Amex Experiment: Replace Cards Online With Passwords

Written by Evan Schuman
February 22nd, 2013

American Express (NYSE:AXP) on Thursday (Feb. 21) took a page from both Apple (NASDAQ:AAPL) iTunes and Amazon (NASDAQ:AMZN) 1-Click, launching a program in India that allows online shoppers to use a password instead of having to type in card number, expiration date and security verification number. Beyond speed for shoppers, this approach takes all of that sensitive data out of the retailer’s servers. The India rollout is the first test of this tactic worldwide.

The program, called ezeClick, was developed by the Amex India group and is being closely watched by Amex corporate. “We let each market develop what they need and what they think will work for them,” said American Express Spokesperson Jim Tobin. “I assume it will start showing up in other markets.”

The India rollout follows a February 11 Twitter offering in the U.S., where shoppers can also sign up in advance and are then able to use Twitter to reply to—and purchase—various product and service promotions. That service requires shoppers to hang around on Twitter, so they can reply quickly (15 minutes is the maximum time permitted) when they see the confirmation note.

“The idea is that we want to make sure that you’re still interested in doing this” purchase, said Amex Spokesperson Bradley Minor. “We think 15 minutes is a great window. We even send a reminder seven minutes in.”

American Express has also added a small bit of non-Twitter verification (namely, an E-mail message to the customer) just in case someone has taken over a shopper’s Twitter account and tries to verify a bogus purchase. Unless the bad guy has also taken over that shopper’s E-mail account, the real customer would get a heads-up of what is going on and would, theoretically, have time to stop the shipments.

Both of these programs reveal an American Express that is aggressively trying to stay relevant and, dare we use the term, hip. (My teenage daughter has banned me from using that word, but if a guy doesn’t rebel every now and then, what’s the point of life?)

Both of these programs also have nice side benefits. The Twitter effort is free marketing, with all participating customers shouting out to all of their Twitter followers, “Hey! I just used Amex to buy something. And it was a great bargain, too.” That’s what happens when Twitter is being used publicly to make purchases.

The ezeClick program has the obvious benefit of making Amex purchases easier than using Discover (NYSE:DFS), Visa (NYSE:V), MasterCard (NYSE:MA) or Diners Club. (Does anyone use Diners Club any more? I digress.) At least that’s true until those brands adopt similar programs. But the better incentive is that, once shoppers have gone through the trouble of creating this account and memorizing this new online Amex password, they are going to go out of their way to find sites that will accept Amex and are participating in this program. And when given choices, shoppers will likely be motivated to use that card more.

It will be interesting to see how many E-tailers go through the trouble of changing their payment page to allow for a password instead of the standard fields. It should be a classic chicken/egg issue. Few will want to make those changes until they see the program becoming very popular—and it won’t be popular at all until a lot of sites start accepting it.

And what incentives will be offered, if any? Retailers clearly pay a higher interchange fee for Amex purchases, so most sites have little reason to encourage shoppers to go for Amex above anything else. To make this change and to, therefore, encourage a higher percentage of purchases to go through a less-profitable payment card, that’s going to take a fair bit of convincing.

No wonder American Express is watching India’s rollout so closely.


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