Founded in 1850, American Express is one of the most recognized brands in the world.
Although American Express is one of the most recognized brands in the world, touching millions of consumers and businesses daily, few know how the company got started or how it evolved from a freight forwarding company into the global payments company it is today. Here is an overview of American Express’ origins and evolution.
Early Years
American Express started as a freight forwarding company that provided express delivery of packages, valuables and other goods. The company was founded in 1850 when Henry Wells (Wells & Company), William G. Fargo (Livingston, Fargo & Company), and John Warren Butterfield (Wells, Butterfield & Company) merged their businesses. By 1862, the company had 890 offices, over 1,500 employees and a network of nearly 10,000 miles of railway and express routes from the East Coast to Minnesota and Missouri. (Note: Wells and Fargo also founded Wells Fargo & Co, the multinational financial services company that operates in 35 countries).
American Express’ foray into financial services started in 1857 when it launched a money order business, followed by the creation of the American Express Traveler’s Cheque in 1891. In 1915, the company began offering travel services which included selling rail and steamship tickets, planning trips and arranging tours. By this time, American Express had offices throughout Europe and Canada, as well as in Argentina, Hong Kong and the Philippines.
After the United States entered World War I in 1918, the government consolidated and managed the formerly private railroad and express companies. American Express exited the express business while keeping its travel and financial services businesses.
Growth of the Financial Services Business
In 1958, American Express launched its first charge card in the United States and Canada. This was followed in 1966 by the launch of the Gold Card, and the launch of a corporate card program which allowed businesses to better understand and control employee spending. In 1972, to grow its card business internationally, the company began to enter into international card-issuing partnerships in South America and Europe. American Express continued to expand its card offerings, introducing the Platinum Card (1984), and the company’s first credit card, the Optima Card (1987), which unlike the charge card, did not have to be paid in full at the end of the month.
In the 1980s, American Express entered the investment banking and brokerage businesses via a series of acquisitions including Shearson, Lehman Brothers, and E.F. Hutton & Co. These businesses were subsequently sold or spun off in the early 1990s. American Express did maintain its financial advisors business (Ameriprise Financial) and its tax and business services unit until 2005 when they were either spun off or sold.
In the 1990s, American Express decided to focus on broader merchant acceptance of its cards and added new card products including the Blue Card, the Centurion Card (also known as the “black card”), and the company’s first cobranded card, the Hilton Optima Card. The Membership Rewards program was also launched. The company also accelerated partnering with other financial institutions to grow its international card business and established the Global Network Services Group in 1997, which leverages its’ global infrastructure and brand to expand its worldwide reach.
During the 2008 Financial Crisis, American Express converted from a corporation to a bank holding company. Subsequently, it continued its evolution into a payments company by selling its publications to Time Inc. in 2013 and spinning-off its corporate travel business as American Express Global Business Travel, selling a 50% stake to an investor group in 2014. In 2020, American Express acquired Kabbage, a fintech focused on small businesses and rebranded it American Express Business Blueprint.
American Express Today
Today American Express is a globally integrated payments company with card issuing, merchant acquiring and card network businesses. As of 2023, the company employed approximately 74,600 people, 26,000 in the US and 48,000 in other countries around the world. The company has four operating segments: US Consumer Services, Commercial Services, International Card Services, and Global Merchant and Network Services, which function together to form an end-to-end integrated payments platform.
American Express’ “closed loop network” produces fee and interest income from the cardholders to which it issues cards as well as fee income from merchants who accept its cards. In contrast, Visa and Mastercard provide networks through which payments are authorized, cleared and settled, but they do not issue cards, nor do they receive a portion of the fees that account holders pay the issuing banks that establish their accounts or the interchange fees the issuing banks receive from merchants.
American Express offers a broad array of card products, rewards and services to a diverse consumer and commercial customer base around the world. It has proprietary card issuing businesses as well as relationships with third-party banks and other institutions in approximately 110 countries and territories which license the American Express brand. In 2023, there was spending of $1.46 trillion on the 80.2 million cards issued by American Express world-wide and $220.5 billion of spending on the 61.0 million cards issued by third parties worldwide. In 2023, American Express earned net income of $8.4 billion.
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