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Amex-Backed Subscriptions Head for a Cliff

Costco announced that they were terminating their partnership with American Express and would no longer accept Amex at their stores nor would they issue Amex cards to members. The impact to subscription provider is serious as Costco make up about 11 percent of Amex issued cards.<br>Read to learn about what merchants and subscription providers can do about the partnership termination.

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Amex-Backed Subscriptions Head for a Cliff

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  1. Amex-Backed Subscriptions Head for a Cliff © 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential. 1

  2. Amex-Backed Subscriptions Head for a Cliff Last year Costco announced that they were terminating their partnership with American Express and would no longer accept Amex at their stores nor would they issue Amex cards to members. This was seen as a big blow to American Express, as the Costco cards make up about 11% of their issued cards. All Costco Amex cardholders will be issued a new Visa card from Citi with slightly improved rewards. (Here are the announcements from Amex and from Citi) What’s the impact to you as a subscription provider? Well, if Amex is 8-12% of your sales volume (a fairly standard range), then you stand to lose about 1% of your total subscriber base in one month (above and beyond normal churn). That’s serious. Normally when a user gets a replacement credit card due to a breach, expiration, etc., it is the same card brand. The card associations run an Account Updater program that provides an automated feed for merchants to update any cards on file, so the process should be easy and transparent to the consumer. In this case, though, there’s a wrinkle: the old card was Amex, and the new card is Visa. The Account Updater infrastructure isn’t designed to support this. At least one processor has indicated that they’re coding a change to make this work, but most processors aren’t going to undertake this work. This transition is highly unusual, and there is always a backlog of “regular” projects that require attention. This one-off event just isn’t rising to the level where processors will expend a lot of effort on it. 2 © 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.

  3. What’s a merchant to do? I can’t speak for other billing platforms. CashBox customers will have an opportunity to save these subscribers through normal outreach. A subscription being billed in CashBox will go through its normal retry logic and if the card account is closed, the hard error will cause the rebilling to fail. We advise all merchants to have an email configured in CashBox in the event of a hard failure. If the merchant has this set up, then the flow is automatic – the billing on Amex fails, and the consumer gets an email from the merchant indicating the need for new payment credentials. It’s not rocket science, but all merchants need to be prepared. If you haven’t thought about this already, and you don’t know how your billing system will react, it’s time to call the developers and ask. 3 © 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.

  4. About the Author: Doug Smith Doug has over 20 years of experience in technology development and professional services in enterprise software and telecommunications. His primary areas of focus are professional services practice development and enterprise- scale integration strategy. Visit our Blog for more information. 4 © 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential.

  5. Thank You Like us on Facebook facebook.com/vindicia Follow us on Twitter @Vindicia Connect with us on Linkedin linkedin.com/company/vindicia © 2015 Vindicia, Inc. All rights reserved. Vindicia Confidential. 5

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