Profile: American Express Company (AXP.N)

American Express Company (American Express), incorporated in 1965, is a global payments and travel company. The Company’s principal products and services are charge and credit payment card products, and travel-related services offered to consumers and businesses around the world. The Company’s Global Consumer Group and Global Business-to-Business Group provide a variety of products and services worldwide. The Global Consumer Group offers a range of products and services, including charge and lending (credit) card products for consumers and small businesses worldwide; consumer travel services, and stored value products, such as Travelers Cheques and pre-paid products. The Global Business-to-Business Group provides, among other products and services, business travel, corporate cards, and other expense management products and services; network services, and merchant acquisition and merchant processing for the Company’s network partners and payments businesses, and point-of-sale, servicing and settlement and marketing products and services for merchants. On February 29, 2008, the Company completed the sale of its international banking subsidiary, American Express Bank Ltd. (AEB), to Standard Chartered PLC.

American Express offers various products and services for merchants. The Company’s various products are sold globally to different customer groups, including consumers, small businesses, middle-market companies, large corporations, and banking and financial institutions. These products and services are sold through various channels, including direct mail, the Internet, employee and independent third party sales forces, and direct response advertising.

Global Network & Merchant Services

The GNMS segment operates a global general-purpose charge and credit card network. It also manages merchant services globally, which includes signing merchants to accept Cards, as well as processing and settling card transactions for those merchants. This segment also offers merchants point-of-sale and back-office products, services, and marketing programs. Cards bearing the Company’s logo are issued by its principal operating subsidiary, American Express Travel Related Services Company, Inc. (TRS), and certain of its subsidiaries, and also by third-party institutions, and are accepted on its global card network at all merchant locations worldwide that accept American Express-branded Cards. In addition, depending on the product, Cards bearing its logo are accepted at automated teller machine (ATM) locations worldwide that accept Cards.

Its Global Network Services (GNS) business establishes and maintains relationships with banks and other institutions around the world who issue Cards and, in certain countries, acquire local merchants on the American Express network. The Company’s Global Merchant Services (GMS) business provides it with access to rich transaction data through its closed loop network, which encompasses relationships with both the Cardmember and the merchant.

The GNS business has established more than 128 card issuing and/or merchant acquiring arrangements with banks and other institutions in 127 countries. GNS signed 13 new partners to issue Cards on the American Express network. In addition, GNS partners launched 130 new products, bringing the total number of American Express-branded GNS partner products to approximately 930. GNS arrangements fall into the three main categories. The first type of GNS arrangement is known as an independent operator (IO) arrangement. As of the end of 2008, the Company had 64 of these arrangements around the world. Under this type of arrangement, it licenses its IO bank partners to issue local currency Cards in their markets, 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, the Company grants the third-party financial institution a license to issue American Express-branded Cards. The NCL issuer owns the customer relationships for all Cards it issues, provides customer service to its Cardmembers, transaction authorization, billing and credit management, is responsible for the marketing of the Cards, and designs the Card product features (including rewards and other incentives for Cardmembers), subject to meeting certain standards. The Company operates the merchant network, route and process Card transactions from the merchant’s point-of-sale through submission to the issuer, and settle with issuers. The third type of GNS arrangement is a joint venture (JV). The Company has utilized this type of arrangement in Switzerland, Belgium and several other countries. The JV typically signs new merchants to the American Express network and issues local currency Cards that carry the Company’s logo. In a JV arrangement, the JV assumes the Cardmember credit risk and bears the operating and marketing costs.

The Company operates a GMS business, which includes signing merchants to accept Cards, accepting and processing Card transactions, and paying merchants that accept Cards for purchases made by Cardmembers with Cards (Charges). It also provides marketing services and programs to merchants, leveraging the capabilities provided by its closed-loop structure, as well as point-of-sale products and servicing and settlement.

U.S. Card Services

As a part of its Card issuing business, its United States banking subsidiaries Centurion Bank and AEBFSB, issue a wide range of Card products and services to consumers and small businesses in the United States. The consumer travel business, which provides travel services to Cardmembers and other consumers, complements the Company’s core Card business, as does its travelers cheques and prepaid services business. The Card business offers a set of card products.

The Company offers individual consumer charge Cards, such as the American Express 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; and a variety of Cards sponsored by and co-branded 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. The Company also offers a variety 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 co-brand agreements with selected commercial firms in the United States. Cardmembers earn rewards provided by the partners’ respective loyalty programs based upon their spending on the co-brand Cards, such as frequent flyer miles, hotel loyalty points and cash back. It also issues Cards that are marketed under co-brand 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 co-branded 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 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 through in-person selling and third-party co-brand partners. Centurion Bank also issues certain consumer charge cards and AEBFSB issues certain OPEN charge cards. Both banks are wholly owned subsidiaries of TRS.

Certain of its 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 1,600 redemption partners worldwide, is offered in 98 markets. The program allows Cardmembers to earn one point for virtually every dollar charged on eligible, enrolled American Express Cards, and then redeem their points for an array of rewards, including travel, retail merchandise, dining and entertainment, financial services and even donations to benefit tens of thousands of charities. 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, online account management capabilities, retail and travel protections, such as baggage insurance, and travel services.

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. Consumer Travel also provides Membership Rewards programs designed for specific Cardmember segments, such as Membership Rewards Land & Sea packages and Gold Card Destinations.

International Card Services

The Company issues its charge and credit Cards in countries around the globe. These are Cards that the Company issues, either on its own or, as co-brands with partnering institutions. Also, as in the United States, it issues Cards internationally under distribution agreements with banks. The Company has more than 1,500 redemption partners across its international business, with an average of 95 partners in each country; less than 25% of these partners are in the travel industry. Cardmembers can redeem their points with more than 50 airlines and over 200 hotels.

Global Commercial Services

Through its GCS group, the Company provides expense management services to more than 100,000 firms worldwide through its Global Commercial Card & Services and Global Travel Services. During 2008, American Express added or retained several Commercial Card clients in the United States and internationally, Dell, Hallmark, Symantec and GE. In addition, the Company added or retained several American Express Business Travel clients in the United States and internationally, Ford, Sun Microsystems, Unisys, Fluor, Commonwealth Bank and Tyco International. GCS offers five primary products and services: Corporate Cards, 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 corporations to pay for everyday business expenses, such as office and computer supplies; Buyer Initiated Payment, an electronic solution for companies looking to streamline their payment processes, vPayment technology, which provides payment for large ticket purchases and permits the processing of large transactions with effective fraud controls; and American Express Business Travel, which helps businesses manage and optimize their travel expenses through a variety of travel-related products, services and solutions.

Global Commercial Card & Services (GCC&S) offers a range of expense management solutions to companies worldwide through its Corporate Card program, Corporate Purchasing Solutions, and electronic payment services such as Buyer Initiated Payment. The American Express Corporate Card is a charge card that individuals may obtain through a corporate account established by their employer for business purposes. Corporate Purchasing Solutions (CPS) helps large corporations and mid-sized companies manage their everyday spending. CPS is used to pay for everyday goods and business expenses, such as office supplies, industrial supplies and business equipment in 22 markets around the world. The Buyer Initiated Payments solutions are suited for large-sized companies that want to streamline their payment processes, reduce supplier inquiries, convert paper to electronic payments, and optimize cash flow.

Global Travel Services (GTS) consists of American Express Business Travel and Global Foreign Exchange Services. American Express Business Travel (Business Travel) provides globally integrated solutions, both online and offline, to help organizations manage and optimize their travel investments, and service their traveling employees. These solutions include travel reservation advice and booking transaction processing, travel expense management policy consultation, supplier negotiation and consultation, advisory services, management information reporting, data analysis and benchmarking, and group and incentive travel services, advisory services and products and solutions that help organizations to maximize the return on travel expenses. Business Travel also provides 24-hour customer service to clients globally, both on a day-to-day and emergency basis.

Global Foreign Exchange Services (FES) consists of retail and wholesale foreign exchange services and international payments. Other than in Australia, Mexico, Singapore and Italy, where it operates foreign exchange offices in city locations, the Company concentrates its retail foreign exchange business in international airports. For corporate clients, its international payments online product allows companies and banks to make cross-border payments in foreign currencies at competitive exchange rates.

Corporate & Other

Corporate & Other consists of corporate functions and auxiliary businesses, including the Company’s publishing business, Travelers Cheques and other prepaid products, as well as other company operations. Through American Express Publishing, the Company publishes luxury lifestyle magazines, such as 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 variety of general interest, cooking, travel, wine, financial and time management books; branded membership services, and a roster of international magazine editions, as well as directly sold and licensed products. The Company sells the American Express Travelers Cheque (Travelers Cheque) as a safe and convenient alternative to cash. It also issues and sells other forms of paper travelers checks, such as American Express Gift Cheques and the American Express Cheque-Secure Funds.

The Company competes with Visa, MasterCard, Diners Club, Discover, JCB Co., Ltd., Citibank, Bank of America, JPMorgan Chase, Capital One Financial, HSBC and Banco Santander.