1. American Express Company, incorporated on June 10, 1965, together with its subsidiaries, is a global services company. The Company’s principal products and services are charge and credit card products, and travel-related services offered to consumers and businesses around the world. The Company’s segments include the U.S. Consumer Services (USCS), International Consumer and Network Services (ICNS), Global Commercial Services (GCS) and Global Merchant Services (GMS). The Company’s range of products and services includes network services; merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; other fee services, including fraud prevention services and the design and operation of customer loyalty programs; expense management products and services, and stored value/prepaid products.
The Company’s products and services are sold to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through channels, including online applications, direct mail, in-house teams, third-party vendors and direct response advertising. Business travel-related services are offered through its non-consolidated joint venture, American Express Global Business Travel (the GBT JV). The Company’s cards include cards issued by American Express, as well as cards issued by third-party banks and other institutions that are accepted by merchants on the American Express network. The Company offers a range of charge cards and revolving credit cards to consumers in the United States and internationally through its USCS and ICNS segments. In addition to its cards, the Company partners with banks and other organizations to issue American Express-branded products.
USCS
The USCS segment includes the United States Consumer Card Services business and consumer travel services in the United States. USCS issues a range of consumer cards and provides services to consumers in the United States.
ICNS
The ICNS segment includes the International Consumer Card Services business, Global Network Services (GNS) business and consumer travel services outside the United States. ICNS issues a range of consumer cards outside the United States and enters into partnership agreements with third-party card issuers and acquirers.
GCS
The GCS segment includes the Global Corporate Payments (GCP) business, small business services businesses in the United States and internationally (collectively Global Small Business Services (GSBS)), commercial financing products and foreign exchange services operations. GCS issues a range of corporate and small business cards and provides payment and expense management services globally.
GMS
The GMS segment includes the Global Merchant Services business and global loyalty coalition businesses. GMS operates a payments network that processes and settles proprietary and non-proprietary card transactions. GMS acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics. GMS also operates loyalty coalition businesses in certain countries around the world.
The Company competes with Visa, MasterCard, Discover, JCB and China UnionPay, National Payments Corporation of India, PayPal, Square, Amazon and Venmo.
SWOT analysis of American express
Strengths in SWOT analysis of American Express
Brand Strength – American Express, also called as AMEX has the advantage of being one of the most valuable brands in the world. As of 2016, it is the 59th highest ranked Brand in the world. The goodwill that it has built for itself helps it to achieve a great response to its new initiatives.
Employee Strength – The company has over 60,000 employees and the levels of employee satisfaction are high. A satisfied, happy and a diverse workforce make for a great place to work.
Market Capital – American Express has a market capital of around $ 60 billion and is one of the largest players in the world in the area of financial services.
Credit Card Schemes – Its global recognition and high usage make American Express a trusted brand. Its tie ups with multiple companies to provide loyalty programmes, credit card programmes etc., make it a very popular choice all over.
International usage – One of the major advantages of American express is that it is known as the safest credit card to be used when you are traveling internationally.
Status symbol – American express is a status symbol and can be obtained only by high net worth individuals and people who are offered the credit card. Not everyone is given the advantage of possessing a credit card. Naturally in rich circles, holding an American express card becomes an immediate indicator of wealth
Weaknesses in SWOT analysis of American Express
Traveller’s Cheque Business – The traveller’s cheque business of American Express is sharply declining and needs to be revived
Lack of Debit Cards – Another concern is the lack of American Express debit cards. While American Express credit cards are widely seen, debit cards are not. Filling this cap can be useful for the company.
Lack of other products – The product line of American express is focused on one or two main products. But additional financial products by American express and implementation of cross selling will help AMEX a lot.
Opportunities in SWOT analysis of American Express
Expansion – There is huge scope in market expansion for American Express. The company doesn’t have a very strong global presence and can get competitive in global markets.
Innovative Schemes – Another opportunity that presents itself for American Express is the innovativeness of the schemes that are offered to attract more customers.
Increase in usage of debit cards – Increasing the penetration of debit cards in emerging economies is a great opportunity too. Emerging economies have a lot of debit card users as debit cards are used a lot to withdraw cash and this can be tapped by American Express
Leveraging Financial brand equity – American express is a known brand in the financial community. It can leverage this equity by offering more financial products and increasing its own turnover as well.
Threats in SWOT analysis of American Express
Rivals – While American Express is a leader in its area of operations, it is not the only one. There are lots of big fish in the sea that are eager to capture market share. Staying ahead of competitors is a challenge and it poses a threat.
Nature of business – Also, the very nature of business that American Express is in poses a threat to it. Volatile economic conditions and financial uncertainties make the system very susceptible to failure. Government regulations also put barriers on a lot of activities and staying highly profitable becomes a challenge.
Competitors – Visa and Mastercard are the major competitors to American Express and are also very popular names.
Bad debts – Obviously, with the type of customers that American express has, bad debts are not something of a major threat. However, when the fish is big, the loss can be big too. Naturally, a single bad debt will be of a huge amount in the case of American express.
2. The American Express Company (AXP) is a global financial services company that competes in the credit card space with rivals such as Discover Financial Services (DFS), Visa, Inc. (V), and MasterCard Worldwide (MA). Without credit cards, there would probably be a significant drop off in consumer spending in the United States. But credit cards are not the only service American Express and its competitors offer.
Visa and MasterCard act as intermediaries in the credit card space. They don’t directly finance credit card transactions. Instead, they allow financial institutions to participate in their networks and issue credit cards that bear the “Visa” or “MasterCard” brand name
In return for their service, Visa and MasterCard receive a processing and service fee from the financial institution that issues the card. The issuing bank also gets a part of the transaction value as a fee and the merchant’s bank also receives a fee for its service. As for consumers, they pay the issuing institutions in the form of card annual fees, monthly charges for carrying a balance, and late fees.
Discover Financial Services and American Express issue cards themselves and thus bear the financing risk. They charge customers for the use of the card and also charges merchants a fee. This sort of system is called an open-loop system, rather than the so-called closed-loop system associated with the Visa and MasterCard business model.
Discover charges the customer interest, if they carry a balance and also other types of fees, such as a late payment fee. That’s how the company, and American Express too, generates revenue from customer use of its credit cards. Thus, it is transaction value that drives its credit card business.
In the case of MasterCard and Visa, it is transaction volume that generates their credit card revenue. The more transactions that consumers engage in with their Visa or MasterCard-branded cards, the more processing fees these companies get.
American Express has typically been associated with more of an up-market customer base than its competitors, historically targeting affluent customers. More recently, competing card issuers have been issuing cards with lower annual payments. As a response, American Express has also come up with prepaid debit cards that are targeted at less affluent customers.
As other companies enter this space, American Express cardholders are losing perks, such as exclusive admission to certain airport lounges. Another setback is that Costco has ended a relationship with American Express, which generated a lot of spending on its credit cards. Not only that, the company has lost an antitrust case accusing the company of reducing merchants’ choice about which card to accept. This means that businesses that accept American Express cards will be also free to accept their competitors’ credit cards on a preferential basis, which could ultimately be good for consumers but bad for American Express. The company is appealing this decision.
American Express’ main direct credit card competitors are MasterCard, Visa, and Discover. While MasterCard and Visa have a different business model than American Express, they all compete in the credit card space. Financial institutions that issue credit cards also compete with American Express for consumer business.
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