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Raging Payment Battle Requires Purposeful Strategic Thinking

July 12, 2016

Today, July 12, is Amazon’s Prime Day.  As part of the event, they are encouraging their members to apply for their Amazon Prime Store Card, which, among other features, offers 5% back on eligible Amazon purchases.

The raging battle for payments continues to escalate.  Amazon is just one more threat to interchange income.  If you want interchange income to continue to be a primary source of revenue, then you must fight this constant battle with constant strategic thinking.  The right business questions need to be asked – and answered – in order to turn strategic thinking into strategic action.  Specific to Amazon, business questions that can be asked could include:

  • How much interchange income are we earning from members’ transactions with Amazon?
  • What would it cost us if we lost 25% or 50% of the Amazon-related interchange income to Amazon?
  • Which members of ours use our card with Amazon and carry a balance?
  • What actions can we take now to protect, and maybe increase, this interchange income?
  • If payments are a critical component of our strategy, how does our strategic thinking need to change so that we are proactive instead of reactive in this arena?

Regarding the questions above, considerations include:

  • Embrace the brutal fact that providing various payment options to your members increases costs and does not guarantee member usage and engagement.  You must be deliberate about creating and monitoring initiatives that promote valuable member engagement
  • Decide if interchange income is going to be a major and/or permanent source of income for you.  If it is, you can’t always be reacting to what traditional and non-traditional competitors do.  You may consider creating a position of CPO (Chief Payments Officer), who has the mandate to increase member usage of credit, debit, and prepaid cards
  • Take a critical look at your business model, with the intention of removing non-value add products, services, and back office processes, to free up resources for those things that do add value for your membership and potential members

You can read more about Amazon Prime and their credit card here.

In an upcoming blog, we’ll discuss the broader payments battlefield, and how purposeful strategic thinking can keep you in the battle.

  • Marcus Smith

    Great Article!

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