American Express to Let Cardholders Pay NYC Taxi Fares With Membership Rewards Points

American Express's loyalty program is set to make a big splash in the offline payment world by letting cardholders pay for their fares in New York City taxis with rewards points.

Through a deal with point-of-sale hardware company VeriFone, American Express will offer the new payment option in about 7,000 New York City taxis - about half of all taxis in the city.

The move marks the loyalty program's first step in what will likely be a major expansion into the physical world. After all, AmEx partner VeriFone also has a presence in plenty of brick-and-mortar retail establishments.

"We built this tech which is very flexible and can be used in a variety of different ways," said Leslie Berland, SVP, digital partnerships and development at American Express. "We are assessing what are the most meaningful powerful areas in the physical world to bring this to life."

Starting with New York City taxis made sense for a few reasons. For one, there was an attractive density of cardholders in the city, specifically in Manhattan. And for cardholders in the city, taking a taxi is a relatively frequent occurrence.

Before this expansion, American Express membership rewards could be used for a variety of different purchases - from gift cards to iPads to purchases on Amazon.com, all of which had to be made online. And, other than those American Express customers who use points for Amazon.com purchases, cardholders don't really have a way to pay for a product or service with points on a daily or even weekly basis.

That changes with this move; American Express is making its program more attractive to cardholders in the area, since they can now use points for a service they use more frequently.

And redeeming points for fares won't require a lot of work on the part of taxi riders. They can simply choose to pay with credit, swipe their card, and then are given the choice on the payment screen to pay with Membership Rewards points if they'd like.

Fares will cost 100 points per dollar, so a $10 fare would cost taxi riders 1,000 points. For taxi drivers, there's no difference between the payout they get for a credit-card purchase and what they'd earn for one of these new types of payment methods, American Express execs said.