Money world

JPMorgan Chase & Co is moving to boost its market share in credit cards for wealthy customers and small businesses, threatening American Express Co’s longtime dominance of those clients.

American Express — the largest U.S. credit card company by purchases — has long enjoyed a leading position among affluent and corporate customers.

It widened its lead as the credit card industry was busy targeting subprime borrowers, which at the time seemed like a profitable niche given the chance of charging fees or increasing interest rates when customers fell behind in their payments.

That strategy backfired when credit card losses spiked to record highs.

A law to limit the ability to increase fees and interest rates will make subprime borrowers even less attractive, forcing card issuers to seek other customers to make money.

American Express also grew in recent years thanks to subprime customers, but that always remained a smaller part of its business compared with those of its rivals.

JPMorgan, the third-largest U.S. credit card issuer by purchases, is likely to emerge as a winner from the overhaul of the card industry, given its conservative expansion strategy and low default rates.

That could be threaten American Express’s dominance among wealthy customers and companies faxless pay day loans.

Other rivals pose less of a threat to American Express, as they are either smaller — like Discover Financial Services — or struggling with losses and government bailouts — like Citigroup Inc or Bank of America Corp BAC.N>.

“Chase is trying to identify attractive customers including the more affluent and small businesses, where there is potentially less credit risk, but still potentially attractive economics,” said Brad Ball, an analyst at Ladenburg Thalmann. “The Chase franchise could pose a competitive threat to the leadership of American Express.”

American Express executives downplayed the risk.

“They are trying to fish where the fish are, and we have been fishing in those waters for 50 years,” said Ralph Andretta, general manager of Membership Rewards at American Express. “We’ve got a lot of hooks in those waters.

“We are not afraid of competition,” said Andretta, adding that the company has eliminated some fees and increased rewards promotions to court customers.

STRENGTH OR LOYALTY

Earlier this year, AmEx said its growth strategy would focus on wealthy and corporate customers. 

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