by Stephanie Overby

AmEx Helps Customers Cash In On Foursquare

Nov 28, 20113 mins
Financial Services IndustrySocial Networking Apps

Credit card issuer American Express looks to turn location-based social network Foursquare into a new revenue stream with cash incentives for customers.

Corporate marketers are keen to tap into the power of location-based social services—applications that use a mobile device’s GPS to locate nearby friends and businesses. But figuring out how to use them to drive consumer behavior and top-line growth has proven challenging.

The biggest issue, says Dave Wolf, vice president of global marketing capabilities at American Express, is creating a reliable user interface while tapping into complex core systems and data on the back end. That’s what the credit card issuer is attempting with a program launched in June. Customers who link their Foursquare profiles to their AmEx cards can redeem merchant special offers without scanning codes or printing coupons. It offers users more tangible benefits to checking in than being appointed mayor, such as $10 off a $75 purchase at H&M. “In the digital space, user simplicity is key,” says Wolf. “[This is] the equivalent of embedding a coupon in your card.”

Participating merchants provide the discount but get to use AmEx’s system for free. When the card is swiped, it recognizes that a discount was earned and sends a notification to the buyer’s phone within 30 seconds. The discount appears as a credit on their statement.

Unlike other credit card companies, who rely on third parties for everything from card provisioning to managing merchant relationships, American Express says its vertical integration produces end-to-end transaction information to fuel these location-based offers. Inside AmEx, it’s called the closed loop and it “allows us to directly connect merchants and card member spend, and deliver exclusive, truly integrated experiences within third-party apps,” says Wolf.

The company piloted the program at South by Southwest in March and figured out how to link Amex customers’ cards to their Foursquare profiles. Specifically, “how our intricate capabilities can be exposed to external partners via APIs,” says Sathish Muthukrishnan, director of closed loop marketing and campaign platforms at AmEx, whose team helped the company integrate with Foursquare.

Going national raised major technology concerns. IT had to meet customer expectations for latency while processing millions of transactions a day. “[We] had to ensure no impact to our core tech systems while leveraging them in never-before-seen ways,” says Muthukrishnan.

The team strengthened infrastructure, adopting a consumption-based model that would balance loads to support traffic spikes. For security, each registered credit card was linked with the app through a unique identifier so no customer data would be shared. The team also mitigated the risk of immature mobile security and token infrastructure by encrypting its APIs.

Merchants have been pleased so far, says Wolf, though American Express would not share specific numbers. Muthukrishnan says the project has also provided valuable lessons for future experimentation, such as: Plan for rapid scaling, assume volatile changes, and build capabilities that can be globalized. “You will be surprised how existing capabilities can be innovatively used in the digital space.”