American Express targets booming tier 2 & 3 cities for merchant network growth

The Global Merchant Services (GMS) division at American Express plays a crucial role in the overall business for American Express, driving expansion of Card acceptance across all channels. More importantly, American Express has a long-standing history of backing small merchants globally and India is no exception. It helps local merchants scale up their business by giving access to high spending customers. Globally, Amex has ‘Shop Small’, an international movement to support small, independent businesses and call attention to the valuable and distinct contributions they make to their communities and the economy. Speaking to Bizz Buzz exclusively, Anurag Gupta, Vice President & Head of Global Merchant & Network Services, American Express, explains how do they operate and also outlines at length Amex’ plans to help grow the GMS business in the country

Tell us about the role of the Global Merchant Services Unit at American Express in India?

The Global Merchant Services (GMS) division at American Express manages relationships with the millions of merchants around the world that accept American Express Cards. GMS plays a crucial role in the overall business for American Express as it drives expansion of Card acceptance across all channels. The business also provides merchant offers for Cardmembers, creates visibility/ bridges the gap between a Cardmember and merchant, supports in the overall brand visibility, drives volume via strategic partnerships with other banks, offers new payment capabilities, analytics & Management Information Support (MIS) and provides Cardmember assistance on high value transactions. We added over one million new merchant locations in India in 2022 and more than 90 per cent of top 400 online merchants in India warmly accept our cards.

What is the key value proposition Amex offers to its merchant partners?

We have evolved our merchant partnerships beyond just acceptance. This is done via providing them with best in class offers and marketing opportunities, access to our high spending Cardmembers, strategic tie ups for business growth, increase in payment options, and providing competition and business analytics & insights.

At American Express, we work very closely with our merchant partners and have strong merchant support and service systems. This helps us in ensuring that merchants get access to interesting offers and marketing opportunities and the challenges or gaps are solved at the earliest. Another strength we have is our closed loop network, which gives us a wealth of data. We issue cards, we are also a network and an acquirer, so we have valuable insights and can tell merchants which are the lean periods for their business, or the demographics of customers in their store, information they can use to boost sales by running offers. This results in an improved experience for both, the Cardmembers as well as the merchants. We have also developed specific strategies to increase acceptance in EveryDay spend categories and enhanced our banking alliance. We offer best in class fraud protection using our closed loop advantage and insights.

We also have new, innovative POPs created & deployed in the marketplace which has positively helped drive acceptance and coverage, further helping merchants expand their business.

How does American Express support small merchants?

American Express has a long-standing history of backing small merchants globally and in India. We help local merchants scale up their business by giving access to high spending customers. Globally, we have Shop Small, an international movement to support small, independent businesses and call attention to the valuable and distinct contributions they make to their communities and the economy.

We work with our small merchant partners to see how they can benefit by expanding their reach.

For instance, if a small business is only offline, we support them to go online to market and provide valuable offers. Whether it’s campaign, offers or expansion of channels, we are there with them along their growth journey.

Reiterating our commitment to backing small merchants in reaching out to more customers, in India, we have recently launched the ‘Offers Next Door’ campaign which focuses on mom-and-pop stores across Delhi, Mumbai and Bengaluru. The offers are spread across categories including fashion & lifestyle, departmental stores & grocery, and health & wellness. Cardmembers can avail the offer communicated to them via the campaign or displayed at the merchant store and pay with their American Express Card.

How do you ensure that you reach merchants at the grassroots?

Using a mix of direct and partner channels, we cover the length and breadth of the country from Gujarat to Northeast and Kashmir to Kanyakumari.

We have strategic bank partnerships with key players like Axis, ICICI, Kotak, SBI and Yes Bank and other leading fintech partners which help us in expanding our coverage footprint. Wherever these banks are acquiring merchants, they are being enabled for American Express. That has helped us reach merchants at the grassroots and expand our reach across the country.

We also significantly supported our merchant partners in their ‘back to business; plans after Covid. In the online space, we have partnered with most aggregators and processors in the market, thus expanding our online presence.

What kind of promotions and offers do you provide?

Amex has always worked towards enabling superior offers for Cardmembers, while also supporting small merchants in the country. Our promotional offers for Cardmembers are customized with dual aims: to increase Cardmember value as well as to drive business growth to partners given the premium mix of American Express Card members.

These offers include various permutations for different Cards which get vouchers and reward points across categories including hotels and luxury brands. Some examples include the Taj + the Oberoi suites + Ananda renewal, Dining Re-imagined program for premium cards, the exclusive Khyber Amex offer, premium events at Ethos & Indian Accent. Then, we have exclusive offers with our merchant partners like Yatra and Paytm.

Amidst the rapid growth of digitalization in India, how are you assisting merchants in adopting contactless payment methods?

Most of our terminals are contactless enabled. Some of the ways in which we are adopting this are:

PayByLink: Launched Payment capability through a SMS link or an email link to support small and medium sized businesses.

Contactless Penetration: Increased penetration of contactless PoS from 50 per cent to 80 per cent of the base.

Tap & Pay: Launched Tap & Pay capability on Amex Terminals whereby Cardmember can pay for transactions above Rs 5000 with PIN by tapping on the terminal.

SoFT Pos: To avoid an extra cost of the terminal, android device of the merchants can act as certified payment terminal. Card can be tapped on the NFC enabled android phone of the merchant to do the transaction.

We are also innovating and working with different fintech companies and merchant partners for seamless customer journeys that can lead to an enhanced shopping experience.

What are your plans to help grow the GMS business in the country?

We have been doing well on both, the issuing, and the acquiring side. We will continue to aggressively sign up more and more merchants and increase our coverage. The needs of our Cardmembers are evolving, and we want to make sure that we are where our Cardmembers want us to be.

There is currently a noticeable demographic and geographic shift, with many more residents of Tier 2 and Tier 3 towns making luxury purchases and seeking out premium experiences. In order to tap this opportunity, we are looking at expanding coverage in these regions to close all coverage gaps.

Traditionally, travel and entertainment has been one of the strongest spend categories for us before the pandemic, both from a consumer as well as corporate standpoint. Now, while we are continuing to focus on travel and entertainment, we are also focusing on everyday spend categories like supermarkets, dining, fuel, retail, healthcare, and departmental stores.

Can you provide more insights into the factors that contribute to American Express Premium Cardmembers driving value to partners through higher transaction sizes?

We have access to high spending Cardmembers, and their spending is twice more than non-Cardmembers (Source: American Express commissioned internet panel survey conducted in June 2022 – July 2022 based on purchases made in the 6 months prior to the survey). Due to higher transaction sizes, premium card members drive value to partners.

One factor contributing to the higher transaction sizes of premium Cardmembers is their elevated purchasing power. Premium Cardmembers are typically individuals with relatively higher disposable incomes and a greater willingness to invest in premium products and services. Their financial capacity allows them to engage in more substantial transactions, which, in turn, translates to larger transaction sizes. As a result, these Cardmembers are more likely to make significant purchases and engage in higher-value transactions across various industries.

Another aspect that influences higher transaction sizes is the value proposition offered by American Express Premium Cards. These cards often come with perks such as premium rewards, travel benefits, and access to exclusive events. Such incentives not only encourage premium cardholders to use their Cards for a broader range of transactions but also motivate them to opt for higher-value purchases to maximize the benefits associated with their premium membership.

Furthermore, the relationship between American Express and its partners likely plays a role in driving higher transaction sizes. Partnerships that offer targeted promotions, discounts, or bonus rewards for specific spending categories can incentivize premium Cardmembers to engage in larger transactions. This collaborative approach between American Express and its partners creates a win-win situation where both - the Cardmembers and the partnering businesses benefit from increased transaction sizes.

What are some of your new merchant signings?

Some of our new merchant signings include Cochin Duty Free, Big Chill Cakery, Mega Cabs, Arambagh Foodmart - East India, Pace Hospitals Hyderabad, Hippo Stores – India, RoyalOak Furniture, Beautiful Retail – Mumbai, Martin's Corner Goa, Chutneys Hyderabad and CMC Vellore. We are working on many more to increase our coverage and acceptance across India.