Unintended Consequences of Mobile Payment

In the payment industry, we are constantly inundated by commentary on the promise of the mobile phone.  While mobile payment certainly offers great potential, at this point, these words seem to travel faster and further than actual penetration and usage.  Yes, mobile presents an enhanced payment plus experience for the user.  But, it may also leave a host of unintended consequences in its wake.  Many in the industry may not find these unintended consequences meaningful or worthy of strategy shifts.  However, I find value in exploring one of these consequences — the negative impact on brand.

By brand, I am referring to a specific case of erosion that may result due to the shift from holding a plastic card in one’s hand to interacting with a mobile app.  No company would feel the dip in this area more than American Express.  For years, American Express maintained a unique position in terms of what it meant to occupy one’s wallet.  When an individual became a Card Member, the card certified that they made it or so they may have thought.  Possession of that oblong piece of plastic created for some Card Members an intangible benefit.  Of course, this may say more about the Card Member than the card, but the endorsement contained value.  The card was a palpable symbol that the Card Member had attained a certain status.

For various reasons — including the pursuit of a younger demographic and the Bluebird fighter brand strategy — this inner benefit has likely deteriorated over the years, though it certainly still radiates truth for some Card Members.  American Express owns an advantage in the leather wallet world because it offers something that the other major cards do not.  It provides a defense — a competitive moat — from commoditization in the cardholder viewpoint.

Now, what happens when the plastic card, and its marked differentiation from the rest of the other occupants in the wallet ceases to exist?  Does the American Express logo on a mobile phone screen, trapped among myriad other payment instrument logos, offer the same brand attachment?  I am not arguing this will diminish the quality of the American Express Card Member experience.  The American Express value proposition exceeds its covenant with its Card Members especially when looking ahead to their positioning in the emerging payment space.  In addition, the American Express mobile experience may be viewed so positively that it acts as a worthy counterweight.  Or perhaps the premium experience — and concomitant intangible benefit — could be achieved at the POS via new, innovative approaches.

But as Warren Buffett said: “Your premium brand had better be delivering something special, or it’s not going to get the business.”  With the migration to mobile, this valuable component of differentiation may be lost.  It loses a small part of what makes it “special” in the eyes of a plastic card-carrying segment of the population.  In the new mobile world, American Express will have to compete on a level playing field, and not the leather wallet setting where it held an advantage.  This benefits the other major networks and issuers ready to compete on the many elements of the emerging card payment value proposition.  To be clear, I do not anticipate a pure or even dominant mobile payment ecosystem happening for a long time.  The payment truism, repeated often by Alastair Lukies CEO of Monitise, that ten percent of a big number is better than a hundred percent of nothing seems to fit here.  It is the model I use for how I view the probable uptake of mobile payment in the foreseeable future.  So, it is not as if a gradual transition to mobile will doom American Express brand equity.  However, it is likely that the migration may cause a dent and dull the aspirational hook a bit.