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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Bomoney
Bomoney (@guest_384798)
April 6, 2017 15:37

They aren’t considering that the churners share great bonus offers with friends and family, that then switch and make Amex money over time because most people don’t have the focus. Amex is missing the bigger picture. Churners create customers.

Steve
Steve (@guest_367426)
March 9, 2017 14:27

I think AMEX has every right to remove those gamers and focus on providing better services and perks for profitable customers. If someone signs up for the opening bonus by only MS at some grocery stores and then toss the card into a garbage can before AF hits, they are certainly not the customers AMEX want. Actually, they are harming the whole group of AMEX cardholders because they are the ones who actually push up the operation costs, and we all have to pick up the price tag.
Someone might argue that you have every right to game against the system and it is not illegal. Just like being polite to others in this society is not required by law, it is an unspoken rule for any educated adults. The same things applies to credit cards – you apply for it, took advantage of the benefits and at the same time, you should not abuse it.
Well, while it is justifiable for you to complain about the perks offered by AMEX, the right thing for you to do is just to cancel your card

Terri Clark
Terri Clark (@guest_367361)
March 9, 2017 12:06

Doc, I am wondering about your recommendations on applying for Amex cards. Should we attempt to get the ones we want now before tougher rules are possibly enforced? Would you recommend transferring the points we have to avoid possible clawbacks, as another commenter mentioned? I have a very long relationship with Amex and would like to keep it on good terms.

Red
Red (@guest_367342)
March 9, 2017 11:42

“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.”

This is a bunch of marketing gobbledygook, but I think the underlying concept is that they want to channel more prospective Amex card applicants through a “pre-qualified” type form where you give them info and it matches cards to you rather than using regular generic card landing and application pages.

Ruttiger
Ruttiger (@guest_367309)
March 9, 2017 10:55

Any discussion about identifying (and banning) people who get a card, hit minimum spend, get the bonus and then close before paying annual fees?

Asking for a friend.

Ben
Ben (@guest_367302)
March 9, 2017 10:48

Somewhat off topic…someone (@Peter I think) mentioned that getting the Ameriprise Platinum bonus disqualifies you from getting a bonus on a normal (Personal) Platinum….is that true? I didn’t think so…

Peter
Peter (@guest_367325)
March 9, 2017 11:17

The general understanding of the AMEX “once per lifetime” rule is that the Ameriprise Platinum and normal Platinum are different products and you are eligible for the bonus on both. AFAIK, you will receive points/pending points after meeting the requirements on the second Platinum variant. What happened over the past few months is that AMEX started clawing back points received from 100k signup links that they claim were “leaked” and one of the reasons provided was the cardmember is not eligible since they have held a Platinum card before (a cobrand).

Basically it comes down to the automated system will award points, but if they audit/clawback they may remove them and cite that reason now. This applies to “leaked” highest offer links. Actual targeted offers to YOU are fine generally AFAIK.

Ben
Ben (@guest_367334)
March 9, 2017 11:32

Ah, OK, thanks for the clarification.

bob
bob (@guest_367225)
March 9, 2017 07:56

stopping people “at the point of application” obviously means some sort of hard(er) “5/25-style” cap. Maybe like what Citi is pretending to do with the 24mo rule.

Obviously, they’re once-in-a-lifetime rule already does that to some extent, but as long as they keep introducing new products, like the SimplyCash Plus, we’ll always come back

Lrdx
Lrdx (@guest_367165)
March 9, 2017 03:54

I hate to tell you dear AmEx, but when you have cards that are not worth keeping but have a huge initial bonus, there will be people who will get the bonus and move on. If you want to keep people, make your cards worth keeping. Without doubt, you can do it: the BCE/BCP/ED/EDP cards are good to keep (depending on your spending and preferences). Then there are cards that don’t make sense (Green card. Just. Why.)

bob
bob (@guest_367226)
March 9, 2017 07:58

that’s what i always tell them when i cancel a card – it’s just not worth using day to day or paying the AF.

Mark O
Mark O (@guest_367261)
March 9, 2017 09:31

The worst is their regular gold card – why would anyone get that when you could pay $35 more and get $100 in airline credit….seems stupid to even offer the card.

Mark O
Mark O (@guest_367107)
March 9, 2017 01:38

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 (@guest_367109)
March 9, 2017 01:45

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 (@guest_367260)
March 9, 2017 09:29

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.

Gabe
Gabe (@guest_367106)
March 9, 2017 01:34

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 (@guest_367423)
March 9, 2017 14:24

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