Amex Building a Culture Around Data, Not Payments

To make a successful digital payments product, American Express is shedding a lot of tradition.

In August, the New York credit card network opened a new Manhattan office to nurture its digital wallet, Serve — and to remove the 200 employees devoted to that project from the culture and tradition of its main office.

That unit, built from Amex's 2010 acquisition of a Florida company called Revolution Money, now works on projects such as Amex's (AXP) collaborations with tech companies such as Facebook.

"We are beginning to realize that data is actually more valuable than the payment transaction itself," says Dan Schulman, Amex's group president of enterprise growth. "The reason that Google wants to move in with Google Wallet is not because they want to move into payments ... What they really want is the data from that transaction."

Schulman's division also manages Amex's prepaid cards, which are known for having nearly no fees (rival prepaid cards are often criticized for their high pricing).

These newer products, which are designed for a demographic that may not qualify for Amex's traditional credit and charge cards, provide Amex with valuable transaction data.

On a per-click basis, Schulman says advertisers pay Google (GOOG) 80 cents to 85 cents. If Google could tell that marketer that each click resulted in a direct sale, that knowledge would be worth $8, he says. The problem for Google is that 70% of its clicks result in an offline sale, which Google can't track.

Serve is designed to follow the payment from the original advertisement to the sale, wherever that sale takes place.

"That data is tremendously valuable to marketers," Schulman says. "They can start to target all of that data to you."

Amex will let users decide what data they share, he says.

Amex is also experimenting with new features for Serve, such as direct deposit and the ability to store digital receipts.

"With the Serve platform we are on … version 1.5," Schulman says. "Then 2.0 comes out, and 2.3 and 2.4. I actually don't know when we stop."

Serve isn't yet profitable, and Schulman would not say when Amex expects it to make money. Amex also does not say how many people use the Serve platform or how much revenue it attracts.

The investment in Serve may pay off over time, observers say.

"Fundamentally [financial companies'] reason for being isn't to create technology... but they now have to use technology to attract customers," says Ben Knieff, a director of product marketing for Nice Actimize, a unit of Nice Systems Ltd.