American Express To Debut Core Transaction Platform

<B> American Express To Debut Core Transaction Platform</B>

By Sarah Welt

American Express in January plans to introduce its "Shared Services Platform" to reduce by $20 the cost of processing a transaction--a launch planned in advance of the latest commission cuts but certainly timed well to help take the sting out of the latest hit to clients' bottom lines.

It has come up with the definition of a core transaction and plans to offer clients a list of core services as well as the option to customize their programs with items that American Express considers extra--including extra MIS reports or wanting longer operating hours or different telephone answer service quality statistics.

"Our goal here is to give clients service that adds value and takes out all the rest. There is a whole slew of things that have built up over time that have added costs that customers have asked us for and we have given them without really telling them what it costs to do those things," American Express Corporate Services president Ed Gilligan said. "For clients that want good service but want us to be proactive in lowering their costs, we have come up with what a core transaction should be. We think it is going to be $20 less than what they pay today on average and it will be focused on being paperless and streamlined and standardized, sharing resources among multiple clients as opposed to dedicated labor, non-value-added activity."

The company still plans to offer what it is calling a "customized program," for clients that are more concerned about service than cost.

"We have a lot of customers in that world today but I think there are going to be fewer in the world six months from now," said Gilligan. He added that the management fee model is "outdated for the Shared Services environment."

Amex introduced the concept of "Shared Services" (a working title) because the industry has reached the point where "the cost of processing will have to be passed to the traveler, so on an American Express corporate card they will be getting a transaction processing fee somewhere in the next year, maybe two years because most clients cannot absorb the cost centrally. They can when they are getting revenue in and it offsets but when it doesn't they are going to say, 'get that out, pass it to the traveler.' " Gilligan said. "So when a traveler gets their statement and says, 'I just paid $45 for a ticket, I could go to the Internet and get this for free. Why am I doing this?' "

When that happens, Gilligan said it is important to be able to explain the benefits of going through the negotiated program and secondly, "you've got to get that $45 down to a number that will stand the test of exposing it to millions of frequent travelers."

Gilligan defined some of the components of a core transaction. "It's 80 percent of calls answered in 20 seconds. It's having an office open from 8 a.m. Eastern to 6 p.m. Pacific. It's sharing staffing to some extent as opposed to dedicated." There also will be different pricing structures for international bookings. He noted, "Value-added components of a reservation at the conceptual level is booking the lowest fare, being able to get through on the phone in a reasonable amount of time, being able to call an 800 number if there is a customer service problem and getting some basic MIS."

This lower-cost model is not a new concept. Gilligan said the company has tried it over the years. "When we built low-cost centers the key to our success we thought was getting a shared service environment. But what clients said is, 'You can move my business to Omaha and Phoenix, but I want it dedicated.' So in a sense they got some benefit of doing that but really lost potential of driving cost down beyond that. The market wasn't ready for it. The market is going to be ready for it in 2000."

The good news for American Express is it will not have to build new call centers as a result of the initiative. Not including its American Express One business, it has more than 100 call centers handling multiple clients with more than 75 agents, and can link centers through call center technology. "We don't have to shut down offices in high cost areas and build new ones, we just have to intelligently route calls," Gilligan said.

As for spreading the word, American Express plans this week to hold focus groups with its largest customers and then do a road show. But when it comes to communicating its definition of a core transaction to the industry at large, the agency plans to step out of the limelight.

"We will run it past customers and show it to NBTA and ACTE. If they think something is there they can be the vehicle with other agencies," Gilligan said. "We can't share pricing information with competitors.