Unlike MasterCard & Visa, American Express Looks Far Beyond Payments for Venture Investments

Visa, MasterCard, and American Express are the largest payment networks in the US (Discover is a distant 4th).  As the payments space sees tech innovation ramp up, the three firms have actively taken to strategically investing in startups. Over the past four quarters, the three have participated in 14 deals representing $165M in aggregate funding.  On a deal basis, the triumvirate have done 27% more deals YoY.

No surprise – Payments investments dominate

Nearly 40% of all deals made over the last five years by AmEx, Visa and MasterCard went to payments tech companies as one might expect. More interesting are investment forays by the payments giants into areas like eCommerce apparel & accessories business intelligence and advertising, sales and marketing tech (more on that below).

American Express goes off the beaten path

When we break down the sub-industry level investments by each company, it is clear that American Express is most heavily investing outside its core payments business. While MasterCard and Visa each made 60% or more of their investments in payments over the period, AmEx’s payments investments accounted for just 27% of their total deals.

Some of American Express’ largest investments have, in fact, been in areas quite removed from payments.  In February 2013 AmEx participated in the $41.5M Series B round for custom glasses maker, Warby Parker. Then, in July, they invested in a $53M Series C round for Fancy, a social shopping and blogging platform to list products.  Both Warby Parker and Fancy would seem to be aligned with AmEx’s affluent, high value cardmember base, but of course, it’d be fair to ask why AmEx felt the need to invest in either company at all esp in late-stage rounds with lofty private market valuations?  Fancy, a Pinterest competitor, was valued at a rumored $600 million in the round AmEx invested in.

Motivations and strategy aside, it is clear that American Express has bought into its venture strategy more than its competitive peers. The NYC-based payments behemoth has in 19 deals in the last 2 years versus Visa and Mastercard which have combined for a total of 6 deals.  Whether American Express’ strategy of actively investing in companies far afield from its core business proves prescient or ill-advised remains to be seen.