They know you like French food and Spanish wine. They know you shop at Nordstrom and Trader Joe’s, that you read The New York Times and TMZ, that you spent $3,000 on a bike and five grand on last year’s vacation. They know where you’ve been and, in all likelihood, where you’re going. And more and more, they’re leveraging that information with brand and media partners wanting to get to know you just as well.
Even in an age in which social media and oversharing have made everybody an open book, perhaps nobody knows more about us than credit card companies—especially American Express. As AmEx vice chairman Ed Gilligan puts it, “Facebook has a social graph, Foursquare has a location graph, and Twitter has an interest graph. American Express has a spend graph.”
AmEx’s edge: Its so-called closed-loop data, which lets it amass cardmember, merchant and transaction data since the company handles both ends of a sale. “We know a lot about our cardmembers—we know who they are, where they spend,” as Gilligan explains.
Over the last 16 months, AmEx has forged relationships with Foursquare and others to stake a claim in the exploding (some would say imploding) deals marketplace. But the 162-year-old financial services company isn’t only taking on the Groupons and Living-Socials of the world. With commerce undergoing a foundational shift as offline and online merge, AmEx is raising the bar for traditional competitors like Visa and MasterCard as well as burgeoning rivals such as PayPal—all looking to establish themselves as a consumer and merchant’s best friend.
AmEx’s spend graph puts it in a unique position to capitalize on social, local and mobile commerce, better than perhaps any other brand. While MasterCard, with 1.8 billion cards, and Visa, with 2 billion, have more customers, they merely serve as payment-processing middlemen with financial institutions. Meanwhile, AmEx, with 98 million cardholders, serves as issuer, underwriter and processor, so unlike the other credit card brands, it owns its customer data.
It is that closed loop that puts AmEx in the family of brands like Facebook and Amazon, as opposed to Coke and Colgate. And it makes a lot of other brands want to get closer to a company with that sort of valuable data at its fingertips.
Still, AmEx hasn’t always been so adept at capitalizing on the closed loop, says Stacey Haefele, who worked on the account as a digital strategist at Digitas and is now CEO of HNW, a marketing firm aimed at the affluent.
“Even a decade ago, at the senior most levels of AmEx, they were still trying to solve the puzzle of closed loop—for years, very secret projects, close-to-the-vest projects [around] what to do and how to leverage closed-loop data,” she says. “Closed loop has always been—and I mean it quite seriously—the holy grail. They know they have this crazy asset, and they’re always trying to figure out, how do they get the most out of it?”
Last year, AmEx launched Smart Offers with Foursquare during South by Southwest. That program made it possible for consumers to link their AmEx cards with an app like Foursquare so that when they checked into participating merchants they would get an offer—say, $10 off dinner at the Cheescake Factory.
“It kind of brings the sexy back to discounting, where it’s not about bargain hunting and that awkward experience of showing a coupon to someone,” says Jake Furst, who works in business development at Foursquare and oversees the AmEx partnership. “It’s kind of your little secret between you and your smartphone, with AmEx in the background.”
Furst says the location-based service aims to provide its merchant partners three things: the frequency and recency of customer visits—something Foursquare is equipped to do—and also the value of those visits, which he calls the “most difficult one.”
“When we partner with AmEx and allow a merchant to run a deal, they can actually understand all the way to the bottom of the funnel how much spending did that actually drive and what were the results of that campaign, so we think it’s really unique in being able to track an offer from start to finish,” Furst says.