Identifying Signals for Card members in OPEN Cards

Business Category

by

Raghav Negi
Roll Number

14P036

Management Development Institute

Gurgaon 122 007
June 2015

Identifying Signals for Card members in OPEN Cards

Business Category

by

Raghav Negi
Roll Number

14P036

Under the guidance of

Naresh Kumar Meena
Director, Risk Management
American Express

Management Development Institute

Gurgaon 122 007
June 2015

Certificate of Approval

The following Summer Internship Report titled " Identifying Signals for Card members in OPEN
Cards Business Category" is hereby approved as a certified study in management carried out and
presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of
Post-Graduate Diploma in Business Management for which it has been submitted. It is
understood that by this approval the undersigned do not necessarily endorse or approve any
statement made, opinion expressed or conclusion drawn therein but approve the Summer
Internship Report only for the purpose it is submitted.
Summer Internship Report Examination Committee for evaluation of Summer Internship Report

Organizational Guide

: Signature.
: Name Naresh Kumar Meena
: Designation Director, Risk Management
: Address..
: Tel No 9810880703
: Email: naresh.kumar@aexp.com

Name: Raghav Negi

Roll No: 14P036

Table of Contents
FOREWORD......................................................................................................................................................................
ACKNOWLEDGEMENT....................................................................................................................................................
EXECUTIVE SUMMARY...................................................................................................................................................
ABOUT THE COMPANY...................................................................................................................................................
LITERATURE REVIEW.....................................................................................................................................................
OBJECTIVE.......................................................................................................................................................................
SIGNALS.........................................................................................................................................................................
METHODOLOGY.............................................................................................................................................................
CASE REVIEWS.............................................................................................................................................................
REFERENCES................................................................................................................................................................

FOREWORD
The project attempts to identify signals in Open Business Card Category (small business
category) and thereby leverage those signals for further purpose.
OPEN business division has been mainly created to facilitate small business and related
category spends. It has a significant amount (in millions) of card members in this
category and its products range from credit cards to charge cards with a lot of cobranded
cards on offer.
The objective of the project was to identify the signals which would help American
Express predict future high spend and transactions. Signals are basically defined as
transactions acting as a trigger for future transactions and a higher spend. A signal could
be a transaction at a specific merchant or a list of spends which are leading to future high
spends and high value transactions.

ACKNOWLEDGEMENT
I would like to thank American Express for giving me an opportunity to do a project in
such an esteemed organization. I would like to thank my organizational guide, Mr. Naresh
Kumar Meena, Director, Strategic Projects at American Express, for helping me out
throughout the project at various junctures. His valuable insights helped me in coming up
with quality output in minimum time. I would also like to thank Mr. Manoj C Choudhary
(Vice President) and other members of my team for their continuous help and being
patient with me during the course of my internship.
I would also like to thank the faculty members over the course of the first year for
imparting invaluable knowledge about various management aspects and concepts.
Finally I would like to thank MDI peers and alumni members for their constant support
and guidance that helped me clear my confusions and doubts regarding the Business
Analytics industry.

EXECUTIVE SUMMARY
There are various business categories in the American Express portfolio and my project
catered to the OPEN business card category products. OPEN business organization
division has been mainly created to facilitate small business and related category spends.
It has a significant amount (in millions) of card members in this category and its products
range from credit cards to charge cards with a lot of cobranded cards on offer.
The objective of the project is to build a Signal Platform to identify the card members in
OPEN business card category (which caters to small business) and identify the signals
(transactions acting as a trigger for future transactions and a higher spend). This platform
would help American Express identify potential future transactions and accordingly assess
behaviour of their customers.
A signal could be a transaction at a specific merchant or a list of spends which are leading
to future high spends and high value transactions.
At the end of the project, I was able to find few signals which had a causal effect in future
transactions and which logically proved various hypotheses about a small business and its
lifecycle.

I.

ABOUT THE COMPANY

American Express Company, also known as AmEx, is an American multinational

financial services corporation with headquarters in Manhattan, New York, United
States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial
Average. The company is known for its credit card, charge card, and Travelers cheque
businesses. In US, Amex cards account for 24% of the total dollar volume of credit
card transactions. BusinessWeek ranked it as the 22nd most valuable brand in the
world, estimating the brand to be worth US$14.97 billion. Fortune listed Amex as one
of the top 20 Most Admired Companies in the World. The company's logo, adopted in
1958, is a Centurion whose image appears on the company's travellers cheques, cards
and credit cards. The business model of Amex is of a typical credit card business
model. When a consumer makes a purchase using a credit or charge card, a small
portion of the price is paid as a fee (known as the merchant discount), with the
merchant keeping the remainder. There are typically three parties who split this fee
amongst themselves:
Acquiring bank: the bank which processes credit card transactions for a

merchant, including crediting the merchant's account for the value charged to
a credit card less all fees.
Issuing bank: the bank which issues the consumer's credit card. This is the

bank a consumer is responsible for repaying after making a credit card

purchase. The issuer's share of the merchant discount is known as the
interchange fee.
Network: the link between acquiring banks and issuing banks. These banks
have relationships with a network, rather than with each other, for fulfilling
card purchases. This allows a card issued by a community bank in Peru to be
used at a shop in South Africa, for instance, without requiring the banks to
have a direct relationship with each other. The two largest networks in the
world are Visa and MasterCard. American Express operates its own network.

II.

LITERATURE REVIEW

As Amex is in a business of payments through cards and other products, it faces a high
risk of default as the money is lend without any collateral or security and is a type of
unsecured loan. So, it needs to continuously monitor and evaluate the probability of
default of its portfolio to minimize the loss arising from it. For risk there is a separate
department in the company known as Risk and Information Management (RIM) which is
further sub-divided into separate teams based on the type and size of client.
I was assigned a project which was not of a typical risk analysis nature. My project
focused more on identifying signals and analyzing transaction post and pre trigger
transactions. I had to pull the data according to my needs and decide on a methodology to
identify signals and analyze those signals using case reviews.

III. OBJECTIVE
The objective of the project given to me was to identify the signals which would help
American Express predict future high spend and transactions. Signals are basically
defined as transactions acting as a trigger for future transactions and a higher spend. A
signal could be a transaction at a specific merchant or a list of spends which are leading to
future high spends and high value transactions.

SIGNALS

A signal is defined as a gesture, action, or sound that is used to convey information or

instructions, typically by prearrangement between the parties concerned.
Signals can be categorized into Probabilistic and Deterministic signals. A deterministic
signal is a kind of signal which if detected helps in conveying information for future.
In case a probabilistic signal is detected, there is a possibility that it will help in conveying
information for future.
A typical example of a deterministic signal can be detecting an object below the sea with
the help of SONAR. If a signal is detected, it is for sure that there is an object which has
been detected below the sea and hence is a deterministic signal.
An example of probabilistic signal can be an internet user searching for features or prices
of a Samsung Galaxy mobile phone. It may imply that a particular user may be intending
to buy mobile phone.

METHODOLOGY FOLLOWED

There are some key steps which have been identified to build the signal platform and
identify the trigger transactions.
Identifying all the card members in OPEN card business category
Finding all the transactions of these spenders over a given period of time
Calculating Post and Pre transaction spend of each of these transactions by keeping a moving
window of a particular time frame

Calculating Post and Pre spend ratios for each transaction

Identifying the possible signals with the help of these ratios and merchants the card
members are transacting with
Looking into the total transaction spend of card members for the merchant identified
for Post and Pre time period
Deep diving into use cases and looking into each possible trigger merchant (lift%,
merchants transacted post trigger, industry codes and similar merchants)
Possible signals would be identified and these signals would be leveraged by American
Express and merchants

CASE REVIEWS
Using the above methodology, some signals were identified. These signals majorly
belonged to Go to Internet category (web hosting, domain services, online marketing),
Business permissions and architects or cost estimators. Using these signals, some more
related signals were identified using deep learning process and unsupervised methods
from Big Data Labs of American Express in Bangalore.
For each case review, Pre and Post analysis was done on each merchant. Lift was
calculated for customers transacting during a particular period and typical industry and
merchants where cardmembers transacted were analyzed. This was an important step in
signal validation process.

REFERENCES

https://en.wikipedia.org/wiki/American_Express
http://www.searchenginepeople.com/blog/925-keyword-buying-signals.html
Internal resources of American Express