Amex has faced trouble before. In the wake of the 1987 stock market crash, merchants started to turn away the Amex card because of its hefty swipe fees, which at the time were as high as 3.5 percent. In 1991, a group of 100 restaurateurs in Boston staged what became known as the Boston Fee Party. “There was a big recession going on,” says Steve DiFillippo, owner of Davio’s, a popular Italian restaurant in the city and one of the Fee Partiers. “The garbage guys and the meat guys were helping us out, but American Express wasn’t doing anything for us.” Visa did its best to make the situation worse with an ad campaign featuring celebrity chefs such as Wolfgang Puck and other merchants who didn’t take American Express. ... JPMorgan and Barclays have poached Amex’s high-spending customers with generous card offers and lower annual fees. Two years ago, Chase cards surpassed Amex in American households making at least $125,000 a year ... “Part of my job is to persuade,” Chenault said. Never mind that even the Black Card no longer has the same mystique with the young moneyed set that Amex desperately needs to attract. In 2004, Kanye West boasted about his, memorably referring to it in a song as the “African American Express card.” But last year, Young Thug, the rap icon and influencer of the moment, rhymed in the hedonistic hit Lifestyle about having a $1.5 million spending limit on his Visa card.
It’s gunning for the $93 billion U.S. market for credit card issuing, an industry that’s dominated by giants such as American Express and Capital One, with PayPal and ambitious startups in close pursuit. Like PayPal, Klarna is an online-payments platform with an emphasis on “buy-now-pay-later” financing. … His dream is that enough merchants embrace Klarna as a free-floating credit issuer so that millions of shoppers will no longer see credit cards as a first choice for financed payments. ... Siemiatkowski has spent the past 11 years quietly turning Klarna into his home country’s biggest digital-payments platform. Klarna processes 40% of all Swedish online payments. Klarna’s big selling point is ease and simplicity. It lets you skip paying for an item up front–no more squinting at a credit card, typing in numbers and remembering a password. You simply enter your e-mail and delivery addresses. That information, plus your activity on an e-commerce site time of day, the product you’re buying and any Web cookies that can be picked up from your visit? is enough for Klarna to decide whether you’re a creditworthy human. Siemiatkowski calls this a “one click” experience. ... Remarkably, Klarna’s bold bet on people’s honesty and solvency has worked. Its default rates are under 1%. Credit card default rates in the U.S. have averaged 2.2% for 2016. ... Siemiatkowski would rather trust his customers than see them walk away at a checkout: 69% of online shoppers in the U.S. abandon their shopping carts, often because they’re asked to create an account or the process takes too long. That’s around $260 billion in lost orders.