Both Amex (AXP) and PayPal (PYPL) are disadvantaged by legacy systems. This is not news to anyone who has worked with Amex or PayPal as a service provider. Management of each company is likely to continue to sweep the problem under the rug out of fear of disappointing Wall Street in the near-term (it is not a cheap fix to rip and replace legacy systems). Both AXP and PYPL are at a strategic disadvantage as a result of aged technology that results in inferior service (my personal experience). Further, legacy systems surely limit each company’s ability to quickly bring new products, features and services to market. Square (SQ), is an obvious beneficiary. Apple (AAPL) is another.
Here is a bit of detail regarding our experiences with each company:
- AXP: We experienced credit card fraud in the past year. Amex replaced the compromised card with a new card that carried a new card number. Some weeks later we received a replacement card for the compromised card (it’s expiration date had lapsed). Clearly the Amex system that issues new cards was not aware that fraud had been committed and that the original card was no longer valid. This is a tell tale sign of two legacy systems that do not communicate with one another. If one could lift the hood at Amex that person would undoubtedly find a spider’s web of legacy systems with various band-aids and workarounds that likely add tens of millions of dollars in unnecessary, non-value-added annual operating expense.
- PYPL: The process of mapping our new Amex card to PayPal exposed a late 1990’s-like PayPal user interface that incorporated unnecessary clicks and created frustration because the user interface would not render properly on our laptop display. This is basic table stakes stuff that ought to be a non-issue 100% of the time. Clearly design and user experience are not CEO priorities insofar as PayPal’s Web user experience is concerned. That is unfortunate as a clean, intuitive design and convenience are paramount with young customers.