American Express (AMEX) is very familiar with using data analytics to benefit both its consumer and corporate business clients. AMEX has been monitoring its closed loop credit system for fraud for years – assessing millions of dollars worth of transactions in milliseconds for indication of fraudulent activity – while corporate clients have been able to work with AMEX’s consumer’s purchasing data to gain insight into basic spending patterns. However, AMEX took a new step forward in data analytics in November, 2017 when they launched American Express Advance, a state of the art, predictive analytics platform for business clients. Now, businesses can gain an unmatched understanding of purchasing patterns for potential consumers. By combining data from both the AMEX closed loop system and publicly available sources, AMEX Advance delivers powerful insight into factors that formed significant predictors of buying behavior and therefore who should be on the receiving end of targeted marketing.
How Did AMEX Get to Where It Is Now?
As a leading global payments, travel and expenses company, AMEX is privy to $1 trillion of point of sales data every year and roughly 5 – 7 billion transactions. Given this volume, AMEX leadership has been focused on big data utilization since the financial crisis. The company has made a serious push to be a leader in the field and employs over 1,500 data scientists across the world.
Prior to AMEX Advance, AMEX had successfully utilized data analytics in a variety of contexts. First, AMEX employed data analytics to help predict which purchases could be the result of a stolen card. This effort has led AMEX to earning its lowest fraud rate amongst the major credit card companies. Second, in 2014, AMEX undertook an internal, large data analytics project to scan its consumer data for variables that would help reduce consumer churn. AMEX built and tested algorithms using 150 variables to help predict which consumers were most likely to leave the card, and then tailored AMEX’s response to those consumers, offering targeted marketing to entice the consumers to stay.
AMEX Advance: Value Creation and Value Capture
Now, AMEX hopes to solve marketing issues for its business clients by offering its predictive analytics capabilities to small businesses through AMEX Advance. Using AMEX Advance, case studies have demonstrated that a small business client, such as pet store, would not necessarily be interested in knowing which customers already own pets, but what customers bought more of prior to buying a pet within 3 months. For example, by running the data analytics on years of AMEX consumer’s spending habits, AMEX reported that consumers who had increased spending on landscape services, summer camp, and bicycle shops proved to be more likely to buy a pet in the next 3 months. Next, AMEX consumers who demonstrated these spending tendencies would be included on a targeted marketing list. Through AMEX Advance’s third party partnerships, the teams can deliver targeted marketing to this select audience with the highest intent to purchase. The overall value created for the client is unparalleled marketing customization in the forms of these targeted audience lists, based on years of spending and trillions of dollars of spending data.
Big Data Future
In an interview with the President, Credit Risk and Global Information Management, Ash Gupta discusses that AMEX still faces many opportunities and challenges with big data implementation going forward. Despite the recent big data implementation successes at AMEX, Mr. Gupta continues to site culture and implementation as an ongoing process. For a transforming firm to be exceptional, he explains, the algorithms are not enough. The key will continue to be quality data as an input, quality algorithms to fuel the machine learning, and ultimately, the right people with the right culture. The first two don’t amount to much without the last piece, and as a leader of AMEX, he states that the firm continues to invest in the right people at the right time, and to drive the data-centric culture from the top.