The Commoditization in the Credit Card Industry Essay Example

U.S. is driving a push towards standardization. The internet will further accelerate this process. In 1999, American Express rebranded itself as a trendy and secure credit card option with the introduction of Blue by American Express. Previously associated with wealth, American Express has now entered the subprime market to counteract the trend of commoditization. They are targeting first-time users and students without credit history who are willing to accept high interest rates on their cards. Additionally, they have also expanded into the small and medium-sized business market, offering comprehensive business solutions at low interest rates but with relatively high annual subscription fees.

They comprehended the combination of financial freedom, trend, and security that students required. The company integrated a smart chip onto the new Blue by American Express cards to tackle the safety concern prevalent during the internet boom. This smart card incorporated the secure and versatile nature of Java Card technology. The chip was both groundbreaking and progressive, enabling enhanced and diverse functionalities within one card that could effortlessly adapt to the customer's evolving requirements.

American Express took advantage of the subprime users' lack of financial responsibility and the high interest rates. They distinguished themselves from other credit card companies like Citibank, Capital One, Diners, and Discover by offering personalized spending limits and benefits for each employee in the corporate credit card users market. This approach addressed both the organization's and the individuals' requirements.

Commoditization, as per Christensen, hampers a company's profit-making ability by diminishing distinctiveness. On the other hand, de-commoditization allows for the creation and capturing of significant wealth. American Express, by segmenting the market and personalizing their cards, has positioned itself advantageously

in the value chain compared to Discover and Diners who are grappling to find their place in the value chain.