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AmEx Is Losing Its Millionaires (BusinessWeek)

  

Hedge-fund manager Whitney Tilson used his American Express card for three decades to buy groceries, trips to Europe and just about everything else. A few months ago, he switched.

“I charge a lot of money on my credit card,” said Tilson, 48, who manages more than $83 million at Kase Capital Management in New York. He said the Barclaycard Arrival Plus World MasterCard gives him more cash perks while rewarding him for the money he spends on travel. “The difference between getting 1 percent and 2 percent cash back is thousands of dollars and for that amount of money, Barclaycard has a better offer,” he said.

American Express Co., long the envy of the industry for its wealthy clientele, is fighting to retain its grip on affluent cardholders like Tilson. Rivals including Barclays Plc and JPMorgan Chase & Co. are courting them with enhanced perks, lower fees and more incentives. And as AmEx seeks to diversify by pursuing tech-savvy millennials and underbanked Americans, the risk of eroding its brand—and its biggest source of revenue—is rising.

“AmEx’s cachet with the affluent is not what it used to be,” said Jason Arnold, an RBC Capital Markets analyst. “AmEx has always enjoyed king-of-the-hill status, but that’s changed. They’ve seen more competition in the upper-end, and they recognize that they have to go elsewhere to fill that gap.”

Spending Slowdown

AmEx remains the most widely held card among high-net-worth households, or those with $1 million or more of investable assets, though its edge is narrowing, according to data from wealth-research firm Phoenix Marketing International.

Fifty-nine percent of wealthy households had a card issued by AmEx last year, unchanged from 2012, while those holding a Chase-issued card rose to 58 percent from 52 percent, the data show. Among households making at least $125,000 annually, Chase surpassed AmEx two years ago, the data show.

The competition is increasing as New York-based AmEx struggles to boost sales amid a slowdown in customer-spending growth. Revenue rose 6.6 percent in the fourth quarter, falling short of its 8 percent goal, while customer card spending increased 6 percent to $268.5 billion, compared with 9 percent in the preceding three-month period. Expenses climbed to $6.3 billion as the company said it planned to cut as many as 4,000 jobs this year to improve efficiency.

Preferred Card

AmEx, whose largest shareholder is Warren Buffett’s Berkshire Hathaway Inc., fell 7.7 percent this year through Feb. 10, the third-worst performance in the 30-company Dow Jones Industrial Average. The shares climbed in each of the previous six years.

Since the financial crisis, banks have relied more on fee-generating businesses such as credit cards to counter tepid loan demand and volatile trading. As less-affluent consumers cut spending during the recession and a 2009 law known as the CARD Act limited lenders’ ability to raise interest rates and charge late fees, banks revved up their pursuit of customers with top credit scores who pay their bills on time. Credit-card write-offs slid to less than 3 percent last year, the lowest in almost three decades, according to the Federal Reserve.

Most Americans carry at least three cards in their wallets and competition is fierce to supply the one that customers use for the majority of purchases, said Matt Schulz, a senior analyst at Creditcards.com.

Private Jets

Banks are wooing customers with lavish perks like exclusive dinner reservations, wine tastings and tennis lessons. Lenders including Barclays and Citigroup Inc. have struck partnerships with airlines and hotels, offering customers discounts on plane tickets and lodging, as well as cash rewards.

Tilson said he prefers his Barclaycard because it gives him as much as 2.2 percent cash back on travel purchases and no fees on foreign transactions, unlike some AmEx cards. JPMorgan’s Palladium card, available only to clients of its private bank, offers complimentary airline tickets for travel companions and free time on a private jet.

“The customers that we service tend to look at Chase for all of their banking needs,” said Jennifer Roberts, president of New York-based JPMorgan’s affluent and high-net-worth card business. “It was something they were asking us for.”

The average annual fee on U.S. card offers increased to $140 last year from $101 in 2012 and $69 in 2007, as banks added more benefits, according to data from marketing-research firm Mintel Group Ltd. The most popular offer was $95, the company said.

Airport Lounges

AmEx has had to trim or alter perks as competitors struck deals with merchants. AmEx cardholders lost free access to American Airlines and U.S. Airways airport lounges last year, and United Airlines also cut off access to AmEx customers in favor of those with cards from its own partner, JPMorgan, following its merger with Continental Airlines. American Express has since built its own airport lounges in cities including New York, San Francisco and Las Vegas.

Still, for some affluent consumers, the loss of such rewards is reason enough to shop around for a new card.

“American Express used to make me feel special,” said Darius Gilvydis, a radiologist from outside Chicago who switched last year from AmEx to the Ritz Carlton Visa card, issued by JPMorgan. “What the heck do I get from them now? It’s just not worth the money,” he said, referring to the $450 annual fee for the AmEx Platinum card, which is $55 more than the Ritz Carlton card.

‘Growth Prospects’

While the battle for affluent clients is intense, AmEx products are “unmatched,” said Josh Silverman, its president of U.S. consumer services. The number of Platinum card holders increased 8 percent last year from 2013, and the company’s customer service and rewards programs remain the industry standard, he said.

“For all the talk from our competitors about the inroads they are making, we have not seen that reflected in our numbers, not in customer retention or the ability to acquire new cardmembers,” Silverman said in a phone interview. “We have great growth prospects with the affluent.”

As banks chase the rich, competition for partnerships is also intensifying. Costco Wholesale Corp. dropped AmEx as its card issuer in Canada last year and and will end the larger U.S. agreement on March 31, 2016. JetBlue Airways Corp. is also in talks to replace AmEx, other people have said.

Broadening Appeal

Under pressure to retain such partnerships, AmEx in December announced it would extend its arrangement with Delta Air Lines Inc. in a deal with an upfront cost of $109 million. Last month, it did the same with Starwood Hotels & Resorts Worldwide Inc.

American Express started a program last year designed to make it easier and cheaper for small businesses to use its network as its cards aren’t as widely accepted as those of rival banks that use networks run by Visa Inc. and MasterCard Inc.

Chief Executive Officer Ken Chenault, 63, has introduced new products aimed at younger and less-affluent customers as AmEx seeks to broaden its appeal. The lender is working with companies including Uber Technologies Inc. and Apple Inc. to expand mobile payments, and courted Americans who lack access to traditional banks with products like its Bluebird prepaid card, offered at Wal-Mart Stores Inc.

Such efforts risk diluting AmEx’s brand, said William Ryan, a Portales Partners LLC analyst. “American Express has always charged merchants a higher rate because of their affluent base,” Ryan said. “What happens when they look like everybody else?”

‘More Battles’

AmEx executives have said repeatedly that becoming more inclusive hasn’t hurt their label and remains a priority. Still, Chief Financial Officer Jeff Campbell has said that efforts to broaden the lender’s appeal are putting pressure on revenue.

The fees AmEx collects from merchants for processing transactions, known as discount revenue, increased last year at a slower rate than the pace of spending on the company’s network, according to data compiled by Bloomberg. That’s a sign that AmEx’s profitability is under pressure and the company is spending more money on rewards programs to retain customers, according to analysts including Moshe Orenbuch of Credit Suisse Group AG.

AmEx is awaiting a decision on whether its rules barring merchants from steering customers to use other brands is stifling competition. The U.S. and 17 states are suing AmEx in an antitrust case in federal court in New York. Chenault has said the rules are needed to protect the company’s brand.

“The days when AmEx could solely rely on higher-end customers are long gone,” said Ron Shevlin, an analyst at payments-research firm Aite Group LLC. “AmEx is facing more battles on more fronts.”

Shh! These Gadgets Are Listening to You (PCMagazine)

From Samsung TVs to your Xbox, some of your gadgets are always listening.

Technology is a beautiful thing, but there will always be the naysayers who are concerned that we are one smartphone feature away from 1984.

That's probably a tad extreme, but if the Snowden documents and countless data breaches are any indication, nothing stays private on the Internet. It probably seems like your every tap, swipe, like, and scroll is monitored and mined for custom ads, location-based deals, and follow suggestions.

But the conversations you have in person, in your living room or your car; they're private, right? Maybe not. Just this morning, it was revealed that Samsung's smart TV privacy policy says plainly that the sets might capture snippets of your conversations in its quest to provide you with better voice-recognition technology.

Samsung was likely just covering itself with that piece of information; a request from its lawyers like those doomsday warnings on pharmaceutical commercials. But it's still a little unnerving. How much snooping are we talking about here?

In Samsung's case, you can turn off the voice-recognition features if you're concerned. But it's not the only gadget with always-on features. As more and more gadgets integrate voice features, expect always on or always listening to be a bigger part of the tech equation.

Check out the slideshow for gadgets that are patiently waiting for your command.

 

Moto X

The Moto X was the first Motorola smartphone to add the "OK Google" command (now known as Moto Voice on Motorola devices). With it, you can say that phrase from across the room, and your phone will wake up and accept your queries—from weather updates to sports scores to text messages. 

You need to activate the option on your phone by sitting with it in a quiet room for a bit so it learns your voice. Moto Voice also works on the Droid Maxx, Droid Mini, and Droid Ultra. On the second-gen Moto X, you can create your own launch phrase, like "Hello Moto X." 

According to Motorola, "Moto Voice is not recording everything it hears, it's simply matching the sound to your tuned launch phrase. The recognition of your launch phrase is done entirely on the phone. Motorola is not saving anything heard by the phone or the command either on the phone or in the cloud."

Nexus 6, Nexus 9, Galaxy Note 4

Motorola devices are not the only ones with always-listening voice commands. The newest Nexus devices—the Nexus 6 and Nexus 9— and the Samsung Galaxy Note 4 also respond to "OK Google" commands. More setup (and opt out) details here.

Chrome

Meanwhile, on Google's Chrome browser, your PC can be in a listening mode if you have Google.com open. Unless you always have your Chrome browser open to Google.com, it's not technically an "always on" feature, but you could set it up that way: on a second screen at the office, or on a laptop on the counter while you're cooking, for example.

Amazon Echo

As Amazon says about Echo: "It's always on—just ask for information, music, news, weather, and more." The device, however, does require a "wake word"—either Amazon or Alexa—to carry out your demands. Amazon says the Echo includes an array of seven microphones, which "use beam-forming technology" to hear you from all directions, even if music is playing. Audio is streamed to the cloud via Amazon Web Services, "so it continually learns and adds more functionality over time," Amazon said. It gets to know you, Amazon says, so it can presumably call you by your favorite nickname right before the robot uprising.

Xbox One

Xbox One

The Xbox One has an Instant-On power mode, which lets you wake it up simply by saying "Xbox on." When this mode is on, your console power supply unit (PSU) remains on and the solid white LED on the PSU is bright. You may also hear the console's fan. To alter settings on Xbox One navigate to Home screen > Menu > Settings > Power & startup. 

It's a handy feature, though make sure you don't confuse your console. Some Xbox One owners reported that a mid-2014 commercial for their console featuring actor Aaron Paul saying the "Xbox on" command turned their devices on, too.

Where Can I Drive You?

A car like Knight Rider's KITT is probably on many of our tech bucket lists. While our trusty sedans can't yet save us from danger or drive up the back of an 18-wheeler unassisted (give Google a couple years), car makers are experimenting with tech that puts your car into an always-on mode (usually via Bluetooth) in order to help you make a call or select music without driving into a ditch. 

The systems still need some work. PCMag's Jamie Lendino says his car has a maddening tendency to launch into a 30-second-long voice command tutorial when it doesn't understand—which cannot be silenced. 

With the launch of Sync 3, Ford said it had improved voice recognition to be more conversational, though PCMag's Doug Newcomb said he'll believe it when he sees/hears it.

Facebook Is Listening (for 15 Seconds)

Last year, Facebook announced a feature that will identify the song, TV show, or movie that's playing while you're writing a status update. Similar to Shazam, Facebook's new optional identification feature listens to your surroundings as you type in a new update, and gives you the option to add to your status that you're listening to Beyoncé or watching Game of Thrones, for example. 

Facebook said that nothing the microphone listens to is recorded or stored, and the app cannot identify background noise or conversation. If you'd rather not have the social network scan your surroundings, navigate to Status, tap the smiley face icon, and tap the audio icon to silence it. 

After some users expressed concern, Facebook said that the feature "will only use your microphone (for 15 seconds) when you’re actually writing a status update to try and match music and TV."

Chinese New Year Celebrations at Miami Dade College

Letter from a Reader: Open Internet for everyone !

We received this comment from one of our readers, about Internet Neutrality issue. I think that it is important for the rest of us, to be aware of it. Please, do not hesitate to let your opinions be known. (Ed)

El chairman de la FCC por fin a dicho oficialmente su plan de tratar broadband como un Public Utility.  Como te dije, la idea es acabar con el monopolio que tienen Comcast, Time-Warner, etc. sobre sus lineas para que otros ISPs puedan competir (Google Fiber).  Tambien prohibe que Comcast y Time-Warner le cobren a compañias como Netflix, Hulu, etc. por priorizar sus velocidades para llevarte el contenido ya que tu como consumidor ya estas pagando por la velocidad maxima para usar esos servicios.  

Esto quiere decir que compañias pequeñas pueden competir con las grandes ya que no tienen que pagar extra para llevarte el contenido, y tu como consumidor accesas todos los web sites y servicios a la velocidad maxima que pagas, no unos mas rapidos que otros a la potestad de Comcast.

http://www.wired.com/2015/02/fcc-chairman-wheeler-net-neutrality?mbid=social_twitter

http://www.engadget.com/2015/02/04/fcc-net-neutrality/

"The internet wouldn’t have emerged as it did, for instance, if the FCC hadn’t mandated open access for network equipment in the late 1960s. Before then, AT&T prohibited anyone from attaching non-AT&T equipment to the network. The modems that enabled the internet were usable only because the FCC required the network to be open."

"These enforceable, bright-line rules will ban paid prioritization, and the blocking and throttling of lawful content and services. I propose to fully apply—for the first time ever—those bright-line rules to mobile broadband."

"For example, there will be no rate regulation, no tariffs, no last-mile unbundling. Over the last 21 years, the wireless industry has invested almost $300 billion under similar rules, proving that modernized Title II regulation can encourage investment and competition."

Raspberry Pi 2 launch: Six times faster with Windows 10 and Ubuntu support (TechRepublic)

A major update to the credit card sized Raspberry Pi board is introduced, with a boost to the CPU and memory expected to help it run as a general-purpose PC. 

Co-creator of the Raspberry Pi Eben Upton, left, and Richard Curtain, global director of strategic alliance for element14 at the launch of the Raspberry Pi 2

The next version of the hugely popular credit card-sized computer, the Raspberry Pi, is available today.

The Raspberry Pi 2 boosts the board's specs to a quad core processor and 1GB of memory - with the new machine racking up several times the benchmark score of its predecessor, as well as being able to run Windows 10 and Ubuntu.

The new board will cost the same as the first-generation, dual-core model B+, and is billed by the Pi's co-creator Eben Upton as the first model capable of running as a general-purpose PC.

"[The improvements] gives us something like six times the processing power and takes Raspberry Pi to the level of performance that makes it genuinely like a PC," said Upton, who is also CEO of Pi Trading, at the launch of the Pi 2 in London this morning.

" Pi 2 does broaden the addressable market and we're hoping with this product we will start to have people buy them as the second PC in the house. Applications load faster, browsing the web is faster, all of the tools are much better."

About 4.5 million Raspberry Pis have been sold since the board's release in 2012, and Upton expects to sell three million Pi 2 and B+ models this year.

The Raspberry Pi 2

 Image: Raspberry Pi Foundation

The new board will also be able to support Ubuntu and Windows for the first time, courtesy of the boards' ARM v7 core, with a Snappy Ubuntu Core image available now.

"We've been working with Microsoft for the past six months to enable Windows 10 on Rapsberry Pi. It runs, I've seen it running, it's pretty cool," said Upton.

"This is Windows 10 intended for IoT applications and the intention here is to have a device which you can use to build IoT devices," he said.

"The intention is you can take a Windows 10 application that you can run on Surface, PC, a Windows phone and now Raspberry Pi as well."

The Raspberry Pi version of Windows 10 will be available to makers for free.

So which tasks will the board perform better compared to the previous generation B+? The new board can run a single-threaded CPU benchmark about 2x faster, the Sunspider benchmark 4x faster, a multi-threaded CPU benchmark like SysBench 6x faster and handle NEON -enabled multicore video codecs more than 20x faster.

The Raspberry Pi 2 is available to buy today from element14 and RS Components for $35. Older models such as the B+, A+ and Raspberry Pi compute module will continue to be sold. Upton said a version of the compute module based on the Pi 2 will be produced at a later date.

The new board is compatible with older models, and should run the same operating systems and software as new OS images are released.

The foundation is working to tailor the popular Raspberry Pi operating system Raspbian to the board's more powerful specs, and is hoping to release an image of the OS that will run on both old and new systems, by swapping out the relevant libraries.

Raspberry Pi 2 boards have been produced for the past four weeks at the Sony Factory in South Wales and 100,000 are on sale through element14.

The Raspberry Pi was made with the intention of encouraging children to code and Upton said he hopes the additional power of the new model further the adoption of even more Pis inside classroom, where children use the machine to learn the basics of programming via drag and drop tools like Scratch and hardware hacking using PiFace.

"It's been successful beyond our wildest dreams. We thought we might get 10,000 into the hands of kids," said Upton, going on to say there are between one and two million Pis being used by children.

"It's become clear there is interest in learning about computing among children, as much as anything there is interest in learning something their parents don't understand."

See photos of the Raspberry 2 Pi board and explore its new features here.

The specs

• 900MHz quad-core Broadcom BCM2836 CPU with 1GB DDR2 RAM
• VideoCore IV 3D graphics core
• 40 pin extended pins - with 27 GPIO pins
• Micro SD slot
• Multiple ports: Four USB ports, full sized HDMI, four pole stereo output and composite video port. CSI camera port and DSI display port
• 10/100 BaseT Ethernet
• Micro-USB power source 5V, 2A
• Dimensions: 85 x 56 x 17mm

The next decade in tech: Three defining forces to watch (TechRepublic)

The trends are gathering around the next forces that will define the technology industry, and it's a safe bet that they will also have an indelible effect on society as a whole. 

This telecom microgrid is powered by wind and solar in New Caledonia.

 Image: UGE

Something is going to happen in the tech industry in next several years that will surprise us. It will shock us. And the whole industry will make a left turn.

It may be a product. It may be a technology. It may be a new company. We've seen it happen over and over again with developments from the integrated circuit to the Macintosh computer to the web browser to the Google search engine. Often, innovation comes from unexpected places.

But, there are also developments we see gathering long before they ever become an industry standard or a dominating force. Right now, there are three of these forces that are preparing to define both the tech industry and society over the next 10 years.

1. Here comes everything

Virtually everything is getting connected to the cloud, including plenty of things that make us wonder. Don't be surprised if we soon see internet-connected tattoos that you can change the colors with an app from your smartphone. That's how outrageous and ubiquitous it's all getting.

Of course, there are plenty of far more useful examples of what the Internet of Things (IoT) can do, and a lot more coming. It's going to change the way we interact with our homes, our offices, our cars, our gardens, our pets, and our kids. In business, it's going to fuel a new wave of automation, eliminate even menial labor jobs, and create tons of new jobs for data scientists and engineers to take all of the data collected by IoT and turn it into useful insights and automated processes.

A decade from now, the next generation of kids is going to be asking their parents to tell them stories about the time when the internet was something you mostly visited with a piece of a software, rather than something that silently connected almost everything.

Don't forget -- as TechRepublic and ZDNet predicted in our first in-depth report about IoT in January 2013 -- that IoT is essentially about the data. It's one of the primary pillars of big data. It's the one that's going to have the biggest impact on the future because it touches virtually every industry and almost every aspect of the economy.

2. Micro-personalization

Take a good look at the user interfaces of today. A decade from now, they are going to be antiques that will be so unfamiliar that we may even regard them with the kind of nostalgia we reserve for things like vinyl records. They will be odd relics of a more rigid era.

Today's interfaces are all about being as simple as possible in order to work for as many different people as possible. The next generation of user interfaces will be just the opposite -- massively complex algorithms that will be enormously personalized. It's going to change computing. It's going to change commerce. It's going to change the way we interact with government, education, healthcare, banks, and more.

In 10 years, user interfaces will be obsessed with meeting your individual needs. And, it won't ask you what your needs are and you won't usually tell it. It's going to anticipate them for you, based on the mountain of data it knows about you. As creepy as that sounds, once it's here it's going to make things so much faster and more convenient that it will change user expectations forever. Many UIs that aren't customized will feel rigid and outdated. You will see the things that matter to you, the data you need will seek you out, and the UI itself will automatically adapt to your patterns and preferences.

This sea change is beginning to come to life in a few very simple ways with things like Google Now, which sounded very creepy when it was first introduced but has turned out to be useful enough that many Google users love it and now depend on it (here's what I wrote about it two years ago). So, micro-personalization is coming. It's going to scare you. You're probably going to love it. And, it's going to change your businesses and completely reset user expectations.

A larger question is what will it mean for society? If for example, you go to a news site and it surfaces articles that are most likely to jive with your ideological views, and thus reinforces them and doesn't show you conflicting points of view. Mass culture is a powerful unifying force in society, but it often suppresses and diminishes minority viewpoints Micro-personalization could have the opposite effect. This is a larger question for another article, but worth considering as part of this topic.

3. The energy challenge

The Internet of Things and micro-personalization are both powered by big data. The third trend is power itself.

Energy is arguably the biggest challenge society faces over the next 50 years. It underlies almost everything in technology and innovation. And while we are getting more efficient in the ways we use power, the demand for it is increasing at a voracious rate -- especially for electricity, which of course powers information technology.

"Electricity demand is increasing twice as fast as overall energy use and is likely to rise by more than two-thirds [from] 2011 to 2035," according the the World Nuclear Association.

The demand for clean, sustainable energy -- solar, hydro, wind, etc. -- is especially strong, as the world tries to wean itself off of unsustainable, ecologically harmful fossil fuels. Two of the biggest challenges that are holding back clean energy are storage and transmission. The current power grid is not designed to optimize this kind of power.

That's where the emerging field of cleantech comes in. While it's technology that is driving much of the increased demand for energy, it's also technology that is being called upon to help solve the looming energy challenges by tackling the storage and transmission problems. Part of that involves creating a "smart grid" (or microgrids) -- a more sophisticated electrical grid that can handle renewable energy -- but it also includes other things like water management, waste management, alternative transportation systems, sustainable design, creating new energy efficiencies, and more. There's even the newly emerging field of cleantech-as-a-service that could help connect some of the disparate parts of the cleantech ecosystem.

This is likely to be one of the most robust sectors of the tech industry in the years ahead because it's tackling such a huge and universally-applicable problem. If we fail to figure out the energy challenges, it will limit future innovation and -- in the worst case scenario -- even lead to energy rations and international conflicts. So, the technology world is practically destined to rally around the problem. Cloud computing, big data, IoT, security, mobile devices, and other aspects of the tech sector will be put to use to help solve the energy challenge.

 Image: DCTI, EuPD Research, KPMG