How MasterCard, Visa, AmEx Will Lean into Innovation in 2025

As newcomers and big techs flood into payments, the "classic" providers aim to keep ahead of the pack.

By Steve Cocheo, Senior Executive Editor at The Financial Brand

Published on January 17th, 2025 in Payments

As the payments business keeps evolving, the four main U.S. card companies remain in a class by themselves.

Two — Mastercard and Visa — develop and maintain payment methods and technologies offered by member financial institutions via the providers’ networks. American Express and Discover work with both sides of the equation — issuing cards and also maintaining the networks that enable merchants to accept their cards. The pending acquisition of Discover — once part of Sears — by Capital One, treated in our recent roundup payments issues for 2025, will bring new wrinkles as the bank, which is an issuer of both Mastercard and Visa, takes advantage of Discover’s own credit card and debit card networks.

Mastercard Leans into Value-Added Services, Transit ‘Halo Effects’ and More

Mastercard and Visa: These two giants of the payments business go back to the days when they were owned creatures of the banking industry itself and all about "plastic." Part of the legacy of that history is that they are always neck and neck in developing new services, products and activities related to their original businesses. But they go far beyond facilitating the credit card business and traditional banks. New deals are as likely to be with fintechs, digital challenger banks and other relative newcomers.

Much of the mainstream businesses of both companies still carry much of the world’s commerce, and they touch nearly every payments trend in some way, both in the U.S. and throughout much of the world. But in recent meetings with securities analysts, a special focus on both companies has been their activities in "value-added services." These run the gamut from consulting and marketing services to fraud and security help to solutions for identification and authentication. Much of this moves through acquisitions of fintechs and other firms by Mastercard and Visa.

During an October earnings call, Michael Miebach, Mastercard CEO, said that he sees data insights as a key growth area in value-added services. "With a highly and a rapidly digitizing world, more and more data becomes available and a lot more businesses want to make sense of that data," said Miebach.

But later in the call Miebach added some interesting perspective on value-added services in the broader payments context. Internationally, he said, there are more and more ways to pay, from person-to-person services to government-sponsored account-to-account payments. Even as they grow, traditional methods remain sticky.

"If you look at the world outside of cards and you compare it to the world of card payments, wherever cards are available in a competitive, level playing field, a lot of businesses and consumers opt for cards because they give them protections," said Miebach. "They give them protection for fraud. They give them protections around digital identity, theft and so forth."

Miebach sees a role for Mastercard in developing services that can increase confidence in using other, non-card payment channels. (Consider the ongoing controversy, and the recent lawsuit out of the Consumer Financial Protection Bureau, over fraud on Zelle.)

During a December UBS-sponsored analyst meeting, MasterCard made it clear value-added services shouldn’t be separated from the transaction business. Using value-added services, said Devin Corr, EVP, investor relations "the deeper we can go into the bank, it opens up more wallets."

In fact, the workaday transaction means growth for Mastercard. During the company’s investor community meeting in November, Jorn Lambert, chief product officer, noted that the growing use of tap-to-pay services in transit systems is paying dividends. He spoke of a "halo effect" — when someone taps to go through a gate, they’ll likely use the same device to buy a coffee or some other routine purchase, and more.

Read more: 2025 Will Be the Year of the Credit Card

Visa’s Flexible Credential Concept Poised for Boom in 2025

While Visa is active in many of the same areas as Mastercard, an area especially to be watched in 2025 is its Visa Flexible Credential push. The concept, unveiled last May, is an "all-in-one" approach to payments.

During a UBS investor event in December, Christopher Suh, Visa CFO, said of Flexible Credential that "we like to call it the Swiss Army Knife of payments because it’s a single card that enables consumers to toggle between multiple funding sources — credit, debit, prepaid, commercial, and even rewards points."

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In the U.S., the spotlight has been on Affirm, the first to use the flex services in the U.S., but Visa has indicated that over 100 issuers globally are exploring using Flexible Credential.

Suh noted that the Flexible Credential concept had launched in late 2023 in Japan with the Olive brand of Sumitomo Mitsui Card Company. Suh said that the service has already been extended to three million accounts and that 70% of the users are toggling between the various funding sources behind their accounts.

Suh added that credit is the "knife blade" most often selected.

Visa and the bank are now experimenting with a business-side version of Flexible Credential. Suh said small businesses can use the arrangement as a cash flow management tool, and said the business version could be rolled out globally as well.

Another angle to watch with Flexible Credential: Enabling users to toggle among multiple currencies. Suh called this "an unlock for people who travel a lot."

This effort is being developed by Liv, the digital bank based in the United Arab Emirates. "The UAE happens to be an area where outbound cross-border travel is one of our fastest growing parts of the business in a market that is a large cross-border market," said Suh.

So for Visa Flex, it’s all about "the toggle." The next test will be for a mainstream card brand to take it up in the U.S.

Read more: How Affirm, PayPal and Now Musk’s X Money Will Jockey for Gen Z’s Money in 2025

American Express Keeps Stoking the Millennial/Gen Z Furnace

"A lot of people thought the American Express Card member was sort of waning and dying out, and that’s not the case," Stephen Squeri, chairman and CEO told Goldman Sachs analyst Ryan Nash during a Goldman event last December. Squeri said that he wanted to send markets the message that AmEx is a growth company. Specifically, his strategy is to add more and more Gen Z and millennial members because of their "lifetime value."

Squeri means this quite literally. Older customers still mean business, but most have topped out, in terms of economic status, and they’re not getting any younger. At multiple events, Squeri has spoken of the upside potential for Gen Z and millennials. In part this comes from their relative youth — they’ve got decades of life and spending ahead of them and that spending ramps up as the years pass.

Aligned with the youth factor is the company’s hope that Gen Z and millennial members will be upwardly mobile within the American Express sphere. Squeri very much wants to see these customers come in beyond the company’s Green Cards and other basic services to higher card types. (For a deeper dive, see "Inside the AmEx Brand Strategy Winning Younger Consumers.")

During the firm’s third quarter earnings call Squeri sketched out what he hopes for as they "start to move up the food chain." Initially, a member may not be traveling as much on their card, but they are dining out a good deal, for example.

"As you start to move along, you might have a little bit more discretionary income. You’re traveling more, you’re taking advantage of [airport] lounges, you’re taking advantage of fine resorts and hotels," said Squeri.

This becomes a flywheel effect. As these particular consumers — as Squeri describes, the better risks of their generations by design — move up, they will tend to live fuller lives. That increased spending makes the services packaged with higher-level AmEx cards — Gold, then Platinum — more attractive. Those cards carry higher fees.

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"If you are going to pay a higher fee for a product, you are going to engage in that product more," Squeri explains. The sooner someone enters the system, the more they can move up, and the more long-term potential they represent for American Express in both spending volume and card-fee income.

Squeri believes there is huge potential for growth in the U.S. AmEx has 5% of the cards in the U.S. and has about 25% of the share of cards bearing fees — lots of room to grow, in his view, and Gen Z and millennials will fuel that growth. And most American Express members pay card fees, which Squeri said tends to draw consumers with better credit and higher incomes.

AmEx is targeting the cream of these generations with Gold and Platinum cards. "Years ago, we used to target them with a fee-free product," said Squeri, "but it did not get the engagement level we needed." He said that offering them higher-level cards ushers them into the higher-level benefits that encourage spending and that drives a higher share of wallet for AmEx.

Abetting this, in terms of gaining share of wallet, is a significant evolution in card acceptance. Years ago, when Baby Boomer members were getting their first American Express cards, the company was firmly rooted in travel and entertainment spending. Retailers generally didn’t take AmEx cards, for example.

Said Squeri to Nash: "When you were growing up and I was growing up, you asked, ‘Do you accept American Express?’ You don’t ask that question anymore, especially in the United States, where the card is as accepted as Visa and Mastercard. That’s a big deal and that gets us a higher share of their wallet."

While neither group may be spending as much as Gen X or boomers presently, that will come in time and Squeri says their lifetime value to AmEx is twice that of older customers.

Keeping the flywheel turning requires generating continuing interest and excitement. That comes via a continuing cycle of card product refreshes, approximately every three to four years. In 2024, the company did roughly 40 refreshes globally and has done around 150 over the last five years.

"Peoples’ needs change," Squeri explained. "Value propositions need to morph and so we continue to do that." Amping up value can also enable a hike in card fees, but he added that "you can only raise the fee when you add more value than the fee that you’re raising."

To illustrate the approach, he points to the Gold Card. "We raised the fee from $250 to $325, but we added around $400 worth of value," said Squeri.

The company’s 2023 annual report provided a capsule of the AmEx flywheel. It said in part that "Our ‘spend-centric’ business model focuses on generating revenues primarily by driving spending on our cards and secondarily through finance charges and fees. Spending on our cards, which is higher on average on a per-card basis versus our network competitors, offers superior value to merchants in the form of loyal customers and larger transactions."

In turn, higher spending and annual fees help fund attractive rewards and other benefits as well as targeted marketing, driving more spending, and enabling the firm to plow more back into marketing.

Behind all this is a marketing muscle. At the Goldman event, Squeri said that the marketing budget for 2024 was increased to $6 billion.

Read more: How Leading Credit Card Apps Are Adding Features to Boost Spending

About the Author

Profile PhotoSteve Cocheo is the Senior Executive Editor at The Financial Brand, with over 40 years in financial journalism, including the ABA Banking Journal and Banking Exchange.

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