The digital disruption of the payments industry has been underway for some time. Yesterday saw the latest iteration as the old world met the new in the form of a tie-up between credit card giant American Express and digital player PayPal.
The alliance allows AmEx cardholders to use PayPal and Venmo payment services and add their cards to the PayPal wallet. Users will also be able to spend AmEx membership rewards points at PayPal merchants.
It’s the latest step in what CEO Sanjay Sakhrani calls Amex’s priority to become “a more essential part of our customers’ digital lives”. It’s an ongoing journey, he explains:
Our progress on our digital efforts takes many forms. Acquiring companies with great technology and AI capabilities, like Mezi and Cake, and working to integrate those capabilities into our app; creating partnerships with a range of innovative startups to stay on the leading edge of exploring new capabilities for our customers; steadily expanding our internal capabilities through new and innovative products, such as Early Pay and Amex Gold for our commercial products; continuing to drive working efficiencies by having more of our marketing and new card member acquisitions come through our digital channels; and building upon our longstanding relationship with a digital leader like Amazon and our strength in small business to come together and launch later this quarter what we believe will grow to be one of our leading small business co-brands in the US.
As for PayPal, the upgraded relationship is intended to expand the reach of digital payments across the AmEx’s network of partners, says Sakhrani:
As part of our expanded relationship, card members will be able to use membership rewards points for purchases at millions of PayPal merchants online and send money via Venmo or PayPal to friends and family directly from the AmEx mobile app easily at American Express card to the Pay Pal wallet directly from the mobile app or website from AmEx’s mobile app or website and pay their American Express bill with their PayPal or Venmo balance via the PayPal instant transfer features.
We’ll have a more prominent place on the platform and we’ll continue to jointly explore additional innovative digital products and experiences. I believe this is going to be a winning partnership for our customers, for our merchants, for us and for PayPal. It's truly a win-win. And as I see it, it is just the latest step in our journey to play a more essential role in the digital lives of our customers.
The key now is to make the integration as simple as possible:
When you think about sort of this integration within the app or within the wallet, the one thing that you realize is, the more seamless you can make things, the easier it is for your card members, your customers to transact. When you think about merchants, for example, one of the things that they look for is to make sure that they don't use shopping carts and that they make sure it is easy as possible online. What we wanted to make sure is that we can make it as seamless as possible for our card members to be loaded in their card into PayPal…to be able to make those millions of merchants of available to our core members in a more seamless way is a win-win for everybody. It's a win-win for merchants, it's a win-win for us, it's a win-win for PayPal, it’s a win-win for card members.
It’s an extension of a long-standing relationship that has a proven track record, Sakhrani adds:
Our relationship with PayPal goes way back. They are a huge partner of ours from a acquiring merchant perspective, they're a leader in the digital space. I think that's very, very clear. My perspective is it always made sense for us to sort of expand our relationship with them…as we went through this, what we tried to think about is ways we could add incremental value to American Express, ways we could add incremental value to our merchants, ways we could add incremental value to PayPal and ways we could add incremental value to our card members.
For PayPal CEO Dan Schulman, this latest partnership is all about choice for customers through strategic alliances:
In just over two years we've signed over 35 partnerships with some of the world's largest and most influential brands in finance, in technology and commerce. As one of the leading brands in the world it always made sense that PayPal and American Express would become strategic partners.
Over the next several quarters PayPal will have enhanced access to American Express as a payment option in our wallet. The agreement will allow PayPal to access American Express tokens and enables a deep integration of our Venmo and PayPal P2P capabilities within the Amex platform. Additionally, PayPal and American Express consumers will be able to use their American Express reward points to pay for their purchases at millions of PayPal merchants around the world.
Over the next year we will rollout these capabilities to our mutual customers and we are pleased to begin what will be an important relationship for both companies. With this agreement we now have strategic relationships in place with all of the major card networks, not only have these partnerships redefined our competitive landscape, they have also created new and unique commerce experiences for our mutual customers around the world.
As Schulman notes, AmEx is only one partnership in an expanding ecosystem. Coming up soon is another major deal, this time with retail giant Walmart which Schulman reckons has tremendous potential:
As part of this deep collaboration, PayPal money services will be available at all Walmart locations in the US beginning in November. Using the PayPal mobile app customers can easily load cash into their PayPal balance, and for the first time customers can withdraw money from their PayPal balance at Walmart retail stores and Walmart money centers across the country. Additionally, customers can use the PayPal cash master card to shop in store on mobile and online at Walmart, as well as withdraw cash at the register or from Walmart's ATM locations nationwide. And this is just the beginning, we are currently working hand-in-hand with the Walmart team to introduce even more capabilities in the future.
The Walmart alliance also opens up digital payments to a new constituency, he notes:
Working together, Walmart and PayPal have developed innovative new product experiences to create a more affordable and convenient way for the ‘unbanked’ segment of customers to more efficiently manage and move their money and as a result, empowering more people to gain access to the digital economy.
Walmart and PayPal share the belief that managing and moving money should be affordable, accessible, efficient and secure for all segments of our population. And while digital and mobile commerce continues to grow at remarkable rates, there are tens of millions of people that still do not have access to the benefits of the digital economy. This partnership which leverages and combines the unique strengths of both our companies is aimed at addressing that issue.
The disruption in the payments industry is still in its early stages. The new partnerships and alliances that are taking shape are worth tracking to see where the various players find their focus. The ‘old world’ of AmEx reaching out to the ‘new world’ of PayPal is a case in point, as is the potentially societally empowering tie-up with Walmart. There’s clearly so much more to come in this space.