Posted by William Charles on March 8, 2017
Credit Cards

Published on March 8th, 2017 | by William Charles

58

American Express Discusses Plans To Fight ‘Gaming’ Of Their Credit Card Rewards During Investor Day (Transcript Now Included)

Today is American Express’ investors day, one of the things they have touched on is people gaming credit card rewards. Unfortunately there is no transcript of the event (update we now have a transcript, relevant sections below the slides), but we do have the following slides from their presentation.

In addition Bloomberg have some quotes:

  • An increase in incentive bonuses has boosted so-called gaming by credit-card applicants looking for a quick reward, Doug Buckminster, president of global consumer services said
  • “opportunity to use our analytics and technology to surgically remove gaming and reinvest in higher-quality, more loyal new customers…”
american express address gaming

p63 of slides

american express address gaming

Transcript

So turn my attention to efficiency and to a topic that has been popular in industry circles these days, and it goes by various names, gaming or churning. And for purposes of this discussion, I’ll define it as a consumer taking out a new credit card account, engaging in the first 3 or 4 months at the level required to earn the acquisition incentive, a cash back incentive or airline points, and then disengaging and moving on. And certainly, the very intense, at times bordering on irrational, competition based on rich sign-up bonuses and a whole social media ecosystem that’s grown up around this particular phenomena has put pressure on gaming and churning trends. Now our more conservative incentive structure and the controls we have in place have largely kept gaming rates constant over the last couple of years, but we still see a substantial opportunity to use our analytics and technology, surgically remove gaming and reinvest in higher-quality, more loyal new customers, achieving an acquisition efficiency gain on a year-on- year basis. And so we’ll leverage technology and analytics at all of our marketing and underwriting touch points. We'll suppress gamers across channels and at the point of application.

Key to enabling all of these use cases from corporate cross-sell to member referral to gaming reduction is our new dynamic application and underwriting technology. And this technology supports custom application flows, it’s device responsive, it allows applications to be interactive with a customer with respect to their data entry. And it allows customer underwriting applications as well. In short, this new suite enables us to maximize conversion rates, while optimizing margins through interactive negotiation with applicants.

In the question & answer section it was briefly mentioned again:

And listen to what Doug said on gaming. My view is you’re going to hear a lot more about gaming in the next 12 to 36 months in the card industry, a lot more about gaming. What we’re focused on is long-term, sustainable, profitable relationships with our customers. Yes? All right, Ken?

What This Means For Us

Honestly I don’t think this means a great deal, American Express already have their once per lifetime restriction and a rewards abuse team. I think there are a few other areas they could target (I won’t tempt fate by mentioning them), but for the most part they have already locked down their rewards for gamers.

The issue credit card issuers have is they want to restrict unprofitable customers (“gamers”) from signing up and receiving bonuses and at the same time ensure that people who are profitable can still sign up. That’s why they have once per lifetime rules, but still send out targeted offers without these restrictions. They also need to balance this with the demands from co-branded partners.

Hat tip to /r/churning



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noturbizniss
noturbizniss

Re:the very last bullet point in the gaming slide…

Sounds to me like it’s the opposite of one of your year end negative predictions. Given the low cost to amex of this and the increased swipe fees I can see it getting better.

Nick
Nick

It’s no secret that reducing or eliminating manufactured spending is already in play at AMEX. If that trend continues other banks that are more lenient will reduce AMEX to rubble. Let’s not kid ourselves: losing COSTCO was the beginning of the end. And I bet post-merger Marriott won’t touch AMEX with a ten foot pole.

Kevin
Kevin

Most banks are cracking down on “gamers” i.e. churners so I’m not sure what you mean about more lenient banks. Even BOA is clamping down at this point.

I also don’t see how losing gamers is going to reduce Amex to rubble. They may be having issues, but people gaming the system aren’t exactly profitable customers anyway.

Not saying people have to like it, but it’s ridiculous to say that losing these types of customers will be the death of a company. They want loyal, long term, organic spending customers. Period.

Lantean
Lantean

i’m always puzzled by the “organic spending customers” desire.
like, when people MS, Amex still get s a % of the swipe… so what do they care? theoretically they should want people to MS more, no?

Brand
Brand

If they’re making 3% on a swipe and they’re giving you 6% and you exclusively use the card on 6% back transactions, that’s obviously losing them money every time you make a purchase.

atxtravel
atxtravel

The cards which are subject to their MS eradication don’t have game-able MS categories. And they don’t care about the very limited 6% categories on general consumer cards.

They’re actually very tolerant of ongoing MS in non-bonus categories, so they’re kind of hypocrites here.

Credit
Credit

Ms is in large fave value. All that you do to v reduce your own cost also reduces Amex fees.

Radster
Radster

The margins just aren’t there to regularly provide 3x or 5x CB/rewards without significant blended spending at 0x or 1x… or regular interest income due to a carried balance.

Michael
Michael

Lantean, its because they negotiate down swipe fees to be competitive. Usually swipe fees are flat rate plus percentage. This means, the more transactions a cardholder makes, the more money they make. This is the opposite of a MS’er who doesn’t usually break large purchases into the smallest amounts.

More important to the bank than that, though, is the interest they collect for the organic customers that carry a balance. That is where the real money is, and the fee they collect will always offset the rewards paid in the end. Again, this is the opposite of the MS’er who usually pays is full and doesn’t carry a balance.

Stephanie
Stephanie

It makes no sense that AMEX’s interest is in organic spend over MS in in hoping customers carry a balance. They’re the number one charge card company, which by very nature doesn’t carry a balance unless the customer has specifically opted in to pay over time.

Randy
Randy

How many “loyal, long term, organic spending customers” are going to be interested in a personal platinum card which benefits are becoming more complex by the month? I understand your premise but until they offer more competitive reward programs, such as the Citi Double Cash and CSR, then they are not going to get many of those types of customers.

aic173
aic173

Agree completely. Having to explain to other people how the $200 uber credit on the Platinum works makes you realize how unnecessarily complicated it is. Or how the 5X points on flights booked through AMEX reservations works.

The CSR’s travel credit is seemless and it just works. No waiting a couple days and seeing if your purchase qualified, just an instant deduction. Chase is just much better at removing the friction in rewards.

MarcoPolo
MarcoPolo

Nor much is going to change.
They have competition from other banks and ALL of them need NEW customers sooner than later. AMEX is already feeling the heat and sending out targeted offers to gain more customers.
Although I am pretty sure that they must be building (if not already) a database of “Gamers” like retailers did with abusers of the return process with “Return/Exchange”.
If you play the game right then you can “churn” while being the “valued customer” at the same time with “Organic spend” mixed in.

JD
JD

Glad I have already gamed the he!! out of their cards

James
James

I swear I was just thinking this, I even gamed their business cards lolol

James
James

Amex most profitable customers are typically wealthy, upper income, corporate clients who regularly use their cards. Most churners and manufacture spenders are still mostly middle to lower middle class income folks who aren’t that profitable for them anyhow.

MM
MM

Lots to comment and critique here, but I’ll focus on the one piece that seemed particularly interesting – innovate offer constructs to incentivize long-term loyalty. Obviously, I say this as someone oriented toward maximizing CC bonuses/rewards, but it’s really hard to envision what long-term loyalty constructs Amex could come up with that would be attractive to either “gamers” or normal customers. For the former, I think there’s generally little appetite for long-term spend-reward incentives – they are a group of the mindset “on to the next”. For the latter, I don’t think they care enough to commit to a long-term spending incentive structure – they want something easy to understand and use (frankly, like Chase’s UR structure).

Look, Amex isn’t run by idiots. They obviously think they can make money with what they’re proposing. But, personally, it’s hard to see how they make up any ground they’ve lost with plans like these.

Peter
Peter

I hope someone from AMEX reads this comment…. Your actions as a company to “crack down on gaming” has caused me to have a negative perception of your brand and products. I am not a “churner” in that I do not open cards with the intent of obtaining a bonus and then closing to maximize my “profit”. I signup for credit cards that provide me long term value in cashback/rewards and other benefits (such as price protection, rental car insurance, trip delay insurance, USA customer service, etc.). While AMEX used to be known for world class customer service, in recent years this has eroded. Much of the customer service is outsourced; which I have verified first hand. Your company also reneges on statements by your customer service representatives, which further erodes my trust in your products. Your cardmember “benefits” are increasingly designed in ways that make maximizing them difficult. This is clearly an attempt to reduce the expenses incurred by your company in the hope the cardmember does not notice/care about being ripped off or having to go through hoops. I pay my credit cards bills in full every month. Therefore, I would be a classic “perfect” AMEX cardmember (in that their original/base is charge cards intended to be paid in full monthly). AMEX has consistently taken action against people who attempt to sign up for the best “leaked” credit card signup bonuses even though AMEX institutes a once per lifetime policy. The reason I view this negatively is simple. If you have a one bonus per lifetime clause, DO NOT over enforce it and start making BS up about “once per card type” (such as AMEX Platinum is same as Ameriprise Platinum, etc) or that “the link was supposed to be targeted, not public”. The bonus can NEVER be had again for that customer for that product. Pay it out and move on. Don’t cause that person to resent your company, especially because you cause negative PR for other possible cardmembers as well (LIKE MYSELF!!). If you want to play the BS game of having people signup for cards and then deny the bonus then don’t have a once per lifetime rule. Not to mention you apply once per lifetime to exclude anyone who has held the card before from getting a signup bonus if they cancel that card and attempt to signup again (even if they never received… Read more »

John
John

Wouldn’t you be better off sending Amex a letter? This blog comment section seems like a strange forum for an open letter to Amex.

Peter
Peter

Well they are the company who created the “Rewards Abuse Team” and are attempting to crack down on churning. My thoughts are that if this team is competent they will be reading DoC (being it is a top-tier blog on the subject matter) and they will read all comments. I would rather this be stated publicly and others can agree, disagree, comment, etc. I have no reason to send this to AMEX directly being I am not a shareholder and have no false illusions that any department receiving a letter will care about my message or forward it to someone who does.

But just maybe the AMEX employee(s) reading this will care. In the end though, it’s their loss if they don’t read it and realize the negative implications of their actions. Who knows, maybe one of the various news outlets will pick up a story about negative consumer perception of AMEX based on our comments.

Miro
Miro

Well they have a “Rewards Abuse Team” for a reason. The term “churning” comes in many different ways, and i have plenty friends who take the “churning” to a different level, not going to mention them here.

The “leaked” sign up bonuses are just leaked and were not intended for a public use, and i find it very funny when people complain when their points get frozen.
I took a risk too and didn’t get the sing up bonus from the last platinum deal. It was a lesson learned and i am not going to jeopardize my 10 year relationship with amex over 1k.

Amex has plenty targeted personal/business card offers that come without the language. I personally have churned amex gold business card 3 times and Platinum business 2x in last 7 years.

Trust me, Amex knows how to treat customers as well.

Phil
Phil

How can a company like this make this mistake multiple times though. If they want a link to be private, then it should be private. It should not be public facing “private”.

Also, they let people sign up using this link that shouldn’t have been able to? Hello… how about they implement something so it will auto deny you if it wasn’t meant for. Not get approved, use the card and then get the points clawed back due to their negligence?

This is very consumer hostile and one more reason why AMEX is going downhill. They made a mistake. They should own up to it and develop a system so this kind of thing can’t happen.

I didn’t see Chase close accounts or claw back UR when the CSR link got posted early. They honored each and every one that got approved and even let people who were way past 5/24 keep the card and the points. That’s called customer service.

Mser
Mser

I have the exact opposite opinion. Amex is tolerant of activities that will quickly get you closed/banned by other issuers. Once per lifetime seems reasonable, although I do agree their response wrt to the 100K Platinum leaked offer was idiotic and generated needless ill-will (and several lawsuits).

All I wish is Amex offer competitive products (the recent Plat personal enhancements are absurd – few will see value from the silly Uber rebate). Sure wish they added some category spend bonuses instead – like 2x travel/dining.

aic173
aic173

Peter, I fall in a similar boat. I don’t churn and burn cards and probably do something similar to you, but the way AMEX handles it is a little over the top and makes me want to choose other banks when I do get new cards.

Plus their rewards are harder to use (AMEX Blue Cash can only be redeemed in increments of $25, Platinum travel credit can’t be used for airline tickets (what the hell??), etc.).

Ultimately there are better ways to handle this and, as you said, I think it negatively impacts their image. When recommending cards to other people I rarely put AMEX towards the top of my list.

bY
bY

Doc – if you want the transcript, I can send you a copy of it.

Bo
Bo
morpheus
morpheus

About the phrase, “surgically remove,” does that give anybody else shivers?

Like those of us who endeavor to pay attention here, to be “rational,” even maximize gain — e.g. profit (golly, or is that only meant for the current 1%?) — that all of us so inclined are somehow dismissed as a cancer needing eradication….

Kinda like those overseas paypal reps telling me that they were under no obligation to explain to me just what it was about my simple ebay transaction today that their “security procedures” deemed to be “risky behavior.” I got the impression that the more I complained, sought explanation, the worse it would be for me…. and as such, I was counseled to go back to sleep, be calm, be silent. Brave new world.

Dan
Dan

PayPal is shit.

sirtheta

They could start by not giving people 9 cards in 3.5 months….

MM
MM

Hahaha, this was also EXACTLY what I thought. Kinda bizarre that an issuer known (at least by churners) for being extremely easy to get approved for is making a fuss about so-called gamers. Step 1: stop giving out (multiple) cards to anyone with a pulse. Step 2: …

esdot
esdot

Reposting a comment I left on PWAC…. for the TL;DR… maybe Amex is trying to be less attractive to churners so it can position itself for something WOW, like public 150k offers. *** Some people have considered signing up for the Amex Platinum before March 30 to save $100 on the annual fee. For $450, they will be able to double dip two $200 airfare credits and score the $200 Uber credit. But maybe people should take a moment to consider whether rushing into the Platinum for $100 would be shortsighted. A long-term perspective guides Amex in its decision making, and maybe there are reasons why we should consider what’s next. These are all speculative thoughts, but nearly all of the blog posts and comments about upcoming changes to the Platinum Card that I read from the points, miles, and rewards community have been rather negative—with many repeated expressions that, well, Amex must be stupid. Really? Do we think Amex is that dumb? Could Amex executives have popped a nice bottle and celebrated after seeing the initial response to its announcements? Again, my thoughts have no real basis, but there are certain things that provide insight to Amex’s thought process. For example, did Amex implement and enforce its once-in-a-lifetime policy to engender love from the churning, bonus-loving crowd? No. It proactively tried to eliminate cardholders motivated by those goals. Last week’s reactions might be exactly what Amex execs were seeking and now could be celebrating. Amex consistently expresses its desire to develop long-term relationships with its cardholders. That business model cares little about what churners, points enthusiasts, or short-term maximizers think. If you ran a business, would you cater to your least profitable customers? I wouldn’t. And isn’t the points, miles, and rewards community one of if not the least profitable segments of Amex’s consumer portfolio? Amex no doubt has been forced to react to the Chase Sapphire Reserve. It does want to maintain its cachet as the premium card. And Amex addressed those needs for the clientele it likely prefers. From Amex’s perspective, the ideal Platinum cardholder, might be the one to respond to someone mentioning 3x earnings on travel by saying “the Platinum card gives me 5x travel on flights and nights”—without considering the tradeoffs of booking through Amex Travel. Amex’s ideal Platinum cardholder might be the one to respond to someone mentioning a $300 travel credit by… Read more »

Mser
Mser

Cachet for having a credit card? Surely you jest!

Ender
Ender

Are you trying to say Amex plat targets people who do terrible in math lol

Ben
Ben

I think where we are in the credit cycle plays a big role in how the issuers are acting. The economy is as strong as it’s been in ~10 years, which means there are plenty of valuable customers who spend a lot and aren’t likely to default. That means the banks can afford to be choosy.

Eventually the economy will turn, issues will be forced to look harder for good customers, and I predict the more onerous rules like 5/24 and once-per-lifetime will be relaxed.

Mser
Mser

I see it likely to be the opposite. What’s the point of inviting churners when profits drop? Money-losing customers can’t be tolerated in good times, let alone bad. I think the tightening trend will continue as algorithms continue to improve.

Gabe
Gabe

What Amex (and possibly the other big banks) fail to grasp, is that consumers are becoming better educated financially every single day via outlets such as this blog, forums, and social media. No amount of “surgical removals” will stop this process. Maybe “gamers” are still a minority today, but once people learn how to optimize rewards, they seldom go back to being the blissfully ignorant so-called “ideal” clients. As this “hobby” becomes more and more mainstream (as shown by the ever increasing media coverage) Amex will eventually have to cater to the savvy consumers as well, or risk becoming irrelevant.

Kevin
Kevin

The more mainstream it becomes, the more banks will tighten the clamps on abuse.

Mark O
Mark O

With everything that has happened with them I have started moving out my MR to be on the safer side. I know it isn’t the best thing to do but I use most of my MR with Delta anyway so I have transferring them over as I earn sign ups leaving a little stash behind. Just seems to be the prudent thing to do at this time.

SumOfAll
SumOfAll

why would you move your MR pts out for no specific reason? Seems to fly in the face of the reason to keep them in a program like MR.

Mark O
Mark O

Because they have been retroactively pulling back sign up bonuses and I would rather be safe then sorry. And like I said 90% of my transfers are to delta anyway and you earn MR at a much quicker rate then you do using a Delta card etc. so it still makes sense. Just being overly cautious.

Be careful if you have ever MS in the past working on one of their sign ups.

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