CRM

Term Project

08Fall

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

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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 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

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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

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.

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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.

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 CardsRewards 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.

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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 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.

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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 Volume

Total amount of Charges incurred during contractual timeframe less Credit 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.

Client Held Day (CHD) Incentive

The client’s speed of pay. Calculated by the Average Number of Days from 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• CHD (Client held days)

Incentive/Disincentive• Average Spent

Incentive/Disincentive• Credit Loss Deduction• Write off Deduction

• Fast Ramp-Up Bonus• Global Net Card Volume Incentives• Inactive Card Benchmark• Membership Rewards Absorption• Partnership Bonus• Performance Bonus• 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:

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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):

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

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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

Options® Membership Rewards®

Membership Rewards Plus®

Value Proposition

The Membership Rewards Options® Program-for those seeking top-name shopping and leisure rewards. Rewards from over 50 of the finest names in shopping, dining, and entertainment-like Home Depot, Morton's of Chicago, and Ticketmaster. Airline and Hotel Rewards. 2 points equals 1 frequent flyer mile or frequent guest credit for most programs

The Membership Rewards® Program-our premium travel rewards program for frequent travelers. All the shopping and leisure rewards, plus premium travel. Transfer points into the frequent flyer programs of 11 airlines. Free flight and discounts from 21 airlines like Delta, Continental, and US Airways. Free stays at hundreds of hotels. 50 luxury cruises. Vacation packages. Spa Retreats. 1 point equals 1 frequent flyer mile or frequent guest credit for most programs

The Membership Rewards Plus® Program-Fly any airline and enjoy no blackout dates with the travel program that offers ultimate freedom. All of the premium travel, shopping, and leisure rewards, plus unprecedented flexibility. Fly any airline. No blackout dates. No frequent flyer seat restrictions. You can even earn frequent flyer miles on your free flights. Point levels vary based on destination

Redeeming Air/hotel transfers require

Air/hotel transfers are at a

All MR Basic

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Rewards redeeming 2x the points (i.e. 50,000 points are needed for most domestic coach tickets, versus 25,000 points for a ticket in the standard Membership Rewards Program )

Sub-set of MR Program rewards, with several unique rewards at lower point levels

$100 Reward($100=20,000 points)

Buy points (1,000 points = $25 )

Charities

1:1 point redemption rate

All standard rewards

All travel rewards including cruises, vacation packages, airline point transfers and hotel stays

$100 Reward ($100=20,000 points )

Buy points (1,000 points = $25 )

Charities

Rewards

All travel rewards including cruises, vacation packages, airline point transfers and hotel stays

$100 Reward ($100=20,000 points )

Buy points (1,000 points = $25 )

Charities

Your Reward

Fees CCSG, Charge & Lending and OSBN program fee: $0

CS only program fee: $40

CS linkage fee: $35

Consumer Charge & OSBN program fee: $40

CS only program fee: $75

Platinum/RPG program fee: $0

CS linkage fee: $35

OSBN linkage fee: $10

Lending Cards(must be linked to an

Consumer Charge & OSBN program fee: $75

CS only program fee: $150

Platinum/RPG program fee: $35

Centurion program fee: $0

CS Linkage fee $35/OSBN Linkage Fee $10

Consumer

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enrolled Charge Card to be eligible)

Lending(must be linked to an enrolled Charge Card to be eligible)

Earning 1 point for $1 spend

No earn cap

No point expiration

1 point for $1 spend

No earn cap

No point expiration

1 point for $1 spend

No earn cap

No point 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 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

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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 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:

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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.

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

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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 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

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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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P O CS I

Systems Used DOCXLOTUS NOTES

ESSBASELNDB

Card Rebate Process Level 1 SIPOC

LOTUS NOTES

Global Corporate

Service GroupManager Account

Development(MAD)

Director Account

Development(DAD/

Client Contracts/AMENDMENT

Review Contracts

Download Data from systems

Calculate Incentive

Draft Mail , Attach

Prelim File forFCW

Review/Send to MAD/DAD

Any Exception in the calc

Y

Final Calculation

Recalculate after exception Approval

fromFinance and attach Draft mail for FCW review / resend to

MAD/DAD

N

Global Corporate Services

ReportsGenerate Monthly

Calculation list

Contract Management

Team

FDSReps

@work, Essbase,

GIS

Activity wise breakup:

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

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Regional Finance

AccountManager

S I P O CACTIVITY

REPS, Essbase, GIS

REPS ReportUM Report

Reconciliation – UM/REPS

Pro-Active Notification

Account Manager

Review & confirmation

- MR Enrollee, Contract, CID Hierarchy confirmation

Calculation Incentive Calculation Template

Account Manager

Approved Calculation

Consolidation & Review

Consolidated File

- Approval

- Bank Details

Prepare Payment Advice

Payment Advice

Regional Finance

Account Manager Review

Other Regions

- Regional Finance

- Account Manager

Regional Finance Review

Account Manager Review

Client

Review and Approval

FCE

Payment Accounting

AD/ Sales / Pricing

New ContractAccrual / Reserve Adequacy

Run Adequacy

Existing Contracts

Report Extraction & Circulation

Rebate Calculation

Consolidation (If Global/ EMEA Led

Payment Processing

SLA*(WD)

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31

* Assuming 90 day rebate payout contract

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Regional Finance

AccountManager

S I P O CACTIVITY

REPS, Essbase, GIS

REPS ReportUM Report

Reconciliation – UM/REPS

Pro-Active Notification

Account Manager

Review & confirmation

- MR Enrollee, Contract, CID Hierarchy confirmation

Calculation Incentive Calculation Template

Account Manager

Approved Calculation

Consolidation & Review

Consolidated File

- Approval

- Bank Details

Prepare Payment Advice

Payment Advice

Regional Finance

Account Manager Review

Other Regions

- Regional Finance

- Account Manager

Regional Finance Review

Account Manager Review

Client

Review and Approval

FCE

Payment Accounting

AD/ Sales / Pricing

New ContractAccrual / Reserve Adequacy

Run Adequacy

Existing Contracts

Report Extraction & Circulation

Rebate Calculation

Consolidation (If Global/ EMEA Led

Payment Processing

SLA*(WD)

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* Assuming 90 day rebate payout contract

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S I P O CACTIVITY

REPS, Essbase, GIS

REPS ReportUM Report

Reconciliation – UM/REPS

Pro-Active Notification

Account Manager

Review & confirmation

- MR Enrollee, Contract, CID Hierarchy confirmation

Calculation Incentive Calculation Template

Account Manager

Approved Calculation

Consolidation & Review

Consolidated File

- Approval

- Bank Details

Prepare Payment Advice

Payment Advice

Regional Finance

Account Manager Review

Other Regions

- Regional Finance

- Account Manager

Regional Finance Review

Account Manager Review

Client

Review and Approval

FCE

Payment Accounting

AD/ Sales / Pricing

New ContractAccrual / Reserve Adequacy

Run Adequacy

Existing Contracts

Report Extraction & Circulation

Rebate Calculation

Consolidation (If Global/ EMEA Led

Payment Processing

SLA*(WD)

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31

* Assuming 90 day rebate payout contract

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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

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