American Express Business Model | How Does American Express Make Money?

American Express Business Model | How Does American Express Make Money?

For those who deserve commendations, American Express Co. leads the page! One of the biggest credit companies in the world, American Express has been serving its customers with absolutely free offers and services for ages now.

The company has come a long way ahead of its competitors. American Express gathers its revenue through the transactions made by merchants' partners along with annual membership fees and interest income.

In the market, there isn't any potential company that can offer such services and a great formation of cash rewards, hotel upgrades, theme park admission, gift cards, and rental cars. Customers can get these facilities very easily, just by purchasing the essential goods.

American Express is considered remarkable when it comes to customer service and profit revenue. It holds two major sources of revenue, that is merchant partners and cardholders.

Although the merchant fees are quite high with such great rewards programs, no one put its service down. Its rewards program is incredible and brings out tremendous results and a customer base. In this article, we will be discussing the incredible business model and revenue sources of the very prominent credit card company, American Express. Let's begin!

About American Express
Where does American Express operate?
Key Products and Services of American Express
Target audience of American Express
Business Model of American Express
How Does American Express Make Money?

Why is American Express Successful?

About American Express

American Express, also referred to as Amex, is one of the biggest multinational financial services companies in the world. The company is headquartered in New York City, United States.

American Express was founded in 1850 and holds the weight of one component among the count 30 of the Dow Jones Industrial Average. Stephen J. Squeri works as the chairman and CEO of American Express, alongside Jeffrey C. Campbell holds the post of Vice Chairman and Chief Financial Officer.

Forbes mentioned American Express as the most valuable brand in the world with the 23rd position, based on the net valuation of the company worth $24.5 billion in 2017.

By the time of late 2019, American Express carried over 114.4 million cards active among which, 54.7 million active cards were in the United States with average annual spending of $19,972 each.

Later in 2020, American Express was ranked 9th on the list of Top 100 Companies to Work for 2020 by Fortune Magazine. This ranking was based on the survey for employee satisfaction.

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Where does American Express operate?

American Express actively functions in around 175 countries with a total of 2,300 offices in the world. American Express initiated three major companies, The American Express Bank Ltd. (AEBL), American Express Travel Related Services (TRS), and American Express Financial Advisors.

Key Products and Services of American Express

When it comes to American Express services, the company is very promising. It offers financial, travel, and insurance services to its customers.

Its key products are as follows:

  • Charge Cards
  • Traveler's cheques
  • Credit cards
  • Corporate banking

Target audience of American Express

American Express has a huge customer base. The company mostly has affluent customers. American Express targets the customer group that considers business as their biggest opportunity to convert. It targets its audience with great services and reward programs.

Business Model of American Express

There is quite a broad range of customer groups in American Express. The company categorizes its customers into multiple sections including large corporations, small businesses, consumers, and mid-sized companies.

Basically, its business model is a two-sided market that activates the interaction between the cardholders and merchants partners. For its consumers and small businesses group, American Express provides a diverse variety of credit card products and charges, stores value, travel-related, and co-brand cards.

  • Credit cards: It exemplifies the company's wide range of payment terms, rate & fee structure, and grace periods.
  • Charge cards: Cards with no pre-set spending limits. These are primarily designed for payment methods, not for financing purchasing.
  • Prepaid cards: Payment cards that are pre-loaded with money for later purposes.
  • Travel services: Offers premium vacation travel along with real-time services provided by the company's proprietary network.

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How Does American Express Make Money?

American Express Annual Revenue from 2017 to 2021
American Express Annual Revenue from 2017 to 2021

American Express generates the largest fraction of money through discount revenue streams that exemplify the transactional earnings from merchant partners. Alongside, the company has many other revenue sources including cardholders who are charged with little amounts of fees through annual membership fees, conversion fees, and interests on notable balances.

American Express follows the spend-centric model which aims to increase the total transactions number on its card through specific offers and fewer fees. The major revenue sources of American Express are as follows:

Discount revenues: Generates the largest fraction of money for the company. In this, the company charges little fees from the merchants when a cardholder pays for a purchased item from the merchant's shop, through their card.

Travel commission and fees: The transaction fees and management fees that are charged by the customers as well as suppliers.

Net card fees: The annual card subscription fees from the cardholders.

Loan interests: Certain interests are earned from cards with notable balances.

Other commissions and fees: Charged on foreign exchange conversions, loyalty coalition-related fees, card fees, and other service fees.


American Express follows a very distinct business model and strategy. The company holds a very strong position in the global market with an immense customer base. American Express sells its products and services through numerous channels such as direct mail, third-party sales, online applications, and others. The company is working towards its global expansion more vibrantly and increasing its consumer base.


Who is the founder of American Express?

American Express was founded by William Fargo, Henry Wells, and John Butterfield in 1850.

Who is the CEO of American Express?

Stephen Squeri is the current CEO of American Express.

How does American Express make money?

American Express makes money from interest income, annual card fees, and payment processing fees.

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