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Fall

08
CRM
Term Project

CRM Study of American Express

Submitted To: Prof. Nalin Jain Submitted By: Group Fellowship

Amit Malik(68),Kunal Gupta(85)

Nikhil (92);Richa Chopra(107)

Arthur(20091); Olivier(20095)
TABLE OF CONTENTS

S.No Title Page

1. Introduction 3

2. Types of Card(Segmentation) 5

3 Card Fees 6

4 Basic Parts of Calculation 7

5 CRM Process 7

6 CRM Programmes/Initiatives 8

7 CRM Focus 13

8 Data Security and Privacy 13

9 Integral View of CRM 15

10 Activity wise breakup 16

11 Business Development Process(result of CRM) 18

12 References and Disclaimer 19

INTRODUCTION

About American Express:

American Express is a leading global payments, network and travel company backed by one
of the world's most recognized brands. American Express is unique in the payments industry

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as an issuer of cards as well as a worldwide network that processes millions of merchant
transactions daily. It offers the broadest array of charge, credit, prepaid and co-brand cards for
consumers, small businesses, midsize companies and large corporations. American Express
issued its first charge card in 1958. Within five years, more than 1 million cards were in use at
approximately 85,000 establishments within and outside the United States. Soon, the
company began introducing local currency cards in markets outside the United States, adding
programs that made it possible for card members to extend payment on large travel
expenditures, and launching additional products, such as the American Express Gold Card in
1966. Within ten years, the card business was growing steadily and generating a healthy
profit. And, to the surprise of many, so was the company’s traveler’s cheque business.

In the late 1970s, American Express – like many other large companies of the era – was intent
on becoming a global conglomerate, with huge, multifaceted businesses and diversified
income streams that could protect the company in the event of hard times in one of its core
businesses. During the next several years the company acquired several large acquisitions
toward that end, including Shearson Loeb Rhoades, First Data Resources, Trade Development
Bank, Lehman Brothers and Investors Diversified Services (rebranded American Express
Financial Advisors in 1995 and spun off as Ameriprise, Inc. in 2005).

Despite the introduction in 1987 of a new revolving credit product in the United States, the
company’s share of the U.S. card market fell during the late 1980s and early 1990s. Trouble
was also brewing on the merchant front. In Boston in 1991, a group of restaurateurs, upset
about what they felt were American Express’ unfairly high rates, staged a revolt that came to
be known as the Boston Fee Party. Outside the United States, card suppression – when
merchants try to dissuade customers from using the American Express Card – began to rise.
Rebuilding relationships with merchants became a top priority, as did significantly
increasing American Express Card acceptance across a wide range of industries and
geographical markets. The company also began forming a number of strategic partnerships
with selected airlines, banks, retailers and other key businesses around the world. Proving
highly successful, these alliances have enabled American Express and its partners to
efficiently leverage their brands and business strengths while providing premium products and
services to their mutual customers.

In 2008, consumers and business spent $683 billon on American Express cards, the most of
any card issuer. There are about 92 million American Express cards in the marketplace around
the world, which are accepted by millions of merchants in more than 200 countries and
territories. American Express is widely recognized for providing superior customer service. It
has earned many honors, including the 2008 J.D. Power and Associates award for highest
customer satisfaction among U.S. credit card companies.

PARTICIPANTS IN THE CREDIT CARD INDUSTRY

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• Cardholder: The holder of the card used to make a purchase or the
consumer.
• Card-Issuing bank: The financial institution or other organization that
issued the credit card to the cardholder. This bank bills the consumer for
repayment and bears the risk that the card is used fraudulently.
• Merchant: The individual or business accepting credit card payments for
products or services sold to the cardholder.
• Acquiring bank: The financial institution accepting payment for the
products or services on behalf of the merchant.
• Credit Card Association: An association of card-issuing banks such as
Visa, MasterCard, Discover, American express, etc. that set transaction
terms for merchants, card-issuing banks, and acquiring banks.

Types of Cards(Segmentation measure)

Credit and charge cards come in a variety of categories to fit almost all purchasing needs.
There are consumer cards, business cards and corporate travel cards. Each type offers a
different combination of financial controls, features, options and perks. They have in common
are convenience and flexibility to buy now and pay later, either in full each month or over
several months. All cards also come with the responsibility to pay back what you spend
according to the cardholder’s agreement.

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Charge Cards

Charge cards are a type of credit card that require you to pay the full amount you’ve charged
each month. There are no periodic finance charges, and charge cards often come with
rewards.

Credit Cards

Credit cards offer a revolving line of credit, meaning that consumers may carry a balance
from month to month rather than having to pay the balance in full every month. Each time
you use a credit card, you are essentially taking out a loan, and card issuers require that a
payment of at least the minimum amount due must be paid by the due date every month.
Interest charges typically accrue on amounts charged.

Rewards Cards
Rewards cards come in the form of credit and charge cards and offer consumers extra value
for purchases. Rewards include cash rebates, merchandise, airline tickets, hotel stays, and
gasoline and gift cards. The way rewards are earned and redeemed varies by product.

• General rewards cards usually earn one or more points for every dollar of purchases.
The points may be redeemable for gift cards, electronics, travel, cash and more.
• Cash-back cards allow consumers to earn cash rewards for making purchases. The
cash reward, typically a percentage of purchases, may be applied to a balance(if there
is one)or to future purchases with select retailers. Alternatively, the cash reward may
be sent to the cardholder in check form.
• Airline mile / frequent-flier cards allow consumers to earn frequency program points
for dollars charged. Points can be redeemed for rewards such as airline tickets and
airline upgrades, hotel rooms and car rentals.
• Hotel or travel cards allow consumers to earn points toward free nights and/or room
upgrades at a particular hotel chain, and sometimes toward airline tickets and rental
cars, too.
• Retail or category rewards cards earn points for products or services bought from a
specific retailer, such as a department store, gas station, home improvement store or
bookstore, or a category of retail spending such as gasoline or grocery. Some retail
rewards cards also offer discounts and invitations to special events.
• Refer to your cardholder’s agreements for information on rewards programs for the
credit cards you carry.

Business Cards

Similar benefits that consumers enjoy from credit and charge cards are available to
companies, which can use cards for everyday business expenses including office supplies,
services (temporary labor, consultants) and corporate travel. Besides being a convenient
alternative to the invoice-and-paper-check payment method, business cards help with expense
tracking, simplify bill payment and reduce reliance on petty cash.These cards come in a
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number of permutations — credit or charge, rewards or not, basic or premium — but also may
come with additional features tailored to business needs. Business card users can determine
billing arrangements (individual or central billing, for example) and can set spending controls,
which limit card use to designated types of merchants .

Card Fees

Part of being a responsible card holder is to understand how card fees work. It is important to
read the cardholder agreement when your card arrives, file it someplace where you can find it
if you need to refer to it, and feel free to call your card issuer to clarify terms and ask
questions.

Fees range from annual fees, levied on all card holders, to fees for certain kinds of optional
transactions, such as balance transfers and cash advances. Other fees are punitive, levied
whenever a card holder violates the terms of a card agreement.

The following are the most common card fees:

• Annual fees are common on charge cards, rewards cards and airline miles credit
cards, and on secured and sub-prime cards.
• Many secured and sub-prime cards charge an application fee.
• Card companies usually charge balance transfer and cash advance fees.
• Fees made outside the U.S. may incur a charge for foreign currency exchange.
• There may also be a fee if you request additional copies of a monthly statement.
• Penalty fees usually are charged for late payments; purchases made over the credit
limit; and returned checks, if your bank account didn’t have adequate funds.

In addition to a penalty fee, a card issuer may raise the interest rate on your credit card.
American Express Card members should refer to their Card member Agreement for more
information on fees and penalties.

Basic Parts of a Calculation

Net Annual Charge Total amount of Charges incurred during contractual timeframe less Credit
Volume Losses, delinquency fees, assessments write-offs and credits as defined in the
contract.

Gross Incentive Net Annual Charge Volume (NACV) multiplied by the basis points indicated
within the contract.

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Client Held Day The client’s speed of pay. Calculated by the Average Number of Days from
(CHD) Incentive the billing date to the date the funds are received.

Average Spend Annual charge volume divided by the average Cards In Force.

Membership Rewards Cost associated with participation in the MR program less any Program Fees.

Other Possible Adjustments

• Claw backs • Fast Ramp-Up Bonus


• CHD (Client held days) • Global Net Card Volume Incentives
Incentive/Disincentive • Inactive Card Benchmark
• Average Spent • Membership Rewards Absorption
Incentive/Disincentive • Partnership Bonus
• Credit Loss Deduction • Performance Bonus
• Write off Deduction • Signing Bonus

CRM PROCESS

CRM programme on the whole is managed by focussed teams determined on area assignments
depending on volumes of spent volume across the globe. The dedicated teams are:

• EMEA (For Europe, Middle East and Africa)


• JAPA (For Japan , Asia Pacific and Australia)
• US
• CANADA
• LAC ( For Latin American Countries)

CRM programmes/initiatives at American Express

1.) Internet Protocol Telephony services(With 24*7 Customer Care)-

American Express, a world-leading provider of credit card and financial services, has installed
Avaya Internet Protocol (IP) Telephony solutions at its Middle Eastern Headquarters and Asia
Pacific Operation centres. Avaya Inc. is a global provider of business communications
applications, systems and services

2.)Incentive Services (AIES):

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American Express Incentive Services (AEIS), a business-to-business prepaid card industry
leader, has joined with Centive, the leader in on-demand strategic sales compensation
management, to offer prepaid AEIS cards as a special incentive reward.Unlike cash, cards
may be customized and personalized, and can direct recipients spending options to ensure that
the reward is memorable. AEIS, a joint venture between American Express Travel Related
Services Company Inc. and Maritz Inc., provides business-to-business reward solutions
including prepaid cards, American Express® Gift Cheques and a Web-based reward
management tool. Its products address a broad array of applications such as employee reward
and recognition, sales incentives and consumer promotions while helping clients drive
consumer and employee behaviors, build loyalty and increase brand awareness.

3.)Advisory Services:

AG has established a Customer Relationship Management (CRM) partnership with American


Express Finan management GmbH, which is headquartered in Heidelberg. The American
Express subsidiary, which only began operations in May 2005, has set itself the objective of
servicing its customers even more extensively, and of further enhancing customer loyalty
under the roof of the powerful “American Express” brand. Through this subsidiary, the credit
card company has added personal advisory services in the areas of liquidity, provisioning and
asset management to the range of financial services it holds available for members in
Germany. The new offerings are based, under the American Express Select heading, on a
portfolio of select independent financial products. For American Express Finanz management
GmbH, the sale of these financial products is not about clinching short-term contracts.
Instead, the aim is the continuous servicing of its members within the scope of the American
Express lifetime concept. It is in this context that the financial services provider will from
now on place its trust in new partner update, whose CRM system marketing.manager in the
Financial Services (FS) sector version supports lifetime customer advisory as a standardised
solution.

4.)Membership Rewards Programme:

About the Membership Rewards Program

Membership Rewards Membership Rewards


Membership Rewards®
Options® Plus®

Value The Membership The Membership The Membership


Proposition Rewards Options® Rewards® Program-our Rewards Plus® Program-
Program-for those premium travel rewards Fly any airline and enjoy
seeking top-name program for frequent no blackout dates with the
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shopping and leisure travelers. All the travel program that offers
rewards. Rewards from shopping and leisure ultimate freedom. All of
over 50 of the finest rewards, plus premium the premium travel,
names in shopping, travel. Transfer points shopping, and leisure
dining, and into the frequent flyer rewards, plus
entertainment-like Home programs of 11 airlines. unprecedented flexibility.
Depot, Morton's of Free flight and discounts Fly any airline. No
Chicago, and from 21 airlines like blackout dates. No
Ticketmaster. Airline Delta, Continental, and frequent flyer seat
and Hotel Rewards. 2 US Airways. Free stays restrictions. You can even
points equals 1 at hundreds of hotels. 50 earn frequent flyer miles
frequent flyer mile or luxury cruises. Vacation on your free flights. Point
frequent guest credit packages. Spa Retreats. 1 levels vary based on
for most programs point equals 1 frequent destination
flyer mile or frequent
guest credit for most
programs

Redeeming • Air/hotel • Air/hotel transfers • All MR Basic


Rewards transfers require are at a 1:1 point Rewards
redeeming 2x the redemption rate • All travel rewards
points • All standard including cruises,
(i.e. 50,000 rewards vacation packages,
points are needed • All travel rewards airline point
for most domestic including cruises, transfers and hotel
coach tickets, vacation stays
versus 25,000 packages, airline • $100 Reward
points for a ticket point transfers ($100=20,000
in the standard and hotel stays points )
Membership • $100 Reward • Buy points (1,000
Rewards Program ($100=20,000 points = $25 )
) points ) • Charities
• Sub-set of MR • Buy points (1,000
Program rewards, points = $25 ) • Your Reward
with several
unique rewards at • Charities
lower point levels
• $100
Reward($100=20
,000 points)
• Buy points (1,000
points = $25 )

• Charities
Fees • CCSG, Charge & • Consumer Charge • Consumer Charge
Lending and & OSBN & OSBN program
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OSBN program program fee: $40 fee: $75
fee: $0 • CS only program • CS only program
• CS only program fee: $75 fee: $150
fee: $40 • Platinum/RPG • Platinum/RPG
program fee: $0 program fee: $35
• CS linkage fee: • CS linkage fee: • Centurion
$35 $35 program fee: $0
• OSBN linkage • CS Linkage fee
fee: $10 $35
/OSBN Linkage
• Lending Fee $10
Cards(must be
linked to an • Consumer
enrolled Charge Lending(must be
Card to be linked to an
eligible) enrolled Charge
Card to be
eligible)
Earning • 1 point for $1 • 1 point for $1 • 1 point for $1
spend spend spend
• No earn cap • No earn cap • No earn cap

• No point • No point • No point


expiration expiration expiration

5.) American Express Acquisition of Revolution Money To Develop Next Generation Payment
Products

Revolution Money, a secure, state-of-the-art technology platform, was created to deliver


significant value to both consumers and merchants through two products, Revolution Card
and RevolutionMoneyExchange(TM).It is a Cross selling exercise and upselling exercise
depending on type of customers. The Revolution Card provides consumers with enhanced
PIN-based security, identity protection and numerous merchant discounts and incentives.
Money Exchange is an online payment service that offers consumers an easy, secure and free
way to instantly send and receive money online. Revolution Money, provides secure
payments through an internet based platform. No names or account numbers appear on
Revolution cards and transactions are authorized by using a PIN number. The company's
online person-to-person payment accounts are FDIC insured and ideally suited for social and
instant messaging networks. The initial areas of focus will include:

• Developing re-loadable, prepaid products for new segments of the market


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• Introducing new products for card members who currently use other alternative
payment systems
• Creating payment alternatives designed for social media sites and allowing open APIs
that can help developers distribute new product innovations

6.)Business Insights,the Analytics service-

American Express announced the launch of American Express Business Insights, a new
analytics and consulting organization that draws on the power and reach of the Company's
global network to help business customers develop better-informed strategies to grow their
business. Unlike conventional research that relies on static, self-reported information or
surveys, Business Insights combines fresh, real world aggregate trend analysis to provide
unique business planning and marketing expertise. Business Insights will identify strategic
opportunities drawn from the aggregate spending patterns on approximately 90 million cards
in force across 127 markets. It will work with business clients to provide data-driven insights
focused on specific customer segments that will help them to develop customized marketing
and growth strategies. Business Insights will be housed within the American Express Global
Merchant Services unit. In keeping with American Express' privacy principles, all data
analysis is done only on an aggregate level and does not disclose any personally identifiable
information to merchants or partners for marketing purposes. At American Express, aggregate
data involves pooling transactional data to create customer segments such as “ultra-affluent”
or “large corporate” to better evaluate the purchasing patterns within a business.

Business Insights will deliver a range of potential consulting applications that includes:

• Identifying consumer spending trends


• New product innovation
• Geographic expansion
• Customer acquisition and retention
• Improved marketing and advertising strategies
• Customer relationship management
• Improved procurement processes

The approximately 90 million cards in force and more than four billion transactions that take
place each year at American Express serve as the foundation for analyzing consumer, small
business and corporate spending patterns. Business Insights will customize its analyses and
also draw on publicly available market data to provide valuable advice that businesses can act
on.Business Insights provides a tiered offering to customers with products and services that
match the needs of any sized company. In addition to large-scale, global consulting projects,
Business Insights also offers a suite of quarterly benchmarking reports that provide spending
trend analysis among various customer segments, vertical industry trends, and specific
merchants' market share and customer mix. It works through building customer Pyramids.

7.)Introduction of SEPA in European Union:

In January 2008, the European Union launched a major initiative to create the Single Euro
Payments Area (SEPA). SEPA aims to create a single “domestic” payments market
throughout the EU, eliminating any distinctions between cross-border and national payments
within the EU countries that have adopted the euro as their common currency. American

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Express has long operated its business in a manner consistent with SEPA’s core principles.
Nevertheless, the Company has pledged to meet several additional objectives and has released
a SEPA Declaration, which outlines our framework and principles for supporting SEPA.

8.) Data Mining and Data Warehousing:

In order to provide superior and customised services to full value, American Express manages
a Data Warehouse by an in housed department of IBM. Data mining is well in place with
parenteral controls managed over Citrix metaframe under the names REPS, Japa and GNS for
different segments of customers and their needs.

A standard practice in the relationships with corporate clients and business partners is to
provide financial rebates. The practice is wide-ranging across global markets and products
and especially prevalent in corporate card arrangements. The financial rebate represents a
critical aspect of contracts that clients scrutinize closely during negotiations and afterward as
periodic payments are made. Additionally, the rebate offering is often times the deciding
factor between competing Corporate Card Companies. The ability to compete for card
customers is becoming increasingly dependent on Amex’s ability to provide tailored contracts
and specialized support. Clients consistently rank rebate payments high on their list of key
satisfaction drivers. The rebate programs are structured to reward/ penalize clients for their
performance against specific drivers-

• To motivate the client to improve drivers

• To promote the right performance in other relationships

• To promote full implementation/penetration of corporate card program

• To promote ancillary products

• To be more competitive in the marketplace

Card Rebate team (FCE) is responsible for processing accurate & timely calculations for these
contracts (US, EMEA and JAPA) and for timely payment & accounting of card incentive
payments to the clients. (Currently EMEA only).

The outputs of these processes are:

• Excel calculation files for US are sent to Card Rebates team for further review, approval,
consolidation and payment as appropriate.

• Excel calculation files for EMEA & JAPA are sent to Account Manager & Regional
Finance for review & approval prior to processing of payments and accruals. For US
calculations are sent to FCW counterparts for their review & payments to clients.

• PTU forms for EMEA & JAPA sent to Regional Finance for payment approval.

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• EMEA Accrual Accounting – Preparation and posting of JE (Journal Entry) for Accruals
booking basis forecasts sent by COE (Centre of Excellence).

• REPS--- SQL based and takes feed from CARE

• UM---based on AR and CARE

CRM Focus

Using the online channel: (e-CRM)

In recent years, Amex has significantly increased the capabilities of its Web site for reaching
new customers, servicing, travel management and more. Now, in markets around the world,
they offer online tools that allow customers to apply for a card, check and pay bills, redeem
rewards points, take advantage of special merchant offers, book travel and receive detailed
spending reports, all in a paperless environment. Since it began offering these services, so
they have developed online policies and enhanced security measures to protect their
customers .

Data Security & Privacy :

Types of Credit Card Disputes

There are three separate protections for credit card consumers. Each of these protections are
intended to require the credit card lender to follow certain procedures when you have a
problem with a credit card transaction. They do not require the lender to come to any
particular decision, that is, they do not prevent the lender from concluding at the end of an
investigation that you are liable for a particular charge. Your actual liability for a charge will
depend on state or other federal law and the facts in your situation.

1. Unauthorized use

The first credit card protection shields you against liability for unauthorized use of your credit
card, that is, when someone steals, borrows or otherwise uses your card or card number
without permission. These problems have increased as many more businesses accept credit
card transactions by telephone and on the Internet.

2. Billing Error Procedures

The second type of credit card protection involves disputes about your bill. These disputes
may include a merchant overcharging you or charging you for products you never received. A
law called the Fair Credit Billing Act provides forces lenders to follow specific “billing error”
procedures to resolve the dispute.

3. Right to withhold payment

The third important credit card dispute protection is the right to stop payment. Stopping
payment is a very powerful tool that you can use when you are dissatisfied with something
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you bought with a credit card. You can use this power if you have a legitimate complaint
about the quality of goods or services you bought with the card and you first make a good
faith effort to resolve the problem with the merchant directly.

In such an environment, CRM has proved its worth in building and maintaining credibility of
American Express as a whole by a dedicated Customer facility for data security and dispute
handling. Though the dispute rate is negligible (1 in million), and this can be considered an
achievement of CRM system in place.

Integral View of CRM as applied at Card Rebate Process:

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Card Rebate Process
S I

Review
Global Contracts
Corporate
Service Group
Manager
Account
Development Reports
(MAD) Generate
Director Monthly
Account Calculation list
Development
(DAD/
15

Contract Client Contracts/


Activity wise breakup:

AD
Pric

ACTIVITY

Report 16
Login through ICARUS Id & Password given by the information integrity team.

Click on the launcher as mentioned in the above screen.

Indicative CRM application screen

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Business Development Process (Result of CRM)

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References:

1. www.americanexpress.com

2. Credit Card Manual 2008

3. CRM Concepts and Application , Alok Kumar,Chabbi Sinha, Rakesh Sharma

4. American Express CRM Initiatives

5. “Getting Closer to your Customer through CRM”

6. Contact- Mr.Chetan Lohani , Project Lead-EMEA

7. Contact-Prof. Nalin Jain ,Professor CRM ,FORE

Disclaimer: This report is an independent academic work. This report is solely made
for academic learning purpose.

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