Rewards and cashback programs, crucial growth tools for credit card businesses, have traditionally been based on what consumers buy. American Express Co. is turning to consumer-focused service apps for giving its customers more tailored rewards, according to the company’s earnings call yesterday evening.

With the hyper-competitive rewards space starting to weigh on issuers’ bottom lines — American Express spent more than $2.5 billion on rewards in the fourth quarter of 2018 — other services are beginning to look like a cost-effective way to differentiate.

A major opportunity for the card issuer, according to chairman and CEO Stephen Squeri, is building on its relationship with payments giant PayPal. This will give the payments company a unique position in the P2P landscape. The company already has plans in the works to strengthen its offerings via this partnership, Squeri said during the call.

Squeri did not elaborate on how it plans to build this relationship with PayPal, except for a statement in the financial report that said:

“The ability of the company to realize the benefits from its strategic partnership with PayPal and provide innovative ways for Card Members to pay online and make P2P transfers…is dependent on the ability of the companies to collaborate and develop capabilities, features, and functionalities, successfully integrate them in their platforms and technologies and launch the solutions.”

Another example of Amex’s growing attraction to service-based apps is its recent acquisition of Japanese restaurant reservation startup Pocket Concierge. American Express acquired the company for an undisclosed amount on Tuesday.

Amex did not specify its intentions for startup, but in an email to Bank Innovation, a company spokesperson said Pocket Concierge will be used to provide cardmembers with additional access to top restaurant reservations in Japan.

Perhaps this proclivity to provide customers with service stems from a growing customer expectation from fintechs and FIs to provide them with a comprehensive experience rather than just specific products, or as Squeri put it, providing value “beyond rewards value.”

“What’s really important is that continued investment in value propositions,” Squeri said in the call yesterday. “You just can’t take a fee for the sake of taking a fee. And what we’ve really tried to do whether it’s an investment in lounges or in other aspects of the value proposition just not within the U.S. but across geographies and across business lines, is to continue to put more value into those cards, value beyond rewards value. And that enables us to provide unique value to card members and also to be able to price for that value. And that’s what’s really important.”

Then, there’s Amex’s partnership with Delta Airline. From this year onwards, Amex doesn’t just provide points on ticket purchases but has also built Centurion lounges at major airports around the world. It plans to add more in 2019, Squeri said. “Cardmembers appreciate the unique benefits and services we provide,” he said. “They recognize and are willing to pay for value, which provides the foundation for earning even the greatest share of their spending and borrowing needs going forward.

Mastercard also has turned its attention to providing customers value beyond rewards and cashback perks. Earlier this month, it created a new role of chief experience officer for the same purpose. Donald Chesnut, previously the global chief experience officer for SapientRazorfish, was hired for the role. He told Bank Innovation that his job is to provide merchants, issuers and other partners “a more holistic way” to work with the company’s products and services.

During 2018, Amex said it added 12 million new cards. The company does not release its mobile numbers, but Squeri noted in the earnings call that it added more mobile app users this quarter.

Amex announced its partnership with PayPal in October. The partnership lets its card members earn rewards points on P2P transactions, and then, in turn, use those reward points for purchases at PayPal merchants. These P2P payments can be done through the Amex app. As a part of this partnership, Amex users can also pay their Amex bill with PayPal or Venmo balance as well as add American Express cards to the PayPal wallet directly from the Amex app.