Amex deepens ties with PayPal, Amazon to get more tech-savvy shoppers

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American Express turned its loss of its Costco card business in 2016 into a pivot to a more technology-heavy strategy, a plan that is paying off with major deals with large partners and solid earnings.

Fresh off its partnership with Amazon, Amex has expanded its collaboration with PayPal to closely integrate Venmo and marketing between the two companies.

“It’s just the latest step toward our journey to play a major role in the digital lives or our customers,” said Steve Squeri, Amex's president and CEO, during Thursday’s earnings call. The PayPal expansion expands on existing merchant acquiring and provides ways to add incremental value to both companies, Squeri said, adding it would help reduce cart abandonment by making it easier to integrate merchants and cardmembers with PayPal for incentive marketing.

The Amazon partnership includes a co-branded card designed to appeal to business owners. Millions of Amex's small business clients were using Amazon’s e-commerce platform and B2B marketplace, making a deeper partnership a natural fit. Small to medium sized business are Amex's fastest growing segment globally, Squeri said.

Amex has several other initiatives and investments that drive digital payments for small businesses.

It recently acquired Cake, a company that makes mobile payments technology for restaurants and bars, and has added billing technology for businesses of all sizes.

Amex also has cobrand relationships with with Hilton, Delta and other travel companies that serve small-business clients. Amex’s hope is that these relationships will complement each other.

“Small businesses use multiple products," Squeri said. “The beauty of these products is they offer small business the opportunity to meet all of their needs. I'd rather have that arsenal of products under the American Express umbrella than have to compete in that space."

For the quarter ending Sept 30, American Express reported earnings of $1.65 billion, or $1.88 per share, compared with $1.36 billion the prior year. Revenue was $10.4 billion, up 9 percent $9.3 billion the prior year. FactSet analysts expected Amex earnings to be $1.77 per share on revenue of $10.06 billion. Amex raised its full year revenue guidance to between $7.30 per share to $7.40 per share, up from a previous range of $6.90 per share to $7.30 per share.

When Amex lost Costco, it dove heavy into mobile, e-commerce and other digital markets, a move that drove a recovery that has kept pace into the most recent quarter.

Other technology investment is on tap, as Amex is additionally using blockchain to expand its payments, marketing and rewards offering. Other investments in artificial intelligence are aimed at using Amex's closed loop model to improve small business service, adding data that supports credit risk, Squeri said.

“The investments we’ve made in new benefits, services, capabilities and the global marketing to support that are generating momentum,” Squeri said. “These are just the latest steps toward our journey to play a major role in digital lives of our customers.”

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Earnings Online payments B-to-B payments Credit cards American Express PayPal Amazon