American Express wins DJ's card business

Dedicated, own-name charge cards are increasingly a dinosaur in the payments card space worldwide. One of the longest running of the lot - the David Jones Card, first introduced in the 1930s - is now on the way out.

Following a long-running tender David Jones yesterday picked American Express as the funder, and also the payments marque, for the replacement credit card that will be in the market by the last quarter of this year.

The alternative funder in the tender was Citigroup, which would have used MasterCard in preference to Visa as the brand of choice.

In opting for a three-party scheme with limited merchant acceptance over a four-party scheme with far greater acceptance David Jones management have had to confront the dilemma of every participant in the crowded cards' space; namely what priority a card-holder will give to yet another payment card in their wallet.

The experience of other retailers and in other markets tends to be discouraging, with new credit cards easy issue but hard to generate any recurring spend - even in the retailer's own outlets, let alone using the card for day-to-day spending.

The David Jones card once had (though may not recently have had) fantastic customer loyalty and used to be responsible for a sizeable chunk of overall DJ's spending. Like a lot of other store card propositions those dynamics faded.

Receivables on the current charge card (at present funded through a securitisation trust managed for almost two decades by Societe Generale) were about $400 million in the middle of last year. Interest revenue was about $50 million and EBIT profit about $35 million.

So the contract is no bonanza for American Express.

Under the terms of the deal the existing store card will remain and all the card receivables will transfer to Amex.

A new David Jones branded American Express card will be issued by Christmas.

David Jones has 800,000 card customers, half of them active.

Customers can expect a rewards blitz and inducements to spend and borrow.

The partners have forecast a receivables base of three to four times the existing store card receivables over time.