American Express Canada appears to be double-doubling down on small purchases, becoming one of its key business drivers.
The company today announced a new partnership with Tim Hortons that enables customers to use their American Express card to pay for their coffee and Timbits. Tim Horton’s quietly began accepting American Express cards at its stores about two months ago, with about 85% of its more than 3,700 stores in Canada now accepting the card.
The announcement follows similar agreements that American Express has signed with merchants including McDonald’s, Costco and Sobeys in recent years.
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David Barnes, vice-president of communications for American Express in Toronto, said the company has been growing “quite strongly” in its coverage of areas that comprise the so-called “everyday spend” category – including quick-service restaurants, gas and grocery, and pharmacy.
Barnes wouldn’t provide actual numbers, but said the “lion’s share” of American Express’s new business signings in recent months has come in this particular area.
“Our tradition is really built around travel and entertainment, but in recent years, as we have broadened our business, it’s becoming increasingly important for us to broaden the merchant coverage,” said Barnes.
While acknowledging that small purchases are playing an increased role in its business, Barnes said these deals are also geared towards expanding the breadth and utility of its card and increasing consumer perception of American Express as a card that is widely accepted.
“The message we want people to take away is ‘Oh wow, you can use at Tim Hortons’” said Barnes. “The other thing that goes with that is ‘I can use my American Express card in more places than I thought.’”
American Express is supporting the new partnership with an integrated media campaign created by Ogilvy Toronto that includes radio, online banners and direct mail. The campaign creative highlights the rewards available to American Express cardholders when they use their card for Tim’s purchases.
The campaign is small, but warranted because of the “iconic nature” of Tim Hortons, he said.
Once reserved for big-ticket items like travel, credit card companies see small purchases as an untapped – and lucrative – revenue stream.
Amex rival Visa, for example, recently unveiled its “Smallenfreuden” campaign demonstrating how people can use their credit card to make small purchases they would make anyway, with the added bonus of points/rewards.
These introductions come amid a prolonged battle between credit card companies and small business owners over the fees charged on credit card purchases, which can range from 1.5% to 3%. These fees typically net the banks and credit card companies, primarily Visa and Mastercard, between $5 and $6 billion a year.
A long-awaited ruling by Canada’s Competition Tribunal as to whether retailers can add a surcharge on credit card purchases and choose which cards they will honor is expected imminently.
