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American Express Co AXP (NYSE)
Sector: Financial Industry: Consumer Financial Services View AXP on other exchanges
Independent Research
American Express Company (American Express), incorporated in 1965, is a global payments, network and travel company. The Company has four operating segments: Global Network & Merchant Services, U.S. Card Services, International Card & Global Commercial Services and Corporate & Other. The products and services of the Company include global card network services; charge card and credit cards for consumers and businesses; consumer and small business lending products; American Express travelers chouse and gift cards; merchant acquiring and transaction processing; business expense management products and services; consumer travel services, and business travel and travel management services, among others. On December 31, 2006, the Company acquired Harbor Payments, Inc. (Harbor), an Atlanta-based technology company. In March 2007, the Company unveiled S2S eInvoice&Pay, a fully integrated electronic invoice presentment and payment (EIPP) solution. In July 2007, American Express announced that its division, American Express Business Travel, acquired the remaining 63% shares in their joint venture Farrington American Express Travel Services Limited in Hong Kong, to form a wholly owned travel management venture.
Global Network & Merchant Services
The Company operates a global general-purpose charge and credit card network through its Global Network Services (GNS) business. Network functions include operations, service delivery, systems, authorization, clearing, settlement and brand advertising and marketing; the development of new products for the network, and establishing and enhancing relationships with merchants globally. GNS focuses on partnering with third-party financial institutions, which choose to issue Cards accepted on the Company's global network.
GNS arrangements fall into three main categories. The first type of GNS arrangement is known as an independent operator (IO) arrangement. During the year ended December 31, 2006, the Company had 55 of these arrangements around the world. Under this type of arrangement, it licenses its bank partner to issue local currency Cards in their market, including the classic Green, Gold and Platinum American Express Cards.
The second type of GNS arrangement is known as a network card license (NCL). In an NCL arrangement, American Express grants the third-party financial institution a license to issue American Express branded Cards. The NCL is the model that the Company implemented with banks in the United States. Examples of NCL arrangements include its relationships with Citibank (South Dakota), N.A. and Bank of America in the United States, Lloyds TSB Bank in the United Kingdom and Westpac Banking Corporation in Australia.
The third type of GNS arrangement is a joint venture. The Company has utilized this type of arrangement in Switzerland, Belgium and several other countries. In 2006, GNS signed 11 new partners to issue Cards on the American Express network. GNS partners launched over 125 new products during 2006, bringing the total number of American Express-branded GNS partner products to approximately 550. Outside the United States, it has signed a number of agreements over the past year in markets, such as Brazil, Indonesia, Malaysia and Turkey. The GNS business has over 90 partners representing over 100 geographic markets.
The Company operates a global merchant services business, which includes signing merchants to accept Cards, accepting and processing Card transactions, and paying merchants that accept Cards for purchases made by Card members with Cards (Charges). It also provides point-of-sale and back-office products, and services and marketing programs to merchants.
U.S. Card Services
As a significant part of its Card issuing business, American Express Travel Related Services Company, Inc. (TRS) and its United States banking subsidiaries issue a range of Card products and services to consumers and small businesses in the United States. The consumer travel business, which provides travel services to Card members and other consumers, complements the core Card business as does travelers check and prepaid services business. The Card business offers a range set of card products.
The Company and its licensees offer individual consumer charge cards, such as the American Express Card, the American Express One Card, the American Express Gold Card, the Platinum Card and the Centurion Card; revolving credit cards, such as Blue from American Express, Blue Cash Card from American Express and Blue Sky from American Express, a travel rewards Card launched in 2005; and a range of cards sponsored by and cobranded with other corporations and institutions, such as the Delta SkyMiles Credit Card from American Express, True Earnings Card exclusively for Costco Members, Starwood Preferred Guest Credit Card and JetBlue Card from American Express. American Express and its licensees also offer a range of revolving credit Cards. These Cards have a range of different payment terms, grace periods, and rate and fee structures.
The Company issues Cards under cobrand agreements with selected commercial firms in the United States. Card members earn rewards provided by the partners' respective loyalty programs based upon their spending on the cobrand Cards, such as frequent flyer miles, hotel loyalty points and cash back.
The Company also issues Cards that are marketed under cobrand partnership arrangements with financial services partners. Such partnerships involve the offering of a standard product (issued by TRS or one of its subsidiaries) to customers of the financial services partner, generally cobranded with the partner's name on the Card. Under these arrangements, the Company makes payments to the financial services partners that are primarily based on the number of accounts acquired and retained through the arrangement and the amount of Cardmember spending on such Cards. The duration of such arrangements generally ranges from three to seven years. In 2006, the Company expanded this partnership to include a cobranded American Express Preferred Rewards Gold Card, to be offered to Guaranty Bank's consumer customers at its various locations.
The Company's revolving credit Cards in the United States are issued by American Express Centurion Bank (Centurion Bank), which markets primarily through direct mail and other remote marketing channels, and American Express Bank, FSB (AEBFSB), which markets primarily through in-person selling and third-party cobrand partners. Certain of the Company's Cards, particularly charge Cards, charge an annual fee that varies based on the type of Card and the number of Cards for each account. The Membership Rewards program from American Express has over 1,300 redemption partners worldwide and is offered in 98 markets. In 2006, the Company introduced features, such as First Collection portfolio, a rewards tier exclusively for Platinum Card and Centurion Card members. Card members have access to a variety of fee-free and fee-based special services and programs, depending on the type of Cards they have and their country of residence. These special services and programs include buyer's assurance plan, car rental loss and damage insurance, automatic bill pay and automatic flight insurance. During 2006, the Company began Membership Changes Everything, a five-week series of free activities in the New York City area for Cardmembers who carry American Express-issued Cards, which was designed to exhibit the benefits and services that accompany Card membership.
OPEN from American Express (OPEN) offers small business owners a range of tools, services and savings designed to meet their evolving needs, including charge and credit Cards, expense management reporting and travel services. During 2006, the Company introduced several new Cards, which includes JetBlue Business Card, American Express SimplyCash and The Starwood Preferred Guest.
In addition to travelers checks business, the Company also offers a variety of other prepaid products, including reloadable and non-reloadable prepaid cards and, through American Express Incentive Services L.L.C., a joint venture with Maritz Inc., it offer various incentive prepaid products, including the Corporate Gift Cheque, the Incentive Funds Card and several points-based incentive cards.
The Company sells American Express Travelers Cheque. Travelers chouse and Prepaid Services offers the American Express Gift Card , which is a prepaid gift card in the United States. The Company also continued to offer the Travelers Cheque Card (TCC), a reloadable, prepaid card marketed as a plastic form of its Travelers Cheque. In 2006, the Company expanded its Gift Card retail distribution network to include Walgreens and Office Depot, as well as more than 2,500 locations in the grocery category, malls and large national retail chains.
The American Express Consumer Travel Network ?USA provides travel, financial and Cardmember services to consumers through American Express-owned travel service offices, call centers, participating American Express Representatives (independently-owned travel agency locations that operate under the American Express brand) and the Consumer Travel Website. Other programs developed by Consumer Travel for Centurion and Platinum Card members include Centurion Cruise Privileges , Centurion Destinations and Platinum Destinations Vacations, the Private Jets Program, Private Villas and Yachts.
International Card & Global Commercial Services
Through the Global Commercial Services (GCS) group, the Company provides expense management services to more than 100,000 firms worldwide through the Corporate Card program, Corporate Purchasing Solutions, electronic invoicing and payment services and Global Business Travel Services. During 2006, the Company added or retained several corporate Card clients in the United States and internationally, including Accenture, Costco Wholesale Corporation, Merrill Lynch, Phillips and Siemens Corporation.
GCS offers four primary products and services: Corporate Card, issued to individuals through a corporate account established by their employer and designed primarily for travel and entertainment spending; Corporate Purchasing Solutions, an account established by a company to pay for everyday business expenses, such as office and computer supplies; S2S, a suite of electronic solutions for companies looking to automate their source-to-settle processes and gain savings and control by integrating steps in their entire procurement cycle, and Business Travel, which helps businesses manage their travel expenses through a range of travel-related products and services.
The American Express Corporate Card is a charge card that individuals may obtain through a corporate account established by their employer for business purposes. Through the Corporate Card program, companies can manage their travel, entertainment and purchasing expenses and improve negotiating leverage with suppliers, among other benefits. Corporate purchasing solutions (CPS) helps global, large and middle market companies manage their everyday spending. CPS is used by corporations to buy everyday goods and services, such as office supplies and industrial supplies and equipment, in 24 markets around the world. S2S solutions are designed to help companies improve the efficiency of their supply chain, reduce processing costs and increase control and compliance along all steps in the purchasing process.
GCS also offers American Express@Work, a secure, Web-based suite of online tools that enables clients to manage their global Corporate Card, Corporate Purchasing Solutions and Corporate Meeting Card programs on a 24/7 basis through a single user interface. GCS Global Travel Services consists of American Express Business Travel and Global Foreign Exchange Services. In 2006, Business Travel sold and franchised operations in Brazil and New Zealand. Business Travel also offers the TravelBahn Distribution Solution, a distribution solution that provides access to airline inventory and fares for American Express Business Travel customers with a number of carriers, in North America and in select international markets. Business Travel also introduced Security Suite, a global traveler security solution to support the clients in locating and caring for their traveling executives in times of unexpected events and crises. Global Foreign Exchange Services (FES) consists of retail and wholesale foreign exchange services and International Payments.
American Express Bank (AEB) serves affluent and net worth individuals and financial institutions through over 75 locations in 47 countries and regions worldwide. AEB's operations are conducted primarily through the Company's indirect wholly owned subsidiary, American Express Bank Ltd., and its subsidiaries. AEB's two primary business lines are Global Wealth Management (GWM), which incorporates The Private Bank and Financial Advisory Services, and the Financial Institutions Group (FIG).
Corporate and Other Segment
The Corporate and Other includes American Express Publishing. Through American Express Publishing, the Company publishes luxury lifestyle magazines, such as Travel+Leisure, T+L Family, a supplement to Travel+Leisure, T+L Golf, Food & Wine and Departures; travel resources, such as SkyGuide; business resources, such as the American Express Appointment Book and SkyGuide Executive Travel, a business traveler supplement; a range of general interest, cooking, travel, wine, financial and time management books; branded membership services; a growing roster of international magazine editions, and directly sold and licensed products. American Express Publishing also has a custom publishing group and is expanding its service-driven Websites, such as travelandleisure.com, foodandwine.com, departures.com, tlgolf.com, tlfamily.com and skyguide.net. It has an agreement with Time Inc., under which it manages the Company's publishing business.
The Company competes with VISA, MasterCard, Diners Club, Discover and JCB Co., Ltd.
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