Businessmodel of American Express

Customer Segments

Amex serves retail consumers and corporates. For corporates, its service offering depends on the size of the company – its services are segmented into small, and medium & large corporates.

• Retail Consumers – Amex provides card-related services, including charge, revolving credit, and co-branded cards. It also provides deposit, and travel related services to retail consumers. These services also come with a reward system that provides cash-back, discounts, and other incentives with heavy use.
• Small Businesses – Amex also provides card-related services that are tailored toward small businesses, including charge, revolving credit, and cobranded cards – similar to the offering to retail consumers. They also offer OPEN, a suite of services for small businesses, including travel and concierge services, retail and travel insurance, expense management tools, and dedicated client managers.
• Medium & Large Businesses – Amex offers slightly different card services for medium and large businesses, including corporate cards and attached expense management systems. They also offer b2b payment solutions and travel-related services. Amex also acquires or partners with merchants who use its card system. These merchants are small, medium, or large businesses, and pay a fee for every transaction facilitated by the Amex network – this is Amex’s largest revenue stream.

Value Proposition

Amex’s stems from its unparalleled global network that provides merchants and retail consumers with access to a convenient networked payment system that allows them to handle payments across borders and without cash. Amex also has a reputation as a reliable service provider, having built up its brand as a household name.

Amex also tailors its offerings to its various customer segments, with different services being provided to customers that need them. For example, for retail consumers, it provides a loyalty service through Plenti that includes large consumer brands such as AT&T, ExxonMobil, Macy’s, Nationwide, Rite Aid, Direct Energy, Enterprise Rent-A-Car, and Hulu.

Channels

Amex uses a multi-channel approach, with channels depending on the type of customers being reached out to. These channels include direct mail, online applications, in-house and third-party sales teams, and direct advertising.

A large part of Amex’s business involves reaching out to merchants who are potential users of the Amex network. It does this through several channels – an in-house sales team, third party sales and service agents, acquirers, aggregator, & aggregators, partnerships with banks and payment processors, internet services, telemarketing, and phone.

Customer Relationships

Amex maintains customer relationships either directly, through its in-house sales and service teams, or through a third party independent operators.

The use of either channel depends largely on the country of operation – in some countries Amex chooses to operate through an independent operator network or through network card license agreements or joint ventures with local or international players, leveraging on their local presence and connections, instead of building a proprietary network.

Key Activities

Amex’s key activities are the provision of card and travel services, and related ancillary services.

Key Partners

Amex’s key partners are merchants around the world that use its payment systems and pay a discount fee for each transaction – the largest source of revenue for Amex.

It also partners with other consumer brands to provide co-branded cards and rewards, for example its partnership with Delta to provide Delta SkyMiles, or its partnership with AirBnB and Best Buy to allow cardholders to use their reward points to pay for their products.

Amex also partners with card distributors, including card issuers and acquirers, merchant acquirers, independent operators, and network card licence holders, all of whom license the Amex brand. Amex also enters into joint ventures in order to break into certain markets – this was done, for example, in Switzerland.

Key Resources

Amex’s key resources are its merchant and payment network, its goodwill, and its customer relationships.

Cost Structure

Amex’s key costs include contra-revenue, which is money paid out to merchants, corporate and retail clients, and other customers for rewards, rebates, and discounts, employee salaries, interest on deposits and long term loans, and marketing expenses.

Revenue Streams

Amex’s main revenue streams are:

• Discount revenues – its largest income stream, this comes from fees charged to merchants when Amex cardholders use their cards to purchase items from them.
• Net card fees – this comes from annual card subscription fees.
• Travel commissions and fees – this comes from transaction or management fees to customers and suppliers.
• Other commissions and fees – these come from foreign exchange conversions, card-related fees, loyalty coalition-related fees, and other service fees.
• Interest on loans – this comes from interest earned on outstanding balances (e.g. from provision of credit)
• Other revenue – this comes from various other parts of the Amex business, for example from contracts with Global Network Services partners, insurance premiums, investments, and others. Source of Revenue/Cost Revenue (FY 2015, million USD) % of Total Revenue Revenues 34441 100% Discount Revenue

19,297 56% Net Card Fees

2,700 8% Travel Commission and Fees

349 1% Interest on loans

7,309 21% Other commission and fees

2,517 7% Other

2,269 7% Expenses 26,503 77% Interest

1,623 5% Marketing and Promotion

3,109 9% Card Member Rewards

6,996 20% Card Member Services and other

1,018 3% Salaries

4,976 14% Provisions for losses

1,988 6% Others

6,793 20% Pretax Income 7,938 23%