With its existing base of mass-affluent customers and ongoing efforts to attract a broader set of customers through efforts like its
It’s a role that requires the card issuer to carefully consider its ongoing technology strategy, particularly when it comes to fraud and data security, its president of U.S. consumer services says.
While EMV chip-cards provide enhanced security for the card market, “Amex has unusually good fraud control,” so the standard doesn’t provide a whole lot of benefit for the company, says Josh Silverman during remarks at the Keefe, Bruyette and Woods Cards, Payments and Financial Technology Symposium on Feb. 11.
“But in the world of fraud, you just can’t be the soft target,” he says. “So if everyone else goes to chip, we’ll go to chip as well.”
The issuer has already started its migration efforts,
But Amex is more focused on how big data can connect cardholders with the correct merchants through targeted offers that customers will actually use. The company sits between the merchants and customers and has a unique opportunity to marry both sets of data.
“We think of ourselves as more a data company that happens to be in financial services,” Silverman says.
He added that new technology being pitched to the financial services industry still hasn’t made it clear why it’s better than current behaviors.
“It’s pretty darn easy to pull out my card and swipe,” Silverman says. “It’s not clear to me, for example, why pulling out my phone, tapping it and then most likely, entering a PIN, is that much of a better experience than pulling out my card and swiping.”
There’s a lot of exciting technology coming to market, but Amex is focused on reducing consumer and merchant friction, Silverman says. “As soon as you get excited about the technology, you’re in trouble. You need to be excited about the customer and customer experience.”
The company’s prepaid product has disrupted consumer’s idea of the Amex brand,
“The symbol of prestige or the red velvet rope is a 1980s view of prestige and not very keeping with the times,” he adds.
Amex’s new TrueEarnings credit cards are also helping Amex capture new cardholders by offering consumer and business cards that are branded by Costco Wholesale Corp.
The products are “very spend-centric,” says Silverman. “It’s a brand that really works with ours because Costco is so customer-centric; it’s a membership organization like ours with very high loyalty.”
Amex hasn’t offered many private-label products because typically, they can only be used at the merchant that brands the card and are “lend products,” he says, meaning charges don’t have to be paid off every month. While the TrueEarnings Card allows cardholders to revolve balances, most consumers don’t, instead using it as a “spend product,” both inside and outside Costco stores. The card launched in September 2012.
The TrueEarnings Card doesn’t carry an annual fee and incentivizes use by giving consumers 3% cash back on restaurant purchases, 2% cash back on gas purchases and 1% cash back on other purchases. In addition, cardholders can opt to receive a supplementary card for a current member on their Costco account.
Silverman said Amex’s net interest income accounts for 20% of the company’s total revenue, compared to a 70% share among its peers, further proof of its spend-centric business model.
Not only will the new card products likely grow Amex’s business, but the issuer’s existing mass affluent customer base continues to be a loyal and profitable segment.
When the economy grows, Amex’s mass-affluent cardholders do well and when the economy is stunted, affluent customers are shielded from the trouble, Silverman says. Because of this, Amex has done well in both good and bad times. “The wealthy are disproportionately benefitting,” he says.
