Nedbank is, as of yesterday, the first bank in Zimbabwe that can accept American Express (AMEX) card payments.
Before we get too deep into this it must be said that Nedbank is not going to be issuing American Express Cards in Zimbabwe. They are only going to be acquiring payments from foreign-issued AMEX cards.
The motivations for this are pretty clear and we have to commend the team at Nedbank for being absolutely forthright with their intentions for this partnership.
In most of these press events, there is a lot of smoke and mirrors but Nedbank went straight to the point and said that this is more for the tourist market than for locals. To understand what this really means let’s dive into what American Express is and why it’s such a key player in international payments.
Why American Express is different from Visa and Mastercard
American Express has the luxury of being a card-issuing financial service provider as well as a payment facilitator. This means that, unlike Visa and Mastercard, American Express can give its own cards to people and businesses in its areas of operation as well as at its discretion.
It is immediately apparent as to who AMEX is looking to give its cards to by looking at the tax bracket they occupy. According to the financial services provider, the median pre-tax income of an AMEX card member is about US$55,000 which they say is 27% higher than non-card members.
The spending power of cardholders is also pretty impressive because according to a 2011 study, American Express cardholders were seen on average to be spending 43% more than those who are non-cardholders.
On top of that 46% of AMEX cardholders are more likely to try a new merchant when they see the company’s logo. Moreover, 52% of American Express members are actively looking out for the facility’s signs before calling ahead or looking at catalogues or websites. And 65% of the AMEX family are more likely to choose a merchant that accepts their card over one that doesn’t, which is a no-brainer from the “convenience of transacting” point of view.
The relative exclusivity of American Express cards can be seen in the number of cards issued as compared to the other players. Visa has a reported 4.2 billion branded cards in circulation, while Mastercard boasts 1.544 billion in the world and American Express has about 135 million cards.
[insert every hip-hop lyric about the AMEX Black Card Here]
The scope of the problem in Zimbabwe for AMEX cardholders
Why Nedbank and American Express are coming together in this fashion because there was an ease of transaction problem when AMEX cardholders came to Zimbabwe.
According to the Nedbank presentation, tourist operators responded to the bank’s enquiries about the nature of card payments in the sector and said that a good number of their guests/clients were AMEX card holders.
The bank also added that those cardholders would have to transact through other markets like South Africa, Kenya or Mauritius in order to access services in Zimbabwe.
The nature of this partnership becomes all the more clearer when looking at the US$580 million tourists spent in the first nine months of 2022. How much did the Zimbabwean tourism ecosystem lose out when operators couldn’t accept the AMEX cards?
Is there an opportunity in Zimbabwe for American Express & Nedbank?
According to the Zimbabwe Tourism Authority of Zimbabwe 2022 Annual Report, Europe and the Americas continue to dominate the number of overseas visitors to Zimbabwe.
These markets have a significant American Express presence if we are looking at the market share and also taking into consideration the proportion of cards that AMEX issues compared to Visa and Mastercard.
According to a Shift Processing report from 2019, American Express held a 7.5% share of the market in the United States, while Visa and Mastercard were at 52.8% and 31.6% respectively. In Europe, and according to Statista, American Express had a market share of 3% which then fell to below 1% in 2020
These numbers, at face value, might seem low for American Express. But if we go back to what we mentioned earlier about American Express, unlike Visa and Mastercard, it actually issues cards to the public and corporates as well as being a payments processor.
More importantly, you need to qualify/be approved to get an AMEX card, meaning that you have to fall into a certain tax bracket or credit threshold to be considered for the various tiers of cards.
The opportunity for Nedbank and American Express may lie in the data they have been seeing or have collected. Because a move like this won’t be done for just “reasons“.
Additionally, Nedbank says that it has already invested resources in onboarding Zimbabwean tourist operators to receive AMEX payments through updated point-of-sale machines.
An investment of time and money like that suggests that Nedbank Zimbabwe must have done some homework to approach AMEX with the proposal that is now a full-blown partnership…
For those local operators who are already in the fold, they may stand to benefit, because now they can sell their wares and services to customers of a relatively high calibre.
If this translates to more Tourist receipts is something we will know for sure in the Zimbabwe Tourism Authority’s 2023 annual report.
Also Read: Financial Inclusion & Digital Use Mismatch In Eswatini Market Creates An Innovation Gap
