This post references an article originally written by AnnaMaria Andriotis for the Wall Street Journal, published on July 30th, 2018.
American Express’ foreign-exchange unit has been accused of taking advantage of foreign exchange pricing for small to midsize business clients–a practice that is believed to have been going on since 2004. The Wall Street Journal reports that former employees and clients of American Express say the company was targeting specific clients, slowly increasing their currency conversion markups, while promising lower rates than their competitors. Former employees report that salespeople would convince potential clients to sign with American Express by offering lower currency conversion rates than their competitors; the company would then incrementally increase the margin they charged for their services, without client knowledge. This behavior was prompted by the competitive environment created within the company due to commission goals and bonuses.
Although in the last year “some customers had margins increased anywhere from .05 to .25 of a percentage point”, American Express representatives feel the margin increases were fair. “Amex said it doesn’t have contractual pricing arrangements with most of its foreign exchange customers”, reports the Wall Street Journal.
American Express was thought to have been targeting small to midsize businesses because they are least likely to have insight into how fair their foreign exchange rates are. This is yet another example of why FX Rate Integrity® is beneficial for businesses doing regular foreign exchange trades.
To read full article, visit The Wall Street Journal
-Paola Gasca, Analyst