Amex has a track record of quickly embracing mobile technology, and Monday’s move to enable Apple Pay for corporate card payments is no exception.
The move, which allows corporate cardholders to make contactless purchases or pay within participating apps at merchants accepting Amex, may not be enough to offset Amex's loss of its Costco accounts in Canada and the U.S. in the short term, but over time it has the potential to soften that blow.
"Apple Pay is a new distribution channel for Amex, and that's what Costco was before," said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC. "But Costco was a single merchant, and Apple Pay has the potential to be every merchant."
Costco was a lucrative account for Amex, on both the recurring revenue and card issuing sides of the credit card equation. While Apple Pay may not bring the card issuing potential during the initial phase of the partnership, it could help drive new accounts in the future, Crone said. More importantly, Apple Pay brings one-touch in-app payment potential to corporate cards for e-commerce transactions, he added.
If Amex and Apple Pay bring the full potential of the technology to the corporate card portfolio, it "could dwarf what Costco was to them over time," Crone said.
The contactless mobile pay opportunities for the corporate cardholder also align nicely with Amex's other major market push in the OptBlue program for small merchants.
With OptBlue drawing 700,000 merchants into a program that lets acquirers adjust costs on Amex card acceptance to eligible merchants in order to compete with other card brands, those corporate cardholders will find more merchants who have Near Field Communication-enabled terminals accepting their Apple Pay transactions. In addition, small merchants possibly using an Amex corporate card to purchase supplies may also find Apple Pay a convenient addition.
Amex has never shied away from new mobile payment technology. It was an early adopter of mobile payment technology by integrating its Serve prepaid card into the Softcard [Isis] mobile wallet in 2013.
While Softcard scuffled for consumer adoption and bank support for two years before selling its technology to Google, Apple Pay comes into the Amex fold as a more proven entity — a powerful technology company operating a secure system through card network rails and extensive financial institution support.
Plus, the corporate card market is a valuable segment in which "everyone is trying to find a way to get a leg up" on the competition, said Jay Bhattacharya, CEO and co-founder of Zipmark, a digital payment company for recurring billing and business-to-business payments.
"American Express has the corporate traveler mentality in its DNA and the combination with Apple's technology can really make strides in that market," Bhattacharya said. referring to Amex being the first card brand to implement Apple Pay in its corporate card portfolio.
The arrangement with Apple represents more of a "market opening" type of play for Amex than a real technology initiative, Bhattacharya added. "It is traditionally difficult to gain market share in the card market because it is so saturated," Bhattacharya said. "The corporate deals are big deals because they go on for a number of years with a lot of cardholders."
American Express' mobile play really completes the picture for the small merchant, Bhattacharya said. "They help them get paid [with OptBlue] and makes it easier for them to spend money, too."
American Express has also long embraced other emerging technology to stay relevant in the payments landscape. The card brand manages the new Plenti cross-merchant rewards program and recently unveiled a new twist to the digital wallet concept with American Express Checkout for e-commerce, operating exclusively for Amex card users and eliminating any need to establish credentials other than what the customer uses for viewing and paying bills online at americanexpess.com.
To add extra convenience for cardholders earning rewards points, Amex is partnering with Best Buy to allow redemption of those points when making purchases on the electronics provider's web site. A year earlier, Amex established a similar partnership with Uber Technologies Inc., allowing cardholders to use rewards points to book rides with the alternative taxi service.
Amex's technology strategy helped it attract ValueAct Capital Management, which this week invested about $1 billion in the card brand with the intent to convince Amex to continue striving for technology adoption and marketplace growth opportunities, according to a Bloomberg report.
American Express did not respond to inquiries about the Apple Pay partnership or the ValueAct investment news prior to deadline.
“Businesses today are going digital, and American Express is at the forefront of digital innovation, helping companies to streamline their payments systems and simplify their processes,” Greg Keeley, executive vice president of global corporate payments for Amex, in an Aug. 10 press release. “We continue to invest and expand digital offerings for our corporate customers in ways that maximize security and enhance the user experience.”