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American Express Benefits From Strategic Growth initiatives

Zacks Equity Research

American Express Co. AXP is trending well on the back of its four strategic imperatives – expansion of leadership in the premium consumer space, build upon its strong position in commercial payments, strengthen its global, integrated network and make itself an essential part of its customers’ digital lives.

American Express is successfully adding new proprietary cards led by its digital acquisition efforts. The company’s continuous expansion of merchant networks in the United States and international markets  and solid billings across customer segments and geographies bode well for its business volume growth going forward.   

American Express is seeing steady increase in customer engagement and acquisitions from its Member Get Member referral program as well as through its innovative lending offerings such as Pay It Plan It for consumers and working capital loans for its SME customers. The company is generating strong billings across international market especially in its consumer and SME segments, which is driving increased merchant coverage.

American Express distinguishes itself from peers in the card industry by virtue of its services provided to its members such as exclusive airport lounges and concierge services. Recently, the company announced to buy Resy, the digital restaurant reservation booking and management platform. With this deal, the company aims to provide its customers with its growing suite of digital-first benefits and services. This includes providing card members with access and experiences across travel and lodging, airport lounges, exclusive events and dining.

American Express has been making efforts to expand in the lucrative hospitality and dining industry. In this vein, the company has recently made a number of acquisitions, which include personal travel assistant app Mezi, UK dining reservation platform Cake Technologies, airport lounge discovery and booking platform LoungeBuddy, and Japanese premium restaurant reservation platform Pocket Concierge.

Recently, the company renewed its co-brand partnership with Delta Airlines through 2030. Delta’s large base of business customers provides many attractive opportunities to build on American Express’ strong position in commercial payments.

American Express has long-term growth path given its brand name, a superior client base, expanding suite of services and growing co-brand partnerships. This has been a competitive advantage and has helped the company retain customers.

What differentiates American Express from other companies such as Mastercard Inc. MA, Visa Inc. V, Discover Financial Services DFS in the same space is that it offers loans to its members via its credit cards, and earns net interest income on the same in return for taking credit risks.  The company also has an affluent customer base and corporate clients. Its success in retaining its clients lies in providing attractive rewards and services like airport lounge and concierge services. Cost of these rewards adds to the company’s overall expenses.

However, the company is facing increasing competition in the fast changing industry from other players offering lucrative rewards to the card users.

Also, continued innovation in the industry leading to emergence of alternative forms such as mobile payment, pose risk to American Express.

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