American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011.Mike Blake/Reuters
Banks, telecom providers and technology companies are gearing up to change the way customers pay for goods, from physical cash and cards to a mobile wallet. But American Express is preparing for that shift in a different way, by amping up its brand-building efforts.
The credit-card issuer and travel company known as Amex says the best way to compete isn't by exclusively targeting new apps or gadgets that will persuade purchasers to use their smartphone rather than cash or plastic. Instead, the task is to show shoppers that Amex is a company they need, and want, no matter how they choose to pay.
That's why Amex is defining itself as a "service provider" that seeks loyalty and brand engagement in the midst of the race for payment technology supremacy.
"I would argue it's the companies that have brands that resonate a certain way around service, trust and security. Those are brands people are going to take with them," said Howard Grosfield, Canadian chief executive of Amex, in an interview.
Amex has been shaken up many times before by customers' changing needs. The firm was founded in the United States 164 years ago as a stage-coach delivery business, moving parcels and banknotes. It came to Canada three years later and gradually morphed into a travel agency business, adding travellers' cheques and eventually launching the charge card in 1958. Fifteen years ago it began to shift its image from being the credit card for business leaders and travellers, toward everyday purchases like groceries and gas. Last year, Tim Hortons locations began accepting Amex cards.
This history of transformation cemented Amex's focus on being the world's most respected service brand, rather than just a provider of great credit cards or travel programs. "If your vision is designed around service as the primary core business – of what you wake up and do every day – it allows you to evolve and in many cases cannibalize and change the business you're in," Mr. Grosfield said.
Today, Amex faces stiff competition in the Canadian credit-card network landscape where Visa Inc. and MasterCard Inc. make up close to 90 per cent of the Canadian market.
Amex is also taking on the country's big banks since it operates as a credit card-issuing business as well.
What's harder to recreate is the relationships Amex has built with its customers. In the past year the company has increased its advertising and expanded its "experiences" such as special concert tickets and restaurant promotions for cardholders. It promotes the American Express brand as something customers have "membership" and "access" to.
Amex's business model also allows it to connect directly with both buyers (the customers that use cards), and sellers (the merchants that pay a fee to Amex for each transaction).
"Amex is in the unique position to directly introduce merchants' services to our card members and be able to shift their spend behaviour," Mr. Grosfield says.
But with trust, security and service being the hallmarks of Amex's brand, the recent string of data breeches at retailers such as Home Depot Inc. and Target Corp. pose a bigger challenge to the company. "We are collateral damage because what they are essentially getting from the retailer is card numbers and card data," Mr. Grosfield said. "Data and fraud is front and centre. It's a fundamental concern."
But the breeches could also afford the company an opportunity to show customers Amex will take care of them better than any other card issuer or network, no matter where they are in the world, he said.