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‘We take a portfolio approach, like a venture capital firm’: Amex Digital Labs’ Matt Sueoka

  • Amex Digital Labs develops, invests, and partners to create new form factors for payments.
  • Matt Sueoka joins us on the podcast to discuss how American Express dedicates resources to the cutting edge and how new products come to market.

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‘We take a portfolio approach, like a venture capital firm’: Amex Digital Labs’ Matt Sueoka

Today’s guest on the podcast is Matt Sueoka, head of global strategy, partnerships, and enablement for Amex Digital Labs.

We discuss what it takes to scale new form factors in digital payments. Matt shares how Amex Digital Labs makes investments, chooses partners, and prioritizes its product pipeline across form factors like QR, tokenization, and P2P. Matt gives real life examples of projects that were headed by his part of the organization that eventually found a home in American Express’ product portfolio. 

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The following excerpts were edited for clarity.

The Digital Labs Team

Our team is global. We're focused on building the next generation of digital products and partnerships. And we focus on a few different areas. We're looking at digital payments, the future of servicing, and the future of membership experiences. So essentially, our team is meant to be a catalyst in the company. We have a history of reinvention, since we were founded in 1850. Our current lab remit is really to help push the company forward into the next chapter in the evolution of our businesses with a particular focus on the fintech space.

Labs is about 100 to 125 people -- it's fluctuated a bit as we expanded and evolved the team.

It's a formalized team. We're viewed as an enterprise center of excellence. It's a fully dedicated team. We have product managers, business development managers, and a function that we created called product enablement, which is really meant to help us program manage our initiatives, and help us work through stakeholder approvals and build various controls that we have to go through since we are a regulated financial institution.

Labs' workflow throughout the org

We definitely follow the development path. There are a few different ways work can come about. Sometimes we come up with our own concepts -- we create and incubate an idea to a certain point. Sometimes it'll stick around within the Labs organization for a few years. And then eventually, we do have a model to graduate it, once a product reaches a certain level of maturity and scale, and when we can find a logical business unit owner somewhere else in the company.

Sometimes partners or startups come to us with ideas and they want to collaborate on things together. Or sometimes an internal team wants help solving a problem or incubating a new product or service. So in that instance, we might help incubate initially, and then the business unit partner takes over and continues to manage the product when it launches.


Scale new form factors

Scaling new form factors is something that I've been thinking about and experimenting around for many years. First is just thinking about, who are the different constituents or groups that would interact or need to support the new payment form factor or feature or technology? You have to think about each of those entities and whether they are incentivized to pick up and try the new technology or solution. Think through the sort of barriers that might inhibit it from scaling.

So for example, you have to think about the end user or the consumer: is this going to be good for them? Does it drive convenience for them? Does it give them greater security? Is there some other incentive or offer that they're going to take advantage of if they can use it? And then thinking about merchants or whoever's receiving the payment: will they adopt it? Will they accept it warmly? What does it take to get that done?

And then, because we're talking about digital things, there's a variety of different players involved, whether it's hardware manufacturers, like the company making your smartphone, or that is creating the software to help your smartphone run, or the NFC antenna on your phone to power the payment if that's being used. So you have to think about, do I need to partner with any of those entities? Do I need to distribute an app to get it into the end consumers' or to the merchants' hands? Does hardware upgrade? Is that part of the equation?

Scaling P2P payments, a la Amex

I think peer to peer payments is probably a good example area to focus on and apply this to. In the US, peer to peer payments are large: there's billions of dollars spent every quarter across a variety of different platforms that customers choose to send money to family and friends. We had seen and watched that trend for many years. However, we also noted that credit cards weren't always a great funding source in that particular use case. On some platforms, credit cards weren't accepted. In other platforms, if they were accepted, there would be a 3% credit card fee to fund. At Amex, credit cards are the core of our business. And we felt like there's an issue here, and we're kind of missing out. There's this new digital peer to peer payments form factor and use case scaling and we're not a major part of that.

So we thought about a few different ways we could provide a solution in the space. We thought about doing our own proprietary peer to peer payment platform. Given that there was so much scale and maturity in a few other platforms in the US, in particular, it felt like that wasn't really a great approach to try to get into the mix, once we were so far behind some behaviors and services that customers were already used to using.

So instead of doing that, we thought, well, we could partner with one of the top platforms, but if we did that, we'd have to make the user experience better. And we'd have to enhance what already exists. So we decided to partner with PayPal and Venmo. And we did a few things. One is, we found a way to remove the 3% credit card fee that Venmo and PayPal typically charge if you fund with a credit card -- that made us a more viable funding source relative to a debit card or a bank ACH payment on the Venmo and PayPal platform.

But that didn't really seem like enough. So we thought further about how we can enhance the experience. Where are there user pain points? Where could this be a better experience? One thing that we noticed is it's really difficult to split payments. So let's say you put the money down to pay for a vacation rental house for your group of friends, or you're paying for a group gift for someone, like for a baby shower or wedding. You have to go through and manually request payments from each individual. And sometimes people might have different amounts if it's a meal and they had different entrees or order different things.

So we decided to introduce a split feature, which lives in the Amex mobile app. And the way it works is you pay the merchant like you normally would. And once you see the transaction in our app, there's a button where you can choose to split it in this experience. And it will let you select contacts that you want to request money from to be paid back. And it lets you automatically calculate an amount. Or you can custom change the amount of people or different amounts. And we let you track who paid you back and who hasn't, right in our app, all in one place, instead of initiating individual requests.

All of this is still done through Venmo or PayPal, whatever the user's platform of choice already is and the platform that all of their friends are already using. And then we plussed up the experience even further, by allowing the customer to apply those funds paid back right directly to their Amex card accounts. So they don't have to wait for the money to show up in their Venmo or PayPal account, and then transfer it to a bank and then pay off the credit card bill. If we tried to introduce something that was competing, but wasn't necessarily better, it probably wouldn't scale or gain much traction. We sort of pivoted that approach and tried to find where there were unique pain points in the experience that we could uniquely solve. And so far, we've seen fantastic traction: a lot of repeat users and customers who are loving the feature and the service that we're providing.

Measuring success

We look at a variety of metrics. For a feature like Send and Split, customers have to enroll -- it's an opt in experience. We look at how many customers have chosen to enroll and link their American Express account with their Venmo or PayPal account. So that is obviously a precondition to driving scale. After that, we look at different metrics surrounding the features. So for Send, we're looking at the payment volume that's sent through that feature product. And then on the flip side, we'll look at the volume of Split requests and the engagement there.

And the other kind of success factor for us with this particular feature is really around mobile and digital engagement. We put a lot of this experience in the Amex mobile app, because we wanted to create that utility and that consistent behavior for customers to come back to a channel that we owned and could talk to them. So we also look at how frequently customers come back, if they're checking the status of who's paid them back and who hasn't. And then we look at repeat usage, like I said, just to see, is this a one-off thing where they try it and forget about it? Or is there a sustainable repeatable behavior that customers are adopting that has longevity?


We take a portfolio approach, kind of like a venture capital firm. In payments in particular, there's so much fragmentation. Think about the last month in your life and all the things that you paid for -- you probably couldn't pay for everything that you wanted to with just one product or one solution. Maybe you paid your rent or a mortgage payment through an ACH payment through a bank account. Maybe you tapped your phone to pay in a store. Maybe you used a credit card online or a checkout button. So there's the theme of fragmentation, because we transact and interact and do commerce in all these different places. And so often, we need different solutions that are better for different use cases.

So because we live in a world of digital payments, and because the space is so ripe for disruption and change as new technologies and form factors are coming about, it means we have to take a portfolio approach. We look to the external world: we see what our customers are doing, how they're shopping, how they're paying for things, where they're spending their time. And we have to basically evaluate: we use data, we do surveys, but we also apply some editorial judgment as well, to say, you know, where do we need to test something or where do we need a partner to develop a solution? We basically create a map that we call the digital battlefield framework, mapping it, plus all the key areas where we think we need to watch a trend or a technology or an opportunity or a channel. And we decide how big or small a bet to place, or whether we should just monitor a space and see what's going on and see how things evolve. Or if it's time to produce a pilot or to do something with much bigger scale, like an Amex Send and Split type partnership with PayPal and Venmo.

Payment trends

The pandemic shifted a lot of behaviors and caused reappraisal for many people in many different aspects of their lives. But there are some aspects that really did have a strong impact on shopping, commerce, and payment behaviors. So for example, many people decided to move to grocery delivery instead of going in stores -- that automatically fuels digital payments behavior. It creates different needs and use cases around paying for that type of purchase, predominantly online. Same thing with peer to peer payments, which we talked about earlier. There's a huge surge in peer to peer payments because people no longer want to touch physical money and hand over physical money to friends and family. Or if you're sheltering at home or you're unable to get on an airplane and you can't see people, you physically can't give them the money and you can't interact in person. So a huge surge in peer to peer payments volume.

E-commerce continues to explode and grow as a piece of that. There was obviously some reduction in certain spend categories like travel during the pandemic, but a huge growth in other ecommerce and digital retail payments happened.

And then lastly, for folks who were still transacting in store (there were still people doing that), there was this aversion to touching point of sale terminals or touching a stylus to sign something or to punch in a PIN code. Contactless became a natural replacement for some of those new concerns that many customers had during the pandemic. For some folks, they decided to tap a phone; for others, they decided to tap their card. So I would say a lot of the solutions or form factors that had grown and helped increase the digital payments volume during the pandemic, many of them existed before the pandemic, but they weren't necessarily used at the same scale or by as many people.

We've seen this huge shift in the user makeup and demographics of users of these different digital payment form factors. The jury's still out in terms of how it will all play out, and what will be sustainable as the world hopefully starts to continue to reopen soon in different countries. Some users will realize the convenience that they found or the benefits that they liked from the new form factor, some of those benefits will remain or the behaviors become so ingrained that they will continue post pandemic. The pandemic isn't going to end with a flip of a switch overnight either way. So there's likely to still be some aversion to physically touching money or physically touching a point of sale terminal that 50 people ahead of you in line might have also touched. So I do believe that contactless and certain digital form factors will continue to have some resonance even after the pandemic.

Looking ahead

There's a lot to be excited about. We see a lot of continued opportunity and growth in the fintech space. Globally, a lot of that will be in the digital payments realm. Much of that involves moving away from card based or more traditional form factor payments. We are looking at account to account payments in markets like the UK, where we have a Pay with Bank Transfer product that allows you to pay merchants using a bank account.

I mentioned that we also look beyond payments on our team. So future of servicing will continue to be a big focus area for us. We've partnered with folks like the Amazon Alexa team on being able to ask questions and service your account. We have our Ask Amex messaging based servicing platform, which allows customers to interact with us in our mobile app. So I think continuing to create new form factors, new ways to interact on the servicing front, and to continue to push that forward, which very much requires different digital tools and platforms -- that'll continue and that will be a big focus area for us.

Lastly, we keep a big focus on broader research and development, and emerging technologies and trends, too. There's a lot in that bucket, whether it's cryptocurrencies and digital currencies, or other new technologies and form factors out there. Those will always be top of mind for us as well as we evaluate where we think the puck is moving and what we think will be relevant for customers, merchants, partners and other folks in the ecosystem.

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