The rise of digital and mobile payments has resulted in a decrease in the number of consumers who are swiping their credit cards and using cash to complete transactions. America Express has anticipated that this shift to mobile payments will continue in the future, and therefore, the company has focused on integrating its services into the platforms where consumers are already choosing to make payments. For example, American Express has partnered with both Uber and Airbnb to make it easier and more appealing for their customers to pay for these services using their American Express cards (2). As platforms like Uber and Airbnb have gained significant market share in their respective industries and have significantly shifted the way consumers make payments in those industries, American Express has altered its operating model to ensure that is can continue to deliver value to its customers despite the changing technological landscape.<\/p>\n
https:\/\/www.emarketer.com\/Chart\/US-Adult-Mobile-Phone-P2P-Payment-Users-2015-2018-millions-of-smartphone-users\/200203<\/em><\/p>\n https:\/\/ehotelier.com\/global\/2015\/11\/04\/american-express-integrates-loyalty-program-with-airbnb-bookings\/<\/em><\/p>\n http:\/\/thepointsguy.com\/2014\/06\/uber-and-amex-team-up-earn-2x-or-use-points-for-rides\/<\/em><\/p>\n A Changing Competitive Landscape<\/strong><\/p>\n Not only has technological advancement changed the way people make payments, but it has also changed the competitive landscape for American Express. The rise of alternative payment technologies such as Apple Pay and Square, have served as both sources of revenue for the company and as competitors (3). It\u2019s a tricky balance. On one hand, both Apple Pay and Square facilitate an increased number of transactions for American Express, and so the company has been quick to partner and develop solutions that are compatible with both platforms. But, on the other hand, Apple Pay and Square are competitive threats that American Express needs to defend against. Although American Express has decided that the current benefits of leveraging these new payment platforms outweigh the costs of competing with them, this is something that the company will need to reassess on an ongoing basis.<\/p>\n https:\/\/www.americanexpress.com\/us\/content\/apple-pay\/<\/em><\/p>\n http:\/\/www.eyeonmobility.com\/2013\/square-businesses-canada-now-accepting-american-express\/<\/em><\/p>\n Leveraging the Closed Loop System<\/strong><\/p>\n The evolution of artificial intelligence and machine learning has transformed a number of industries including facial and speech recognition and autonomous vehicles. American Express has incorporated machine learning to better leverage the data generated from the company\u2019s \u201cclosed loop system\u201d. Because American Express is able to issue its own cards to consumers and doesn\u2019t need to partner with an issuing bank, the company has created a \u201cclosed loop system\u201d in which it is both the issuer of cards and the payment network operator (4). This \u201cclosed loop system\u201d differentiates American Express\u2019 business model from its credit card competitors\u2019 business models. While this aspect of American Express\u2019 business model hasn\u2019t changed as a result of technological development, the company\u2019s ability to leverage its \u201cclosed loop system\u201d certainly has. Over the past few years, American Express has implemented machine based learning algorithms to detect and prevent fraud by using a variety of data sources to identify suspicious events and compare those events to a large dataset. Additionally, American Express has used machine based learning to improve its customer experience whether that means providing customized restaurant recommendations or real time coupons based on a customers\u2019 current location (5,6,7).<\/p>\n Risks and Opportunities<\/strong><\/p>\n As reported in a study published earlier this year, 60% of merchants reported that they have experienced fraudulent online sales and 25% said their level of fraud with online sales increased versus last year (8). Although American Express has initiatives in place to minimize its risk, security will continue to be a top concern for the company. As American Express looks to innovate, one area that the company should evaluate is the peer-to-peer payments space in which American Express does not currently have a product. Additionally, American Express should continue to expand its ability to leverage the data produced from its \u201cclosed loop system\u201d. \u00a0While American Express has been able to adapt its operating model to align with the changing technological landscape, the company\u2019s future success will depend on its ability continue to develop new systems and services that increase consumer value while protecting itself against security threats. (767 words)<\/p>\n (1)\u00a0https:\/\/services.hbsp.harvard.edu\/services\/proxy\/content\/56157960\/56157962\/1158b6f8f146cc2d02207d5ab2521095<\/a><\/p>\n (2) http:\/\/digiday.com\/brands\/not-technology-technologys-sake-amex-betting-digital-partnerships\/<\/a><\/p>\n (3)\u00a0http:\/\/ir.americanexpress.com\/Cache\/1500081626.PDF?O=PDF&T=&Y=&D=&FID=1500081626&iid=102700<\/a><\/p>\n (4)\u00a0https:\/\/centricdigital.com\/blog\/digital-trends\/american-express-needs-exploit-digital-advantage-visa-mastercard\/<\/a><\/p>\n (5)\u00a0http:\/\/data-informed.com\/american-express-charges-into-world-big-data\/<\/a><\/p>\n (6)\u00a0https:\/\/www.mapr.com\/blog\/machine-learning-american-express-benefits-and-requirements<\/a><\/p>\n![\"growth-of-mobile-payments\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Growth-of-Mobile-Payments.png\")
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