Amex's new feature could strengthen results (AXP)

BI Intelligence

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American Express launched two new features, called Pay It and Plan It, to give US cardholders mobile bill pay flexibility. Pay It allows customers to use the mobile app to pay immediately for low-value purchases rather than waiting for their statements.

And Plan It serves as a financing option by offering customers fixed-fee payment plans, lasting up to 24 months, for qualifying purchases over $100. The features are already available on all US cards, including cobrands, issued before June 1 of this year, with more recent cards gaining access in early 2018.

Amex’s embrace of two popular features could be attractive to customers.

• The move is giving customers increased flexibility. Amex said Pay It appeals to customers who like to pay their bills in segments over a statement period, indicating demonstrated interest. And Plan It could also be attractive, as 17% of US adults are interested in monthly payment plans to finance big purchases. Consumers across the board look for ways beyond credit cards, or complementary to those cards, to pay for large purchases.
• And it’s allowing them access on a convenient channel. As both mobile banking and mobile bill pay become more popular, it makes sense that Amex is looking for innovative ways to embrace these channels. That’s especially true in light of the success Amex has been seeing on mobile of late — the number of monthly users accessing the firm's apps doubled from 2014 to 2016, and logins increased by 50%.

And that could help the firm execute on two key targets:

• Spending and revenue: By allowing customers to pay small bills right away, Amex is making balances seem lower, which could encourage more spending over the course of the month. And on the other side of the coin, financing options make high-ticket purchases more palatable, especially if risk-averse customers can eschew interest; that could push customers to do more of their high-value purchasing on Amex rather than on a competitor's card. That helps keep the product top-of-wallet, and could increase spending and, in turn, revenue, which will come in addition to the amount the firm collects on the fixed fee. That’s something the firm needs as it looks to recover from last year’s Costco portfolio loss.
• Reaching into new customer bases: One way Amex has been working to recover from the Costco loss is by stretching into customer bases beyond its traditional high-income audience. The mobile aspect of these offerings, plus the flexibility, could help Amex attract millennials and build up its base in that age group as they increasingly seek credit. And the financing options could appeal to lower-income consumers who want options for larger purchases, which could build up that segment of the firm’s base.

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed credit card rewards explainer that:

• Identifies the costs associated with offering rewards for issuers and how they have increased over time.
• Details why credit card issuers continue offering high-valued rewards.
• Analyzes how the industry has evolved since 2011
• Explores how credit card issuers will advance in order to continue reaping the benefits of offering rewards without assuming increased costs. 

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