American Express: Innovation Leader

Happy New Year! Football is on my plate today so this blog will be short.

American Express is cranking out innovation at a tremendous pace. I’m very impressed at what Ken and Dan have done here in last 3 years. For example I just received a note in the mail yesterday that all of my Amex transaction receipts will be in my Apple passbook (don’t know why they used the USPS to tell me). Here are a few other innovations

Retailers don’t like the costs of Amex… but they love Amex customers. Amex has a very heavy bias toward business and T&E spend. Although Amex has only 12% of global card payment volume, each Amex customer spends more than 4x the amount of a typical V/MA holder. In full disclosure I own Amex stock, and I’m an Amex points junkie.

Amex is working to expand its consumer base (into mass) through Bluebird and Serve, but I won’t go into that here.. What I’m most impressed with is that they are the first card network that is beginning to deliver value to advertisers and retailers…. Yes, through its massive trove of consumer insight, Amex is beginning to show signs that it can deliver value to retailers.

Following on from my Nov Blog: Retail CRM Enabled by Payments, Amex’s recent loyalty partners acquisition is showing signs of success in coupling merchant transaction data with its DataInsights business. Through this, merchants have new mechanisms to identify customers, incent loyalty and market specific products.

In my view, Amex is at least 5 years ahead of any other issuer/network. Of course they have the benefit of operating as a 3 party network and regulated bank. This allows them to own: the consumer, the merchant and the rules of the network. As such they have many “innovation” advantages over the V/MA networks and issuers; Amex’s network is much more pliable, where the 4 party networks are very hard to change.

This same dynamic is why Discover is the “dance partner” of choice for anyone working to do something unique at the POS. It is also why I see a 3 party network as the winner of MCX (?a NEW 3 party network?).  As I stated previously, innovations at the POS will be less about payments and more about data and re-orchestrating commerce to create new experiences. There are 3-4 entities that each have unique data, none of which have shown interest in pulling it together: retailers, bank, advertiser, telecom.

Amex is the first to start breaking down this data “log jam” with willing participation from retailers. Although their consumer segment is very narrow, margins are tremendous in this top tier.. which means Amex could be in a position to further accelerate its affluent value proposition without mainline retailer participation (ex focus on T&E).

Random thoughts for Investors

  • Data business revenue, enough to move the needle?
  • Affluent card – Net new customers
  • New 3 party network for MCX. Will it kill 40-60% of Visa’s debit revenue (in 10 yrs)
  • Why did Amex buy Serve again? It seems it can justify higher margins through data…
  • Bluebird growth. Can Amex manage value proposition for affluent and a lower mass segment?

Sorry for typos and short blog

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5 thoughts on “American Express: Innovation Leader

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