Signs of intelligent life at American Express

As security threats grow, and credit card fraud worsens, it’s heartening to know that someone is looking around the corner and doing some rethinking about the future of credit cards.

Having said that, I will admit to being a bit surprised at the source – American Express.  This is their second really solid idea in just the last few years.  This from the company many had left for dead at the end of the 20th century.  I believe it was a top ten list in The Wall Street Journal that listed the biggest corporate blunder of the 20th century was the AmEx refusal to participate in frequent flyer points on credit card purchases, leaving the door wide open for Visa to, seemingly overnight, crush them like a tube of Pepsodent.  And with the stigma of higher merchant fees, it really didn’t look like there was any way for them to claw their way back.

Then in 2009 or 2010 came the black card, now known as the Centurion card.  It turned out to be urban legend that there was a black credit card you could get from AmEx that required an incredibly high bar of proving your personal wealth to get this card which came with all sorts of privileges.   So what did the folks at AmEx do about this urban legend about an incredibly desirable product?  They did what they should have done, which was to take the urban legend as the blueprint for what is now the very real Centurion card.  I still haven’t seen one, but I look forward to it.

That’s great for fortifying the brand, but by definition only a tiny percentage of people qualify for this product.  What would they do to get the masses?

Well that question has been answered. Emphatically.

The new prepaid card from AmEx does a couple of really smart things,

1) Drastically reduces the risk of credit card fraud because thieves can never take more than you store on the card.

2) Gives people a good way to avoid the criminally high interest rates most credit cards charge (which I have blogged about before).

Now this isn’t perfect.  AmEx still charges merchants too much, but as soon as they sort that out, Visa is in real trouble (not that there’s really anything to stop Visa, but for now AmEx has a big first mover advantage on this).  The other asterisk which isn’t really avoidable is that by having to load the card with money before you spend it, there’s a good chance AmEx is going to make money on that float, which no doubt covers some of the money they would otherwise be getting from the high interest rates,  but for people who are really diligent about loading up their cards just ahead of need, that’s not a huge issue.

Well done AmEx. 

I don’t think this would have been as relevant ten or even five years ago, but with the recent PlayStation security breach that compromised so many cards, I think the timing on this is right on the money.  There’s probably a great partnership opportunity for Sony and AmEx to use your prepaid card for a monthly subscription and then just get AmEx or Sony to send you a monthly reminder to move your money.   In that case it would make more sense to have AmEx do it for all of your monthly subscriptions, making them more central to your day-to-day financial activities.  I’d sign up for that. . . .

I bet Michael Fertik at Reputation.com would like this idea.  He might be another smart partner for AmEx,

-Ric