American Express: An in-depth guide

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  1. Introduction
  2. How does American Express work?
  3. Where is American Express used?
  4. Who uses American Express?
  5. How American Express benefits businesses
    1. Benefits of accepting American Express
    2. Benefits of using American Express business cards
  6. American Express security measures
  7. Working with American Express
  8. Alternatives to American Express

American Express is a globally recognised financial services corporation with its headquarters in New York City. Founded in 1850 as an express postal business in Buffalo, New York, American Express has become a leading player in the credit card, charge card and traveller's cheque sectors. The business is known for its selection of credit cards tailored to personal, small-business and corporate needs, with more than 133 million cards in circulation worldwide in 2022.

American Express serves a diverse customer base that spans the globe. Amex credit cards are known for their membership rewards programme, which offers points that cardholders can redeem for travel, shopping and other experiences. Beyond card services, American Express offers financial planning tools, investment products and business finance solutions.

American Express's revenue model hinges on card member spending and fees, as well as merchant fees for card acceptance. The business's merchant fees are higher than those of other major card networks, which has affected its market acceptance. In recent years, American Express has focused on enhancing its digital services to meet the increasing demand for online and mobile financial solutions.

Despite its global prominence, American Express faces competition in regions where customers prefer local payment methods or other card networks, often because of lower fee structures or different service offerings. In competitive markets, American Express offerings, such as higher-end cards and the rewards programme, appeal to affluent customers and large organisations.

Below, we'll cover what businesses need to know about American Express: its operational scope, target customer segments, fee structure and most popular competitors, as well as how to accept American Express as a payment method.

What's in this article?

  • How does American Express work?
  • Where is American Express used?
  • Who uses American Express?
  • How American Express benefits businesses
  • American Express security measures
  • Working with American Express
  • Alternatives to American Express

How does American Express work?

American Express offers a range of products and services that cater to different types of customers and businesses. Here's a look at American Express's offerings:

  • Credit and charge cards: American Express is best known for its credit cards and charge cards. Credit cards allow customers to carry a balance with interest, while charge cards require customers to pay the full balance each month. For customers, these cards offer various benefits, including rewards points, travel perks and insurance coverage. For businesses, American Express provides specialised cards that help with expense management, with features such as spending controls and data reporting.

  • Merchant services: Businesses that accept American Express work with their merchant services, which offer businesses data insights on customer spending patterns and marketing strategy to help attract and retain customers. American Express charges higher merchant fees compared with those of Visa or Mastercard, which can be a deal-breaker for small businesses, but many businesses decide that the higher fees are worthwhile because they give them access to American Express's affluent customer base.

  • Business financing: American Express offers businesses financing solutions including business loans and lines of credit. These products help businesses manage cash flow, fund expansions and cover unexpected expenses. Typically, businesses must undergo a credit assessment to benefit from these financing solutions.

  • Membership rewards: Amex's membership rewards programme is a major attraction for American Express cardholders. The programme allows customers and businesses to earn points on their spending, which can be redeemed for travel and shopping, among other opportunities. For businesses, these rewards can create employee incentives or reduce travel costs.

  • Travel: American Express offers comprehensive travel services that give cardholders access to travel booking services, airport lounges, exclusive hotel programmes and travel insurance. Premium cardholders gain access to more exclusive services.

  • Expense management: American Express provides expense management tools for corporate clients that can help businesses track and control employee spending and gain insights into spending patterns. These tools integrate with the accounting systems that businesses use.

  • Customer service: American Express is known for its strong customer service, particularly for its premium cardholders and business clients who benefit from dedicated business account managers and 24/7 customer support.

  • Digital services: American Express offers a suite of online and mobile features for cardholders and businesses. This includes mobile payment options, online account management and digital expense tracking.

Where is American Express used?

American Express's global usage is influenced by customer spending habits, business trends and regulatory conditions. In more developed markets with strong credit systems and higher incomes, American Express often finds success with its premium card offerings and rewards programme. In emerging markets or regions with different regulatory environments and financial habits, the business faces more challenges and often adapts its strategy to better serve local preferences and conditions. American Express's usage patterns in different regions are outlined below.

  • United States: Amex is widely used across the US, its home market. The business's success in the US is partly because of a strong customer culture of credit card usage and customer desire for loyalty programmes. The US market is characterised by a relatively high acceptance of credit cards by small and large businesses, though American Express sometimes faces limitations around card acceptance because of its higher merchant fees.

  • Europe: American Express's presence varies across European markets. In countries with strong financial infrastructure, such as the United Kingdom and Germany, Amex cards are a popular choice, especially among affluent customers and businesses. But in other parts of Europe, particularly in smaller countries or those with credit systems that are not as developed, American Express faces more challenges and is not as widely accepted.

  • Asia Pacific: In the Asia-Pacific region, the usage of American Express cards is mixed. In countries such as Japan, Singapore and Australia, American Express has a notable presence and is supported by strong economies and high customer spending power. In emerging markets, such as India or certain Southeast Asian countries, however, the penetration is less because of the prevalence of local payment methods coupled with fewer businesses being willing to accept Amex. Regulatory environments in these regions can also be a limiting factor, with some governments promoting domestic card networks over global options.

  • Latin America: In Latin American countries, American Express usage is generally less widespread than in North America or Europe because of factors including economic volatility, lower average incomes and less of a cultural focus on credit-based financial products. In certain segments such as travel and high-end retail, however, American Express maintains a presence, reflecting the spending habits of more affluent customers.

  • Middle East and Africa: American Express cards are popular among the wealthier segments of society in the Middle East, particularly in affluent countries such as the United Arab Emirates and Saudi Arabia. Amex usage reflects the region's luxury customer trends and high-end business activities. In many African countries, American Express's presence is more limited because of less developed financial systems, lower card acceptance and the dominance of cash transactions and mobile payment solutions.

Who uses American Express?

American Express caters to different customer segments and industries. Amex's appeal is consistently tied to its reputation for premium services, its extensive rewards programme and its aura of prestige, all of which influence which customers and businesses use these cards and how. Broadly, the business's customer base can be categorised into these segments:

  • Affluent customers: American Express is popular among affluent customers who are drawn to premium card offerings, such as its Platinum and Centurion cards, which come with extensive rewards, travel benefits and exclusive services. These customers use their cards for everyday spending, travel, dining and high-end shopping, taking advantage of the cards' rewards points and prestigious status.

  • Business clients: Businesses ranging from small startups to large corporations make up another substantial portion of American Express's clientele. These clients use Amex's business credit cards, corporate expense management solutions and business travel accounts. Business cards are typically used for expenses such as travel, office supplies and client entertainment. Corporate clients often use American Express's corporate card programmes for employee expense management and data insights. Small businesses and entrepreneurs may take advantage of Amex's expense management, cash flow management and rewards programme – the points from which they can use to offset business expenses. Small-business cards are often used for purchasing supplies, covering operational expenses and managing employee spending.

  • Travellers: American Express offers travel-related benefits such as airport lounge access, travel insurance and concierge services, making it a preferred choice for frequent travellers and those who work in the travel industry. Amex cards are frequently used for booking flights, hotels and car hire, and are typically accepted by most airlines and travel-related businesses.

  • High-end retailers: American Express cards are widely accepted and used in the retail sector, particularly in high-end marketplaces. Retailers that cater to wealthier customers – such as luxury boutiques, high-end department stores and exclusive online shopping platforms – often accept American Express because they recognise that Amex cardholders are likely to have higher spending power.

  • Service establishments: American Express cards are commonly used in service industries such as dining, hospitality and personal services, especially those that cater to upscale customers. These businesses often accept and encourage payment with American Express because they understand their clients' spending habits.

How American Express benefits businesses

Benefits of accepting American Express

  • Access to affluent customer base: Accepting American Express cards can attract a more affluent customer segment. Because these customers often have higher spending power, their patronage can translate into larger average transactions for businesses.

  • Digital finance tools: American Express's digital tools, including online account management and mobile payment options, provide businesses with modern, efficient ways to handle transactions and track spending. This digital integration can enhance customer experience, streamline transactions and simplify financial tracking and reporting.

  • Data reporting: American Express provides businesses with valuable data insights and marketing opportunities that can help them understand their customers better, tailor their offerings and target their marketing efforts more effectively. This aspect is particularly beneficial for businesses that want to refine their customer engagement strategies and boost customer loyalty.

Benefits of using American Express business cards

  • Financial management services: American Express offers business clients different ways to manage their expenses more effectively with features such as spending limits, detailed transaction reports and integration with accounting software.

  • Business financing options: American Express provides business clients with a range of financing solutions, such as business loans and lines of credit. These can be key for managing cash flow, funding expansion or covering unexpected expenses. Such flexibility and quick access to funds can be particularly valuable for businesses in growth phases or those needing short-term financial support.

  • Enhanced travel benefits: For businesses with substantial travel expenditures, American Express's travel-related services can bring substantial value. Card benefits such as airport lounge access, travel insurance and concierge services enhance the travel experience for employees and can lead to savings.

  • High-level customer service: American Express's focus on customer service can be an important asset for businesses. By offering dedicated support for business accounts that can help resolve issues quickly and provide guidance on maximising card benefits, Amex empowers businesses to spend less time managing credit card issues and more time focusing on core operations.

  • Business credit: For smaller businesses or those starting out, using an American Express business card can help to build a credit profile. A strong credit history can be beneficial for financing needs and can contribute to the business's overall financial health.

  • Customised corporate support: American Express has customised card programmes and expense management solutions for its corporate clients. These solutions are tailored to the specific needs of the corporation, providing scalability and efficiency in managing corporate expenses.

American Express security measures

American Express employs a comprehensive range of security measures to protect customer data.

  • Regulatory compliance: American Express complies with the Payment Card Industry Data Security Standard (PCI DSS), a set of technical and operational standards developed to protect payment card data. PCI DSS requirements include maintaining secure networks and systems, protecting cardholder data, implementing strong access control measures, monitoring and testing networks regularly, and maintaining an information security policy. American Express also ensures adherence to additional international and local regulations, including those specific to high-risk sectors.

  • Tokenisation Service: The American Express Tokenisation Service includes a token vault, payment token issuing and provisioning, token lifecycle management, and risk services to help prevent fraud. Tokenisation reduces exposure to data breaches by replacing sensitive payment credentials with randomly generated token numbers. This service also helps in reducing PCI compliance scope for businesses by storing tokens instead of card credentials.

  • Biometric modalities and SafeKey: American Express's SafeKey 2.0 service includes integrated biometric features such as facial and fingerprint recognition for an added layer of authentication. These features help Amex meet regulatory requirements and simplify the online checkout process. These measures are designed for the mobile commerce environment and help identify potential fraud in real time.

  • Multi-factor authentication: In line with the European Union's Second Payment Services Directive (PSD2), American Express has implemented Strong Customer Authentication (SCA), a two-factor authentication process that adds a layer of security for electronic payments. Part of the multi-factor authentication process may include entering part of the customer's card personal identification number (PIN), which is encrypted in SafeKey, during the online checkout process.

  • Risk assessment algorithms: As part of a larger fraud prevention strategy, American Express uses advanced risk assessment algorithms that analyse transaction data to identify and prevent fraudulent activities.

Working with American Express

Businesses that want to accept American Express as a payment method must complete these steps:

  • Establish a merchant account: The first step is setting up a merchant account, which can be done through an acquiring bank or a payment processor such as Stripe. Stripe's integration is user-friendly for businesses because it automatically enables American Express acceptance alongside other major card brands without the need to open a separate merchant account.

  • Agree to contract terms: Businesses must agree to the contract terms set by American Express, which will outline the operational and financial terms and conditions of accepting Amex cards and each party's rights and obligations.

  • Ensure compatibility: To accept American Express payments, the business must confirm that its payment terminals or POS systems are compatible with Amex cards in all applicable environments including in physical shops, online and through mobile applications.

  • Maintain PCI DSS compliance: Businesses that accept card payments must ensure constant compliance with PCI DSS, which regulates the protection of card information during and after transactions.

Alternatives to American Express

Businesses have many alternatives to American Express. The most popular options and their core features are outlined below.

  • Visa and Mastercard: Visa and Mastercard are widely accepted global card networks with offerings for different customer segments. They are known for lower merchant fees compared with those of American Express.

  • Discover: Discover, another credit card alternative used in the US, has similar benefits to American Express but typically comes with lower fees.

  • Local card networks: Local card networks are prevalent in many regions. For example, UnionPay is a popular option in China, while RuPay has a strong foothold in India.

  • Digital wallets: Services such as Apple Pay, Google Pay and Samsung Pay are becoming increasingly popular payment methods. These wallets often integrate with a variety of card networks.

  • Online payment gateways: Online payment gateways such as PayPal, Stripe and Square allow businesses to accept payments online and integrate with a variety of payment methods. These inclusive options are popular with e-commerce businesses.

  • Direct debit and cash payments: Direct bank transfers and cash payments maintain a strong presence across the global payments scene, especially in regions with lower credit card penetration.

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