Operation Management

BSTR/476
IBS Center for Management Research
American Express Redefines Its Strategy
This case was written by Adapa Srinivasa Rao and G V Muralidhara, IBS Hyderabad. It was
compiled from published sources, and is intended to be used as a basis for class discussion rather
than to illustrate either effective or ineffective handling of a management situation.
 2015, IBS Center for Management Research. All rights reserved.
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BSTR/476
American Express Redefines Its Strategy
“We are becoming a more inclusive brand, a more welcoming brand to a broader
range of American consumers, all the way from prepay to premium.”1
– Josh Silverman, American Express President for Consumer Products and
Services in March 2014.
“If your vision is designed around service as the primary core business – of what
you wake up and do every day – it allows you to evolve and in many cases
cannibalize and change the business you’re in.”2
– Howard Grosfield, CEO of American Express Canada in November 2014.
INTRODUCTION
In February 2014, American Express launched a new credit card called the ‘Amex EveryDay
Credit Card’ (Amex EveryDay). This card did not have any annual fee but had a unique rewards
program that rewarded frequent users. Unlike the other offerings from American Express which
were traditionally targeted at busy executives and entrepreneurs, Amex EveryDay was targeted at
housewives and students. The card was part of the strategic shift at American Express to target the
mass market rather limiting its offerings to premium customers. Since the time it entered the card
business, American Express had operated a closed-loop network and focused on a limited number
of profitable customers. It also charged higher commissions from the merchants than other banks
and card companies. Despite offering its products to a limited group of customers, American
Express enjoyed a higher share of the total card spending.
In the mid-2000s, American Express started facing new challenges from online payment
processing companies and other card companies. The online payment processing companies
offered safe and cheaper payment processing services which lured customers from the
conventional card companies. Big commercial banks and credit card companies that processed
transactions through their open-looped networks too started giving higher competition to American
Express by offering super premium cards. Cards like the Visa Infinite and Sapphire Card from
JPMorgan Chase & Co. offered features similar to that of high-end cards from American Express.
Faced with the prospect of losing its affluent customers and the growing market for online
payment processing, American Express launched new products and services to reach new
customer segments which it had traditionally ignored. New products like the ‘Bluebird’ prepaid
card, ‘Serve’ digital payment system, and the ‘American Express PAYBACK Credit Card’ were
launched targeting the mass market. The company also started focusing on offering basic banking
services to its customers. American Express converted itself into a banking holding companya
during the financial crisis of 2008 and started rolling out cheaper banking products like savings
accounts with low balance requirements. Most of the newly launched products were received well
in the market. Some analysts supported the shift in the business strategy of American Express. But
others were skeptical about the success of the new strategy. They opined that American Express
might end up losing its premium brand image in the market and thus its premium customers.
a
According to the American Bank Holding Company Act of 1956, a bank holding company is a company
that controls one or more banks.
1
American Express Redefines Its Strategy
AMERICAN EXPRESS- BACKGROUND NOTE
American Express Company (American Express) was founded in the year 1850 as an express mail
business. The company was formed with the merger of some leading express companies of the
time like Wells & Company, Livingston, Fargo & Company, and Wells, Butterfield & Company.
In the initial days of its operation, it enjoyed a monopoly on the movement of all kinds of express
shipments like goods, securities, and currency in New York State. In subsequent years, the
company started expanding its reach to cover all parts of the country by entering into business
agreements with other companies in businesses like express mail, railroads, and shipping. In the
year 1882, American Express started expanding into the business of financial services by
launching the money order business. The company became a major player in the international
financial services business with the launch of American Express Traveler’s Cheques in the year
1891. The Traveler’s Cheques issued by American Express quickly became popular as they were
accepted in all the major cities of the world. In the year 1915, American Express entered the travel
services business, which went on to become one of its most lucrative businesses in the later years.
Its travel services business, which later came to be known as ‘American Express Travel &
Lifestyle Services’, offered premium travel services to affluent customers in both the USA and
other countries. In the year 1917 (during World War I), the then president of the US, Woodrow
Wilson, commanded that all the railroads in the country be merged into one single company to aid
the war efforts. As a result of this move, American Express suffered a major setback with the loss
of its railroad business.
In the year 1958, American Express entered into the payments business with the launch of its first
charge cardb. This card proved to be a huge success in the market and was followed by other
charge cards like the Gold Card in1966 and the Platinum Card in the year 1984.With the success of
its charge card business, American Express launched its first credit card called the ‘Optima Card’
in the year 1987. The Optima Card was an instant success among young customers as it allowed its
users to carry over the balance to the subsequent month without having to pay the whole balance.
In subsequent years, American Express introduced multiple credit cards to suit the needs of
customers from different income segments. In the year 1999, American Express launched a super
premium charge card called the ‘Centurion Card’ targeted at rich customers. The Centurion Card
was offered only by invitation to the users of its Platinum Card. It was made of titanium and had
no preset credit limit. American Express also issued a number of co-branded cards in partnership
with airlines, hotels, retailers, etc. that offered higher benefits to the customers. Apart from the
charge cards issued to retail customers, American Express issued a range of commercial cards
(popularly called Corporate Cards) to help mid-size and large companies effectively manage their
operating expenses. In the year 2008, the company further strengthened its business services
division by acquiring GE’s Corporate Payment Services business.
As part of its travel services business launched in the year 1915, American Express started
publishing travel guides for its customers who were traveling all over the world. In the year 1968,
American Express acquired U.S. Camera Publishing Co. which published a monthly travel
magazine called U.S. Camera and Travel. 3 American Express renamed the magazine ‘Travel &
Leisure’ and invested resources to expand its reach. By 1970, Travel & Leisure had become the
highest selling travel magazine in the US. Over the years, the publishing arm of American Express
launched other popular magazines like ‘Food & Wine’, ‘Black Ink’, ‘Departures’, etc. In the year
2013, American Express sold off its publishing business to Time Inc. due to banking regulations
that restricted companies in the banking business from runing non-financial businesses. 4By the
year 2014, American Express was concentrating on aggressively expanding its financial services
business. For the fiscal year 2013, its total revenues were US$ 33 billion (Refer to Exhibit- I for
select financials of American Express).
b
Charge cards are similar to credit cards where the customer is billed periodically for the transactions
made on the card. The only difference between the two is that that the customer needs to pay the whole
balance on the charge card and cannot carry it over to the next billing cycle.
2
American Express Redefines Its Strategy
GLOBAL PAYMENT CARD INDUSTRY
The global payment card industry was highly competitive and was dominated by a few big
companies. The higher entry barriers of the industry in the form of high investments needed to
build the network and time taken to build reliable brands prevented new players from entering and
succeeding in the industryc.
Despite the presence of a number of smaller players supported by local governments, the payment
card industry was mostly concentrated in the USA. Two American companies, Visa and
MasterCard, had a significant market share in terms of the total cards in circulation. However, in
terms of the total value of transactions made by customers, American Express led the industry.
Banks played a leading role in the global payment industry by issuing the credit cards to their
customers, bearing the default risks, providing support to customers, etc.
The global payments industry was expected to grow at a healthy rate with an annual increase of
total payments at 5 percent till the year 2016.d Noncash payment products were mostly preferred in
the USA, Europe, and some big Asian economies. With the higher preference for non-cash
payment instruments in North America, people used cards to make their payments.5 Going
forward, the industry’s growth in the developed markets was expected to be modest as the market
was already well penetrated by major card issuing companies. Most of the future growth was
expected to come from emerging economies like China and India. The increasing prosperity of
consumers in the emerging markets coupled with the spread of financial services were the main
reasons for the high growth projections of payment cards industry in these markets.
BUSINESS MODEL OF AMERICAN EXPRESS
Since the time it entered the card business, American Express had followed a very unique business
model when compared with other credit card companies. It maintained its own closed-loop
network that did not process the card transactions of other credit card companies (Refer to ExhibitII for network models of different card companies). It directly issued its own cards to the
customers and extended the required credit for the purchases made. Instead of focusing on
transaction volumes, American Express always focused on the spend volumes of its customers. A
few premium customers of the company gave it higher revenues than the large number of small
customers for other credit card companies. For the year 2013, Visa processed a total of 60 billion
transactions with 2 billion cards. During the same period, American Express processed 6 billion
transactions with just 107 million cards in use. A limited number of transactions helped it in
controlling its costs, leading to higher profitability.
The cards issued by American Express had high membership fees which made them unaffordable
to low income customers. In return for the high membership fees charged for its cards, American
Express offered a premium loyalty program (called the Membership Rewards program) that
rewarded its customers in the form of gifts, air miles, club memberships, access to airport lounges,
etc. Since American Express operated its own network, it was able to get valuable insights
regarding the spending patterns of the customers so that it could send customized marketing offers.
Such offers helped the company maintain a good relationship with its customers while
encouraging the customers to stay loyal. The insights it gained through the past spending habits of
c
d
There are different types of payment cards in the market like credit cards, debit cards, charge cards, and
prepaid cards. Debit cards and Prepaid require users to have ,money deposited in their bank/card accounts
to make transactions. However, banks and credit card companies give credit on transactions made
through credit cards and charge cards. Customers will be charged a fixed rate of interest on the amount
outstanding in their card accounts.
Sukriti Bansal, Philip Bruno, FlorentIstace, and Marc Niederkorn, “Global Payments Trends: Challenges
Amid Rebounding Revenues,” McKinsey on Payments, September 2013.
3
American Express Redefines Its Strategy
customers also made it possible for American Express to match them with the right merchants and
incentivize higher spending. American Express charged a higher commission per transaction from
each merchant than other card companies. In return, merchants who accepted its cards got access
to its affluent customer base with its high spending power. Due to its exclusive focus on such
lucrative customers, American Express had a low market share of 9.2 percent of the total credit
card market in the year 2013 (Refer to Exhibit- III for the market share of major card companies).
However, it experienced a continuous growth in its billed business for the five years preceeding
2013 (Refer to Exhibit- IV for billed business of American Express from the year 2009 to 2013).
The flipside of issuing its own cards was that American Express had to extend credit on its own to
the customers and incur losses due to payment defaults by the customers. However, as the
company exclusively focused on affluent customers, it had the lowest percentage of loans that
were past the due date. While an average of 2.39 percent of the total credit card loans issued by
American commercial banks were past the payment deadline for the month of October 2013, just
1.07 percent of the credit card loans issued by American Express in USA were due past the
deadline. 6
American Express followed a similar model for its travel services. Even though the travel services
were initially targeted at the general population, it later restricted them mostly to its business
clients. Its travel services helped big businesses to effectively manage the travel requirements of
their executives.
Other major credit card companies like Visa and MasterCard followed a business model that was
based on the volume of transactions generated by their business activities. They did not issue cards
directly to the customers. Instead, they issued cards through banks and other financial institutions
which were members of their network. These cards were used by consumers to buy goods and
services from merchants. All the transactions made through the cards bearing the logos of Visa and
MasterCard were routed through their networks to the card issuing banks. The open-loop system of
these companies allowed any bank in the world to issue globally accepted credit and debit cards.
Payments were processed once the banks authorized the transaction after checking the availability
of funds in the accounts or credit limits of the customers. Visa and MasterCard made money from
the data processing and from service fees from their clients.7 Apart from the fees, credit card
companies did not earn any other income like interest and other fees directly from the customers.
All the risks related to the credit issued to the customers like payment defaults were borne by the
card issuing banks. As Visa and MasterCard issued cards through a number of banks all over the
world, the small fees earned from each of their clients when pooled became a revenue source for
these companies. Visa and MasterCard charged extra fees for value added services like dispute
resolution and loyalty reports.
NEW CHALLENGES
Since the mid-2000s, the major card companies in the world including American Express had been
facing new competition from online payment processing companies like PayPal. Many Silicon
Valley based technology companies too entered the payments business and introduced online,
mobile, and cloud-based services that directly competed with the services provided by the
conventional card companies.8 The difference between the conventional card issuing companies
and online payment processing companies became blurred as these companies made it possible for
payments to be made at physical merchant points of sale (POS) units through mobile phones.
Unlike the conventional charge and credit cards which had fixed annual fees, the services of online
payment processing companies were cheap or totally free for the customers.
American Express also started facing higher competition from banks and credit card companies.
As the default rates in the subprime market increased due to the global financial crisis of 2008,
many big banks started targeting affluent customers. Credit card companies and banks started
launching premium and superpremium cards targeted at their rich clients. In the year 2009,
4
American Express Redefines Its Strategy
JPMorgan Chase & Co.e launched a premium credit card called the ‘Sapphire Card’ targeted at the
richest 15 percent of American households.9The Sapphire Card offered an exclusive rewards
programs similar to the one offered by American Express. In the same year, JPMorgan Chase &
Co introduced a charge card which was also the first charge card issued on the Visa/MasterCard
networks. Visa and MasterCard also launched super premium cards targeted at rich customers.
Cards like ‘Visa Infinite’ and ‘World Elite MasterCard’ offered similar features to that of
American Express Platinum and Centurion Cards for a higher membership fee. These super
premium cards could be issued by any bank in the world that fulfilled the requirements set by Visa
and MasterCard.
Since the super premium cards that worked on the networks of Visa and MasterCard had higher
acceptance around the world than those issued by American Express, business executives and rich
customers started preferring them to the latter.
CHANGING BUSINESS STRATEGY
The changing payments business worldwide forced American Express to consider changing its
business strategy. The prospect of losing its affluent customers could limit the future growth of the
company. At the same time, there was no way for the company to introduce more premium
products as it had already served the top end of the market with its premium and superpremium
products like the American Express Platinum and Centurion Cards (Refer to Exhibit-V for the list
of cards issued by American Express in USA). The explosive growth of e-commerce made it
difficult for American Express to ignore the business of digital payments. In view of the changing
market conditions, American Express changed its business strategy to focus on both the premium
and mass markets with new products.
Recognizing that online payments were reshaping financial transactions, American Expess
launched its own digital payment system called ‘Serve’ in the year 2011.10 Serve competed with
other online digital payment services like PayPal and had similar features. Users of Serve could
make payments to online merchants through the Serve website and their mobile phones. The Serve
account could be funded through transfers from bank accounts, credit cards, and transfers from
other Serve accounts. As cash could be easily transferred from one Serve account to the other, the
service also acted as both a payment and money transfer solution for customers. With Serve,
American Express hoped to reach customer segments that neither used physical cash nor plastic
cards to make payments and thereby emerge as a provider of software based payment solutions.
Commenting on the introduction of the Serve digital payment system, Dan Schulman, group
president of enterprise growth at American Express, said, “This is really the first time that
American Express is going to be able to address those consumers that typically would utilize either
a debit card or checking account. There’s a large cultural shift happening at American Express in
terms of us really moving to becoming more of a software- and platform-based company.”11 In the
year 2013, American Express made it possible for the users of Serve to use physical cards issued
by the company to make payments at online and offline stores.12 The additional facility of using
plastic cards to make payments increased the utility of the Serve payment system. Other than
targeting customers who did not have regular bank accounts in the western markets, American
Express also wanted to use Serve to expand in developing countries where customers were directly
moving from cash to mobile payments.13
American Express introduced new card products with little or very low membership fees to attract
more consumers to the company. In the year 2012, it launched a new prepaid card called Bluebird
in partnership with WalMart Stores. Bluebird was positioned as an alternative to the regular
checking accounts and debit cards issued by commercial banks. The card was targeted at
e
JPMorgan Chase Chase& Co. is an American banking and financial services company. It is
headquartered in Manhattan, New York, USA.
5
American Express Redefines Its Strategy
customers who were concerned with the increasing costs of running regular bank accounts.
Commercial banks in the US charged higher charges for using their ATM services and overdraft
services and for non maintenance of monthly and quarterly balances.
The Bluebird prepaid card was accepted at all the locations where the regular American Express
cards were accepted. Customers could get a Bluebird card from WalMart Stores or the special
website14 created for the card. Cash could be transferred to the Bluebird cards easily from the
regular checking accounts of customers, through free deposits at the checkout registers of WalMart
stores, and through the direct transfer of paychecks. The prepaid card had a number of features that
were generally available with the conventional checking accounts offered by commercial banks.
While the prepaid cards issued by other companies allowed the customers to just load money on
their cards and use it at shopping outlets, Bluebird was designed to be a compelte alternative to the
regular savings accounts from commercial banks. Bluebird card users could easily manage their
everyday finances with features like withdrawing money from ATMs, writing checks, setting up
subaccounts, and paying utility bills. Access was also free to ATMs with which American Express
had a tie-up.
The card was given free of cost and without any annual maintenance charges having to be paid. 15
American Express made money through the commissions paid by merchants when the Bluebird
card was used for purchases and and through the fees charged for using the card at ATMs outside
its network. With the Bluebird, American Express hoped to reach customers that it could not
through its conventional charge and credit cards. WalMart on its part hoped the card would help
attract more customers to its brick and mortar stores and ecommerce store.16 Other than luring the
customers of regular commercial banks, American Express also hoped to target people who had
never had a checking account with commercial banks.17
Seeking to offer a suitable alternative to the credit cards of banks, American Express too came up
with cheaper credit cards with low or no maintenance charges. In February 2014, it launched a new
credit card called ‘Amex EveryDay Credit Card’ (Amex EveryDay) targeted at the mass market.
Unlike conventional card products from the company, Amex EveryDay did not have any annual
fees.The new card was aimed at increasing the reach of its card products to customers who were
averse to paying membership fees for their credit cards and hence preferred the payment products
of rivals like Visa and MasterCard. Apart from not having an annual fee, the Amex EveryDay card
also had a uniqe rewards program that encouraged its customers to use the card more frequently.
Customers who used the card for a minimum of twenty times a month could earn 20 percent extra
reward points. Rather than redeeming the reward points for merchandise or cash, all the reward
points that were earned on the card could be transferred to American Express’ business partners
like airlnes and converted into airmiles. Under the EveryDay series, the company also launched
another card called Amex EveryDay Preferred Card. This had a nominal annual fee of US$ 95 per
year and offered more features.The main target customers for the new EveryDay range of cards
were housewives, students, and junior professionals who shopped frequently in small quantities.
Commenting on the launch of the Amex EveryDay Credit Card, Josh Silverman, President,
Consumer Products and Services, said, “Our goal is to be a more inclusive and welcoming brand
by building new products for different lifestyles and spending needs, backed by the service and
quality that has made American Express so successful.”18
The reach of American Express in emerging markets like India was limited as many persons there
were not eligible for its premium cards. In order to expand its reach in such markets, American
Express introduced a new range of credit cards under its PAYBACK brand. PAYBACK was a
loyalty program brand acquired by American Express when it took over PAYBACK’s parent
company Loyalty Partner in the year 2011. Customers who owned the PAYBACK loyalty card
could gain and redeem reward points at any of the merchants enrolled for the program. American
Express used the PAYBACK brand to launch the American Express PAYBACK Credit Card and
American Express MakeMyTripf Credit Card in 2013 and 2014. These cards allowed the
f
MakeMyTrip is one of the premium travel portals in India. The American Express MakeMyTrip Credit
Card was launched as a co-branded credit card between MakeMyTrip and PAYBACK.
6
American Express Redefines Its Strategy
customers to redeem the reward points at any of merchants which were part of the PABACK
network. The American Express PAYBACK Credit Card was free for customers whose total
spending in a year exceeded US$ 2,443.
BANKING BUSINESS
In the year 2007, American Express sold its subsidiary company American Express Bank Ltd. to
Standard Chartered PLC for a sum of US$ 1.1 billion. 19 American Express Bank had been
providing banking services to financial institutions and high net-worth customers around the
world. The decision to exit the banking business was taken to enable the company to focus on its
high-growth and high-return payments business. However, American Express continued to operate
under restricted banking licenses in some countries like India which did not allow non-banking
companies to offer financial services like issuing credit cards and travelers’ cheques. The changing
financial business around the world made American Express refocus on its banking business.
During the financial crisis of 2008, American Express converted itself into a bank holding
company after getting approval from the Federal Reserve System. 20 It started to aggressively push
into the consumer banking space. Converting itself into a commercial bank enabled it to access
cheap deposits from the public and get help from the government during the crisis. Instead of
focusing on premium customers, the company started providing banking services to the mass
market. As part of its banking services, American Express offered basic banking products like
savings accounts and certificates of deposit.21 The new banking products were cheaper and did not
charge customers for non-maintenance of minimum balances.
The supreme court rulingg in the US in 2004, which allowed American Express to issue its cards
through other banks in the country, helped it enter the open-loop network while effectively
retaining its lucrative closed-loop network. 22 American Express looked to expand its reach through
tieups with major U.S. banks. Some big American banks like U.S. Bankh reached an agreement
with American Express to offer its cards to their customers. 23 However, the adoption of American
Express cards was slow due to the competition from Visa and MasterCard.
IMPACT ON THE BRAND VALUE
With the introduction of new products, American Express was redefining itself as a reliable
financial ‘service provider’ available to all kinds of customers rather than as an issuer of
charge/credit cards. Rather than targeting every new product and new technology that was being
introduced in the market, it wanted more customers to believe that American Express was the
brand for their financial needs. The new products from American Express targeted at the mass
market were well received in the market. Some analysts praised its efforts Express to reach the
mass market.
However, some analysts were skeptical about American Express’s attempt to focus on both the
premium and mass markets with different products under the same umbrella brand. They opined
that the new mass market products might adversely impact the company’s brand. Many customers
of American Express considered its cards as a symbol of accomplishment in life. American
Express too had positioned its products as something customers had ‘membership’ and ‘access’
to.24 The premium image of American Express enabled the company to earn higher revenues in the
g
h
In the year 2004, the American Supreme Court ruled that both Visa and MasterCard had violated antitrust
rules by restricting their member banks from offering credit/charge cards that could be used on other
payment networks. American Express and Discover Financial filed lawsuits claiming damages. These
lawsuits were later settled out of court.
U.S. Bank is the fifth largest commercial bank in USA. It is part of the U.S. Bancorp holding company
headquartered in Minneapolis, Minnesota, USA.
7
American Express Redefines Its Strategy
form of annual membership fees. Merchants too were willing to pay higher commissions as they
were able to gain access to high spending customers. Some analysts felt that premium customers
could leave the company if the brand value of American Express became diluted due to the
cheaper products. Some other analysts opined that the premium image of American Express might
prevent low income customers from even trying out the new products.
OUTLOOK
American Express exited from some of its noncore businesses to concentrate on financial services.
In the year 2014, it separated its business travel division and entered into a joint venture with an
investor group led by Cetaras LP to run its travel business. American Express was to share the
responsibility of managing the joint venture with its partner.25 The main objective of separating the
business travel division was to free up funds for investing in other initiatives taken by the
company.
Meanwhile, the competition in the payments business was increasing further with the entry of big
technology companies. In October 2014, Apple launched a new payments system called Apple
Pay, which allowed customers to pay for their purchases safely from their mobile phones.26 Apple
included advanced safety features like fingerprint recognition in the Apple Pay service to
authenticate the transactions. Since Apple had a significant share of smartphones sold all over the
world, analysts predicted that the new service would disrupt the payment card industry.
Competition in the premium cards segment further intensified with more banks launching their
own products targeted at affluent customers. In March 2013, Citibank launched a super premium
credit card called Citi Prestige Card.27 The Citi Prestige Card offered a premium rewards program
which offered customers Relationship Bonus Points over and above the regular reward points
based on the length of their relationship with the bank and their total yearly spends. According to
some industry analysts, the future of American Express would depend on how effectively it could
convince both the premium and regular customer segments that it was a brand they could rely on.
Since the time the company was founded, American Express had weathered many crises that
threatened its very survival. It remained to be seen how it would overcome the current challenges
and emerge as the financial service provider of the future.
8
American Express Redefines Its Strategy
Exhibit-I
Select Financials of American Express (In US$ Millions)
Item
2013
2012
2011
27,927
26,927
25,586
Total interest income
7,005
6,854
6,696
Expenses
Total interest expense
1,958
2,226
2,320
5,047
32,974
4,628
31,555
4,376
29,962
2,110
1,990
1,112
Total revenues net of interest expense after provision for losses
30,864
29,565
28,850
Total expenses
22,976
23,114
21,894
5,359
4,482
4,935
Revenues
Total non-interest revenues
Net interest income
Total revenues net of interest expense
Provisions for losses
Net income
Source: Annual Report of American Express, 2013.
Exhibit-II
‘3-Party Model’ of American Express and Models of Other Payment Companies
American Express(Closed-Loop Network)
Visa and MasterCard (Open-Loop Network)
Source:
http://cdn.nerdwallet.com/blog/3_party_model.png,
http://www.capgemini.com/resource-fileaccess/resource/pdf/global_trends_in_the_payment_card_industry_2012_acquirers.pdf.
9
American Express Redefines Its Strategy
Exhibit-III
Market Share of Major Card Companies (End of 2013)
Number of Cards in
Circulation
Card Company
Market Share
Average Annual
Spending
Visa
285 million
49.3%
US$ 3,786
MasterCard
178 million
30.8%
US$ 3,146
American Express
53.1 million
9.2%
US$ 11,996
Discover
62 million
10.7%
US$ 1,774
Source: http://www.cardhub.com/edu/market-share-by-credit-card-network.
Exhibit-IV
Billed Business of American Express (In US$ Billions)
952
1000
888
900
822
800
700
713
620
600
500
400
300
200
100
0
2009
2010
2011
Source: Annual Report of American Express, 2013.
10
2012
2013
American Express Redefines Its Strategy
Exhibit-V
Cards Issued by American Expressi
Name of the Card
Card Type
Annual Fees
Amex EveryDay Credit Card
Credit
US$ 0
Blue Cash EveryDay Card
Credit
US$ 0
American Express Premier Rewards Gold Card
Charge
US$ 175
TrueEarnings Card from Costco and American Express
Credit
US$ 0
The Starwood Preferred Guest Credit Card
Credit
US$ 65
Platinum Card
Charge
US$ 450
Blue Cash Preferred Card
Credit
US$ 75
American Express Green Card
Charge
US$ 95
Gold Delta SkyMiles Credit Card
Credit
US$ 95
Blue from American Express
Credit
US$ 0
Hilton HHonors Card
Credit
US$ 0
Amex EveryDay Preferred Credit Card
Credit
US$ 95
Platinum Delta SkyMiles Credit Card
Credit
US$ 195
JetBlue Card
Credit
US$ 40
American Express Gold Card
Charge
US$ 125
Blue Sky
Credit
US$ 0
Blue Sky Preferred
Credit
US$ 75
Delta Reserve Credit Card
Credit
US$ 450
Hilton HHonors Surpass Card
Credit
US$ 75
The Mercedes-Benz Credit Card
Credit
US$ 95
Source: https://www304.americanexpress.com/credit-card/compare/?inav=menu_cards_pc_viewallcards.
i
In USA as on January 26, 2014.
11
American Express Redefines Its Strategy
Endnotes:
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Hilary Stout, “With New Rewards Card, Amex Focuses on Busy-Mom Market,”
http://www.nytimes.com, March 2, 2014.
Jacqueline Nelson, “American Express Shake-up to Rely on Trusted Brand, Customer Service,”
http://www.theglobeandmail.com, November 3, 2014.
“99 Years of Content Marketing: How American Express Became a Major American Publisher,”
http://contently.com.
“It’s Official: Time Inc. Buys AmEx’s Food & Wine, Travel & Leisure Magazines,” http://adage.com,
September 10, 2013.
“Global Trends in the Payment Card Industry 2012: Issuers,” http://www.capgemini.com/resource-fileaccess/resource/pdf/global_trends_in_the_payment_card_industry_2012_issuers_0.pdf, 2012.
“Delinquency
Rate
on
Credit
Card
Loans,
All
Commercial
Banks,”
http://research.stlouisfed.org/fred2/data/DRCCLACBS.txt.
“How has Visa Achieved Double Digit Growth and is it Sustainable?” http://www.trefis.com, March 6, 2014.
John Huggestuen, “Emerging Payment Technologies will Create New Winners and Losers in the Giant
Credit Card Industry,” http://www.businessinsider.in, May 19, 2014.
Juan Lagorio, “JPMorgan Challenges AmEx in Credit Card Industry,” http://www.reuters.com, October
9, 2009.
Audrey Watters, “A Challenge to PayPal? American Express Launches Digital Payments,”
http://readwrite.com, March 28, 2011.
Margaret Collins, “AmEx Pushing World Expansion Takes on EBay’s PayPal with Prepaid E-Wallet,”
http://www.bloomberg.com, March 29, 2011.
Sarah Perez, “American Express Serve Goes After the ‘Under-Banked’ with Prepaid Cards you Load
with Cash in Stores,” http://techcrunch.com, October 8, 2013.
Nick Summers, “American Express Wants to be Your Banker,” http://www.businessweek.com, October
25, 2012.
The official website for Bluebird card is www.bluebird.com.
“what is Bluebird?” https://www.bluebird.com.
Emily Jane Fox, “Wal-Mart and American Express Launch New Prepaid Card,” http://money.cnn.com,
October 8, 2012.
“Amex Launches Bluebird Card for Wal-Mart,” http://bankingfrontiers.com.
“American Express Announces New No Annual Fee Credit Card, the Amex EveryDay Credit Card,”
http://about.americanexpress.com/news/pr/2014/no-fee-amex-everyday-credit-card.aspx, February 28, 2014.
“American Express Company Agrees to Sell American Express Bank Ltd. To Standard Chartered PLC.
Sale Reflects American Express’ Continued Focus on High-Growth, High-Return Payments Businesses,”
http://ir.americanexpress.com/Mobile/file.aspx?IID=102700&FID=4860504, September 18, 2007.
AviSalzman, “The New AmEx,” http://online.barrons.com, September 13, 2014.
Nick Summers, “American Express ‘EveryDay’ Card: For Trucks, Not Faberge,”
http://www.businessweek.com, March 3, 2014.
Eric Dash, “MasterCard Will Pay US$ 1.8 billion to American Express,” http://www.nytimes.com, June
26, 2008.
“U.S.
Bank
and
American
Express
Announce
Card-Issuing
Agreement,”
http://about.americanexpress.com, November 20, 2013.
Jacqueline Nelson, “American Express Shake-up to Rely on Trusted Brand, Customer Service,”
http://www.theglobeandmail.com, November 3, 2014.
Samantha Sharf, “American Express to Spin Off Business Travel Division into Joint Venture,”
http://www.forbes.com, March 17, 2014.
Donna Tam and SharaTibken, “Apple Pay Mobile Payments Service to Launch on Monday,”
http://www.cnet.com/news/apple-pay-mobile-payment-service-to-launch-on-monday, October 16, 2014.
“Citibank Launches its First Global Credit Card for the Affluent Segment,” http://www.citigroup.com,
March 4, 2013.
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