As the number of mobile payment applications in the U.S. proliferates, it has gotten easier and easier to pay for goods and services using a smartphone. And as big companies like Google and Isis battle to control the digital wallet market, the future of plastic credit cards remains unclear.
But credit card companies are not giving up that easily. Last year, for instance, American Express introduced Serve, a digital payments platform to compete with bank debit cards and other prepaid cards. Serve enables customers to open an online prepaid account that can be funded with a bank account, an American Express card or another card. A physical card is issued, but clients may use the account for online transactions, including electronic transfers of money to others.
Last week, KnowledgeToday sat down with Joanna Lambert, head of the enterprise growth group at American Express, at the Money 2020 Conference in Las Vegas, Nev., to talk about what’s in store for Amex and the credit card industry.
An edited version of the transcript follows.
KnowledgeToday: What do you think has been the biggest change in the way consumers and businesses use money today as compared to the way they did, say, five or 10 years ago?
Joanna Lambert: Consumers are increasingly comfortable doing transactions and living their lives on their mobile devices. There’s been a big increase in things like restaurant bookings, ticket bookings and buying groceries on mobile devices. One thing that is really exciting from my perspective is the innovation in what we’re calling “advanced payments,” where it’s become easier for consumers to do things like … put a salary deposit into a digital bank account.
KnowledgeToday: Are consumers uneasy about the idea of the digital wallet from a security perspective?
Lambert: When we talk to consumers, they tell us they need to be working with a financial services company that they can trust. They expect that their personal information will be vigorously protected. And while we see many consumers sharing a lot of their social graph online — from pictures of their kids to how they feel about the political campaign at the moment — we’re not seeing people wanting to share their financial data.
KnowledgeToday: Are plastic cards going away anytime soon?
Lambert: I don’t think so. The fact is, the credit card and debit card ecosystem is really efficient here in the U.S., and I think that will continue to be the case for the foreseeable future. There’s so much change and disruption going on in the industry. We’re seeing a lot of startups coming in and providing some pretty sensational user experiences and disruptive technologies. We are seeing a lot of technology companies come into the space, too. From the perspective of American Express –and our colleagues at Visa and MasterCard — we’re all building new things and [testing] new things.
KnowledgeToday: What does that mean for how Amex approaches technology?
Lambert: We’re just approaching it as a technology agnostic. At this early stage in the game, we’re still not quite sure what the solution will be. But we do know where the puck is going, so we’re working on building our own infrastructure and technology, and testing our own technology. We’re also working with partners — from Zynga to Isis to Wal-Mart — to help advance this.
KnowledgeToday: Will these partnerships change who your target customer is?
Lambert: I work at a part of American Express called enterprise growth, which was established a couple of years ago to be a catalyst for change as we drive forward into digital payments and digital commerce. American Express has traditionally played in the affluent market — that’s our sweet spot. One of the mandates for us is to look more broadly and use technology to seek out different customers and provide different customer experiences. We’re attracting a different kind of customer with our partnerships — younger, more female skewed, and customers such as the underbanked or underserved, who, in the past, didn’t think they had access to American Express products and services. Right now about 44% of Americans do not have access to credit, so being able to provide a solution that allows them to shop online and utilize digital accounts is really interesting to us.
KnowledgeToday: How soon are we going to see big changes in the payment market?
Lambert: The vast majority of transactions are still bricks-and-mortar and point-of-sale. I think it’s a little over 90%. But the 10% that are online has really only been in the last few years. It started, of course, with the big retailers, but now we’re also seeing small retailers and mom-and-pop shops building up their online presence.
In terms of mobile commerce, we’ve seen a 62% growth in transaction volume from 2011 to 2012. When you look at global spending, the amount on mobile devices is tiny, but the trend is there. Look at how quickly people moved from reading paper books to reading digital books; look at how quickly we went from buying CDs to buying music on our iTunes account. I think mobile payment is going to be the same.
