Travelers-Check Players Taking Different Roads
Piskora, Beth, American Banker
Reports of the death of the travelers check are greatly exaggerated.
And to borrow again from Mark Twain, "There's millions in it" - which the leaders in the business have been happily earning for a century.
Nevertheless, travelers checks are under serious attack from their plastic competitors: credit, debit, and even stored value cards.
At the same time, a shakeout is under way among the existing companies: American Express is strengthening its hold on the No. 1 spot in market share, which raises questions about the prospects of the bank-owned Visa and MasterCard brands.
"Travelers checks are still a very useful product for consumers," said Stephen Szekely, vice president of Payment Systems Inc., a Tampa-based consulting firm.
"Consumers like to see what they're spending, and travelers checks let them do that easily," he added. "But I have to say I think bankers do not view travelers checks as a priority. They provide them as a convenience to customers.
"Most banks are concentrating on cards," which have, indeed, been much more of a lucrative growth business.
Travelers checks currently account for less than 1% of consumer spending. However, they still have a big share of what is known in industry jargon as "on-trip spend" - money that travelers budget for a specific trip.
From yearend 1993 to yearend 1994, American Express picked up $1.11 billion in travelers check sales volume. Visa said it lost $2 billion in volume in the same time period, and MasterCard reported virtually no growth.
American Express said it has been successful in attracting banks to its brand.
Most recently, Bank of Tokyo announced that it would cease selling Visa Travelers Cheques and issue the American Express product instead.
Others that recently switched allegiances to Amex include Banc One Corp., Signet Banking Corp., First Chicago Corp., and First Hawaiian Inc.
"Our growth strategy is not just conversions, but also new products and services," said Toby Usnik, an American Express spokesman. He suggested the company is more committed to the long-term viability of the travelers check than either of the bank card associations - a message Amex has been trying to get out since MasterCard and Visa entered the fray in the late 1970s.
To demonstrate its seriousness, American Express introduced Cheques for Two, which allow two travelers to share a set of checks. It also launched a product called Global Money Pack, which includes travelers checks, foreign currency, and travel tips.
The New York-based company beefed up its delivery channels, making travelers checks available through bank branches, 1,700 American Express Travel Service offices, American Automobile Association offices, automated teller machines, and by mail.
The company is not, however, ignoring the plastic revolution.
"We are constantly on the lookout for card-based products," said Carl Lehmann, president of American Express Travelers Cheque group. "But we can't get so enamored of technology that we forget about the consumer.
"Our focus group research on plastic travelers checks showed very little demand for such a product," he said. "We found that consumers were perfectly happy with the paper-based travelers check. It's simple, it satisfies a customer need, and consumers feel safe and secure using it."
Visa points out that the world is moving toward plastic, and that a product like its new TravelMoney card is complementary to its existing product line. …