Understanding Merchant Amex Options: Direct vs OptBlue
Understanding Merchant Amex Options:
Direct vs OptBlue
Merchants now have more rate options if they choose to accept American Express cards at their business. Long viewed as the “outsider”, Amex cards fall behind Visa and Mastercard when it comes to merchant acceptance. Amex is accepted at roughly 9 million locations throughout the U.S., while both Visa and Mastercard are accepted at over 10 million.
Steeper rates have been the primary reason that merchants are hesitant to allow customers to pay with Amex; at an average fee of 2.33% per transaction—compared to 2.17% for Visa/MasterCard and 2.09% for Discover—accepting Amex cards can easily cut into merchants profits.
However, the tides have turned as American Express makes a push to be available in more merchant locations and boost spending on its network. It has recently cut rates through a new program for qualified merchants, which we discuss in more detail below.
Amex OptBlue is a processing option released by American Express in 2014. Previously, Amex cards were solely processed through a separate merchant account managed by American Express, resulting in higher, non-negotiable rates and more intermediaries.
With OptBlue, American Express took a page from the Visa and MasterCard book and opened up the processing of Amex transactions to other merchant account providers. This made it more appealing for merchants to accept Amex cards, due to:
Quick Payment: Amex, Visa, MasterCard, and Discover all follow the same deposit schedule.
Better Reconciliation: One provider for deposits means everything is streamlined and easier to reconcile.
Simplified Billing Statements: Amex OptBlue deposits are listed along with other card brands on the same monthly billing statement.
Increased Support: Both American Express and your merchant account provider are able to provide customer service support and answer questions regarding Amex transactions.
Better Rates: Merchant account providers now own the rate structure for Amex cards, meaning merchants have more options and more room to negotiate than they did under American Express’ former flat-rate plan.
Overall, this option simplifies card processing for merchants and makes it more financially appealing to accept Amex cards.
Amex Direct adheres to the original flat-rate merchant account structure that American Express employed prior to launching the newer OptBlue service. Amex Direct is a mandated merchant account used by businesses processing $1MM+ per year in American Express transactions. As a closed network, Amex is able to require this type of separate, direct merchant agreement for merchants that want to accept Amex cards.
As an exclusive merchant account, merchants are subject to Amex’s standard rates rather than another processor’s rates. This tends to be much higher than the processor rates.
Many believe that American Express rolled out OptBlue in an effort to cut rates and allow processors to add a decent markup while keeping rates low enough that new merchants would be compelled to start accepting Amex cards.
This incentive for merchants gets sticky, though.
Since OptBlue wasn’t well-advertised, some speculate that American Express gave too much power to processors, who took advantage of the situation and added huge markups to the new low rates. This kept unknowing merchants in the dark, as their overall rates didn’t change, but their processor’s rates for Amex went up substantially—in some cases up to 50%.
Feeling Blue? Let Us Matchmake for You
Navigating rates, rules, and processors can be a burdensome process.
Arrow Payments can help you iron out the details and choose the best option for your business. Whether you process a lot of volume or qualify for OptBlue, we’ll help you get the best rates. For OptBlue-qualifying merchants, we’ll use interchange optimization to lower your rates and avoid flat rates, saving you the difference.
Let Arrow Payments do the heavy lifting for you. Contact us today.