I guess I thought that the second week of December was a busy week for loyalty. After all, Tibco bought Loyalty Lab and TeleTech bought an 80 percent stake in Peppers and Rogers that week.
But — I was wrong. Last week ushered in news of an even bigger acquisition in the loyalty industry. American Express announced the USD $660 million purchase of Loyalty Partner GmbH. Besides acquiring the loyalty marketing services and capabilities of this loyalty service provider in Europe, the purchase includes the loyalty coalition Payback that currently operates in Germany and Poland.
This move by American Express underscores just how attractive and increasingly competitive the loyalty space is becoming. The “loyalty industry” is no longer just the domain of technology & database vendors. Agencies and the management consulting firms have been marching into this territory for years now. American Express’ purchase just shows that — now — even client loyalty operators see the benefits in leveraging their expertise, technology platforms and resources to create new revenue streams.
More important, this purchase shows just how vital sustainable loyalty strategies are in the financial services sector. American Express and other major card issuers have been pursuing more aggressive partnerships and strategic alliances for the last several years. But by aligning with Loyalty Partners, American Express hopes to gain even more credibility as a potential service provider in the verticals (like retail) that they have limited experience in.
Perhaps most telling of all is that American Express’ purchase of Loyalty Partners and Payback reinforces the power of the coalition model. While American Express has a vibrant network of partners that “play” in the Membership Rewards program, the earn velocity and participation rates in true coalitions — like Payback, AIR MILES and Nectar — still represent the “killer app” of loyalty. I surmise that American Express knows that and wants to further leverage that power in countries where they aren’t already participating in a coalition. Not to mention that this move may open up more card acquisition opportunities among a more diverse consumer group than the typical upscale American Express customer base.
What comes next? Well, clearly American Express is now a new mover-and-shaker to watch. Whereas the expansion march and “great migration” of loyalty coalitions (more here and here) has been underway for a while now, adding a major financial services institution in the mix will further speed the expansion of loyalty programs and coalition strategies into new arenas and new geographies.
As pressure on the payment networks and banking industry continues to mount, we may see other game-changers from the financial services sector as they look to add more value to their merchants and extend new revenue models.