon be profitable Amex customers.

I can trace an Amex strategy that looks like Alipay’s U.S. penetration strategy: up the usage of pre-existing Amex customers so that they continue to use Amex products abroad and rely on the Amex network while in a foreign land. But I can’t imagine them becoming the U.S. version of Alipay. There’s a lot of factors why (tech vs. banking development, innovator’s dilemma, responsibility to shareholders vs. long term growth, etc.) but to their credit, the first problem on the road is being addressed: Become Accepted Everywhere.