AAA Divorce from AMEX Travelers Check Milestone
Lee, W. A., American Banker
Last week's announcement that the American Automobile Association will stop selling American Express Co.'s travelers checks on Jan. 1 and start selling Visa-branded ones from Travelex PLC marked a shake-up in this normally quiet business.
AAA, which has sold Amex's product to its members for 19 years, generates 15% of the travelers check volume in the United States. The not-for-profit organization, which has an enviable 45 million highly loyal members, said it sold more than $1.5 billion of Amex travelers checks last year.
The auto club, which is based in Orlando, said the move was a pure branding play. It has marketed a cobranded Visa credit card since 1979 (now issued by MBNA Corp.), and wanted to sell Visa products only.
"By offering an American Express product we were in effect competing with ourselves," said Tom Wilt, the managing director of the club's partnership program. "Having one AAA-Visa branded portfolio makes it a lot easier to market," he said. Besides, he said, members' affinity is with the auto club, not with the payment company.
Though the loss of the exclusive contract was a big one, American Express picked up an even bigger customer last year when Citigroup Inc. agreed to replace the travelers checks it issued with Amex's. Last year, Citicorp travelers checks sold more than $2 billion worth of Citibank and Visa cobranded checks, according to The Nilson Report.
"Clearly, we're disappointed" with the loss of the AAA contract, said American Express spokeswoman Christine Elliott. "We believe the decision will inconvenience AAA member who have come to know and rely on the benefits of American Express." Ms. Elliott said her company conducted research that showed that most AAA members prefer American Express to other travelers check brands.
Fran Schall, an executive vice president at Visa U.S.A. who manages the AAA relationship, said the auto club told Visa that it wanted to offer more financial products to its members. This year was AAA's 100th anniversary, and the organization was aiming to take advantage of the milestone to "try to reestablish itself," she said. "It seemed to them that offering a package of financial services would fit in very well" with its makeover plans, Ms. Schall said.
AAA will add other Visa products next year. On Jan. 2 it will begin to sell travel money cards, which members will load in advance and then use to obtain local currency from any ATM that takes Visa. The club will also introduce prepaid gift cards for point of sale purchases. MBNA will issue all AAA-Visa products.
According to AAA, nearly all of its American Express travelers checks were purchased in person at the auto club's branches, which have limited hours and locations. …