AmEx Cuts Costs But Boosts Marketing with Web Efforts

American Express Co. cardholders paid their AmEx bills nearly 100 million times in 2005 using the Internet, Judson C. Linville, president of the New York City-based firm's U.S. Consumer Card Services Group, told analysts Wednesday. “The Web has fundamentally transformed our business in the last few years,” Linville said at AmEx's semi-annual Financial Community Meeting, a pow-wow with analysts to review company strategy and finances. AmEx executives, including chairman and chief executive Kenneth I. Chenault, spent considerable time at this latest meeting focusing on the firm's Web efforts. In contrast, much of the news coming out of AmEx over the past year has involved its strategy to sign up banks to issue AmEx-branded cards whose transactions ride over the AmEx network (Digital Transactions News, April 24). Compared to processing their paper equivalents, online card applications are 53% less expensive, online payments 84% lower, and Web-based redemptions for the Membership Rewards loyalty program 86% cheaper, according to Linville. Balance-inquiry costs are 97% less. But marshaling the Web isn't just about cutting costs, according to Linville. AmEx in 2005's fourth quarter redesigned its U.S. home page and added more functionality, including sound and animation, to appeal to broadband users. And for some segments, AmEx is adding hip features such as downloadable podcasts. AmEx also is doing Web-based promotions. Card accounts generated through the home page are up 86% since the redesign, according to Linville. “The Internet is an accelerant to our spend-centric business model,” he said. Asked by an analyst whether the plugged-in U.S. has much more upside for AmEx's Web efforts, Linville said only 38% of transactions in three areas he cited on cost reductions?applications, payments, and Membership Rewards redemptions?currently are done online. “We're closer to the beginning than the end,” he said. Meanwhile, AmEx has 62 country-specific Web sites but is looking to add more. On the topic of AmEx's U.S. card-issuing bank partners that now include such heavyweights as Citigroup Inc., Bank of America Corp., and USAA Federal Savings Bank, chief executive Chenault said in response to a question that AmEx differentiates its proprietary cards from the bank-issued ones in part by offering Membership Rewards only on the AmEx-issued cards. AmEx and the banks work together on special promotions, but Membership Rewards “is off the table,” he said. Chenault also said “our overall relationships with merchants are good.” He was responding to a question about AmEx's merchant relations in light of a pending retailer class action against Visa and MasterCard over interchange.