AXP 10-K diff: FY 2023-12-31 → FY 2024-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+98 paragraphs −96 paragraphs ~96 changed
FY 2023-12-31 (earlier)
ITEM 1A. RISK FACTORSThis section highlights certain risks that could affect us and our businesses, broadly categorized in accordance with the risk types identified in our Enterprise Risk Management (ERM) Framework: “Strategic & Business, Reputational and Country Risks,” “Operational and Compliance/Legal Risks” and “Market, Funding & Liquidity, Credit and Model Risks.” You should carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K, including in “Risk Management” under “MD&A,” which describes our approach to identifying, monitoring and managing the risks we assume in conducting our businesses and provides certain quantitative and qualitative disclosures about market risks. The risks and uncertainties we face are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.Strategic & Business, Reputational and Country Risks
Business and economic conditions are a major driver of our results of operations and difficult conditions in the business and economic environment may materially adversely affect our business.We offer a broad array of products and services to consumers, small businesses, mid-sized companies and large corporations and thus are very dependent upon the level of consumer and business activity and the demand for payment and financing products. Slow economic growth, economic contraction or shifts in broader consumer and business trends significantly impact customer behaviors, including spending on our cards, the ability and willingness of Card Members to borrow and pay amounts owed to us and demand for fee-based products and services.
Factors such as consumer spending and confidence, household income and housing prices, unemployment rates, business investment and inventory levels, bankruptcies, geopolitical instability, public policy decisions, government spending, international trade relationships, interest rates, taxes, inflation and deflation (including the effects of related governmental responses), energy costs, availability of capital and credit and the lingering impacts of the COVID-19 pandemic all affect the economic environment and, ultimately, our profitability. Additionally, sustained periods of high inflation may, among other things, increase certain of our expenses and erode consumer purchasing power, confidence and spending. An economic downturn or recession may result in higher unemployment and lower household income, consumer spending, corporate earnings and business investment, which may negatively impact spending on our cards and demand for our products, and increase delinquencies and write-off rates.
Travel and entertainment (T&E) expenditures, which comprised approximately 28 percent of our worldwide billed business during 2023, for example, are sensitive to business and personal discretionary spending levels and tend to decline during general economic downturns. Likewise, spending by small business and corporate clients, which comprised approximately 43 percent of our worldwide billed business during 2023, depends in part on the economic environment and a favorable climate for continued business investment and new business formation. Increases in delinquencies and write-off rates as a result of increases in bankruptcies, unemployment rates, changes in customer behaviors or otherwise could also have a material adverse effect on our results of operations. The consequences of negative circumstances impacting us or the economic environment generally can be sudden and severe and can impact customer types and geographies in which we operate in very different ways.Our business is subject to the effects of geopolitical conditions, weather, natural disasters and other catastrophic events.Geopolitical conditions, terrorist attacks, military conflicts, natural disasters, severe weather, widespread health emergencies or pandemics, information or cybersecurity incidents (including intrusion into or degradation or unavailability of systems or technology by cyberattacks), operational incidents and other catastrophic events can have a material adverse effect on our business. Political and social conditions, including actions upending geopolitical stability (such as from tensions involving China and the U.S.), fiscal and monetary policies (including developments related to the U.S. federal debt ceiling, budgetary issues and government shutdowns), trade wars and tariffs, labor shortages, regional or domestic hostilities, economic sanctions and the prospect or occurrence of more widespread conflicts could also negatively affect our business, operations and partners, consumer and business spending, including travel patterns and business investment, and demand for credit. Because we derive a portion of our revenues from travel-related spending, our business is sensitive to safety concerns related to travel and tourism, limitations on travel and mobility and health-related risks. In addition, disruptions in air travel and other forms of travel can result in the payment of claims under travel protection products we offer.
The COVID-19 pandemic had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and consumer and business behaviors. The pandemic and resulting containment measures adversely impacted a significant portion of our network volumes. The global macroeconomic outlook continues to remain uncertain due to a variety of factors, including the emergence of new variants, impacts to the labor market, supply chain disruptions and inflation. The extent to which our business and results of operations may continue to be adversely affected by this macroeconomic uncertainty will depend on numerous evolving factors and future developments, including the continued spread and severity of the virus and new variants; the availability, distribution, use and effectiveness of treatments and vaccines; the extent and duration of lingering effects on the economy, inflation, consumer confidence and consumer and business spending; and the impact on consumers and businesses as forbearance and government support programs end, including the end of the moratorium on student loan repayments.
Several military conflicts are taking place across the world (such as the ongoing Russia-Ukraine and Israel-Hamas wars), which may adversely affect our business, and geopolitical tensions may result in additional conflicts or escalate existing conflicts. Following the Russian invasion of Ukraine, we announced that we suspended business operations in Russia and Belarus and this
22Table of Contentsconflict has led to economic uncertainty and market disruptions, including the imposition of financial and economic sanctions and export controls designed to constrain Russia. The conflict in Israel and surrounding areas has also created economic uncertainty and regional instability, including due to the risk of escalation into a wider regional conflict, and resulted in the imposition of sanctions targeting Hamas-affiliated individuals and entities. The broader consequences of these conflicts remain uncertain, but may include further sanctions, regional instability and geopolitical shifts, increased prevalence and sophistication of cyberattacks, potential retaliatory action against companies such as us, heightened regulatory scrutiny related to sanctions compliance, increased inflation, further increases or fluctuations in commodity and energy prices, decreases in global travel, further disruptions to the global supply chain and other adverse effects on macroeconomic conditions.
Hurricanes and other natural disasters have impacted spending and credit performance in the areas affected. Other disasters or catastrophic events in the future, and the impact of such events on certain industries or the overall economy, could have a negative effect on our business, results of operations and infrastructure, including our technology and systems. Climate change may exacerbate certain of these threats, including the frequency and severity of weather-related events. Card Members in California, Florida, New York, Texas, Georgia and New Jersey account for a significant portion of U.S. consumer and small business billed business and Card Member loans, and our results of operations could be impacted by events or conditions that disproportionately or specifically affect one or more of those states.Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry.The payments industry is highly competitive, and we compete with card networks, issuers and acquirers, paper-based transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and ACH), as well as evolving and growing alternative payment and financing providers. If we are not able to differentiate ourselves from our competitors, develop compelling value propositions for our customers and/or effectively grow in areas such as mobile and online payments and emerging technologies, we may not be able to compete effectively.We believe Visa and Mastercard are larger than we are in most countries based on purchase volume. As a result, card issuers and acquirers on the Visa and Mastercard networks may be able to benefit from the dominant position, scale, resources, marketing and pricing of those networks. Our business may also be negatively affected if we are unable to continue increasing merchant acceptance (including by merchants that accept cards on the Visa and Mastercard networks) and perceptions of coverage, or if our Card Members do not experience welcome acceptance of our cards.Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have and may offer richer value propositions or a wider range of programs and services than we offer or may use more effective strategies to acquire and retain more customers, capture a greater share of spending and borrowings, develop more attractive cobrand card and other partner programs and maintain greater merchant acceptance than we have. Government actions or initiatives may also provide competitors with increased opportunities to derive competitive advantages and may create new competitors, including in some cases a government entity. We may not be able to compete effectively against these threats or respond or adapt to changes in consumer spending and borrowing habits as effectively as our competitors. Costs such as Card Member rewards and Card Member services expenses could continue to increase as we evolve our value propositions, including in response to increased competition.
Spending on our cards could continue to be impacted by increasing consumer usage of credit and debit cards issued on other networks, as well as adoption of alternative payment mechanisms, systems and products. The fragmentation of customer spending to take advantage of different merchant or card incentives or for convenience with technological solutions may continue to increase. Revolving credit balances on our cards could also be impacted by alternative financing providers, such as point-of-sale lenders and buy now, pay later products. To the extent other payment and financing mechanisms, systems and products continue to successfully expand, our discount revenues earned from Card Member spending and our net interest income earned from Card Member borrowing could be negatively impacted. In addition, companies that control access to consumer and merchant payment method choices at the point of sale or through digital wallets, commerce-related experiences, mobile applications or other technologies could choose not to accept, suppress use of, or degrade the experience of using our products or could restrict our access to our customers and transaction data. Such companies could also require payments from us to participate in such digital wallets, experiences or applications or negotiate incentives or pricing concessions, impacting our profitability on transactions.
The competitive value of our closed-loop data and demand for our products and services may also be diminished as traditional and non-traditional competitors use other, new data sources and technologies to derive similar insights and by certain regulations, such as open banking initiatives that are increasingly being promoted by governments and regulators, which may result in disintermediating existing financial services providers, steering customers away from our products and services or decreasing our attractiveness to partners.
To the extent we expand into, or further grow in, new business areas and new geographic regions, such as mainland China, we will face competitors with more experience and more established relationships with relevant customers, regulators and industry participants, which could adversely affect our ability to compete. Laws and business practices that favor local competitors, require card transactions to be routed over domestic networks or prohibit or limit foreign ownership of certain businesses could limit our growth in international regions.
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Table of ContentsWe may face additional compliance and regulatory risks to the extent that we expand into new business areas, and we may need to dedicate more expense, time and resources to comply with regulatory requirements than our competitors, particularly those that are not regulated financial institutions.Many of our competitors are subject to different, and in some cases, less stringent, legislative and regulatory regimes, and some may have lower cost structures and more agile business models and systems. More restrictive laws and regulations that do not apply to all of our competitors can put us at a disadvantage, including prohibiting us from engaging in certain transactions, regulating our business practices or adversely affecting our cost structure.
We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations.In the ordinary course of our business we enter into different types of contractual arrangements with business partners in a variety of industries. For example, we work with partners such as Delta, Marriott, Hilton and British Airways to offer cobranded cards for consumers and small businesses, and with partners in many industries, including Delta, to offer benefits and rewards to Card Members. See “Partners and Relationships” under “Business” for additional information on our business partnerships, including with Delta.
Competition for relationships with key business partners is very intense and there can be no assurance we will be able to grow or maintain these partner relationships or that they will remain as profitable or valued by our customers. Establishing and retaining attractive cobrand card partnerships is particularly competitive among card issuers and networks as these partnerships typically appeal to high-spending loyal customers. All of our cobrand portfolios in the aggregate accounted for approximately 21 percent of our worldwide network volumes for the year ended December 31, 2023. Card Member loans related to our cobrand portfolios accounted for approximately 36 percent of our worldwide Card Member loans as of December 31, 2023.
Cobrand arrangements are entered into for a fixed period, generally ranging from five to ten years, and will terminate in accordance with their terms, including at the end of the fixed period unless extended or renewed at the option of the parties, or upon early termination as a result of an event of default or otherwise. We face the risk that we could lose partner relationships, even after we have invested significant resources in the relationships. Additionally, partners may make changes to the products and services they offer, which may lower the value of our products, such as the cobranded cards we issue to our customers. We may also choose to not renew certain cobrand relationships. Network volumes could decline and Card Member attrition could increase, in each case, significantly as a result of the termination of one or more cobrand partnership relationships. In addition, some of our cobrand arrangements provide that, upon expiration or termination, the cobrand partner may purchase or designate a third party to purchase the loans generated with respect to such cobranded card portfolio, which could result in the loss of the card accounts and a significant decline in our Card Member loans outstanding.We regularly seek to extend or renew cobrand arrangements in advance of the end of the contract term and face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms that are acceptable to us, as competition for such relationships continues to increase. We make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The amount we pay to our cobrand partners has increased, particularly in the United States, and may continue to increase as arrangements are renegotiated due to increasingly intense competition for cobrand partners among card issuers and networks.
The loss of exclusivity arrangements with business partners, the loss of the partner relationship altogether (whether by non-renewal at the end of the contract period, such as the end of our relationship with Costco in the United States in 2016, or as the result of a merger, legal or regulatory action or otherwise) or the renegotiation of existing partnerships with terms that are significantly worse for us could have a material adverse impact on our business and results of operations. See “ Our business is subject to evolving and comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition ” above for information on the uncertainty regarding our cobrand and agent relationships in the EU. In addition, any publicity associated with the loss of any of our key business partners could harm our reputation, making it more difficult to attract and retain Card Members and merchants, and could weaken our negotiating position with our remaining and prospective business partners.Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners.
Our success is, in many ways, dependent on the success of our partners. From customer acquisition to cobranding arrangements, from participation in our rewards programs to facilitating B2B supplier payments for our corporate clients, we rely on our business partners across many aspects of our company and our arrangements with business partners represent a significant portion of our business. Some of our partners manage certain aspects of our customer relationships, such as our OptBlue partners. To the extent any of our partners fail to effectively promote and support our products, experience a slowdown in their business, operational disruptions, reputational issues or loss of consumer confidence, or are otherwise unable to meet our expectations or those of their other stakeholders, our business may be materially negatively impacted. For example, the operational rights relating to our prepaid reloadable and gift card business are owned by a business partner and the reloadable operations have experienced disruptions and compliance issues that impacted the ability of our prepaid customers to load and use their cards. If such operations are interrupted, suspended, terminated or otherwise experience further issues in the future, it could further negatively impact our customers’
24Table of Contentsexperience, result in additional costs, litigation and regulatory action, and harm our business and reputation. We also face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms that are acceptable to us. In addition, we may be obligated to make or accelerate payments to certain business partners such as cobrand partners upon the occurrence of certain triggering events such as a shortfall in certain performance and revenue levels. If we are not able to effectively manage these triggering events, we could unexpectedly have to make payments to these partners, which could have a negative effect on our financial condition and results of operations. See Note 12 to the “Consolidated Financial Statements” for additional information on financial commitments related to agreements with certain cobrand partners.
Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings, consolidations, operational outages, cybersecurity incidents and other similar events that may occur in any industry representing a significant portion of our network volumes, which could negatively impact particular card products and services (and volumes generally) and our financial condition and results of operations. We have previously and may in the future pre-purchase loyalty points from certain of our cobrand partners, the value of which may diminish to the extent such partners cease operations or such points become less desirable to our customers. We could also be materially impacted if we were obligated or elected to reimburse Card Members for products and services purchased from merchants that have ceased operations or stopped accepting our cards. For example, we are exposed to credit risk in the airline industry to the extent we protect Card Members against non-delivery of purchases, such as where we have remitted payment to an airline for a Card Member purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the airline, we may bear the loss for the amount credited to the Card Member. At December 31, 2023, our best estimate of the maximum amount of billed business for purchases that had yet to be delivered by, or could be charged back to, merchants was $35.3 billion. This amount assumes all such merchants worldwide cease operations and thus are no longer available to deliver such purchases or to accept such chargebacks, and that all such billed business results in claims-in-full by Card Members. Such a maximum amount has not been indicative of our actual loss exposure in the past and we have not experienced significant losses related to these exposures to date; however, our historical experience may not be representative in the current environment given the current global economic, financial and geopolitical conditions.
For additional information relating to operational risks of our business partners, see “ We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services integral to the operations of our businesses. These third parties may act in ways that could materially harm our business ” below and for the general risks related to the airline industry, see “Risk Management — Institutional Credit Risk — Exposure to the Airline and Travel Industry” under “MD&A.”We face continued intense competitive pressure that may materially impact the prices we charge for accepting our cards for payment, as well as the risk of losing merchant relationships, which could have a material adverse impact on our business and results of operations.We face pressure from competitors that primarily rely on sources of revenue other than discount revenue or have lower costs that can make their pricing for card acceptance more attractive. Merchants, business partners and third-party merchant acquirers and aggregators are also able to negotiate incentives, pricing concessions and other favorable contractual provisions from us as a condition to accepting our cards, being cobrand partners, offering benefits to our Card Members or signing merchants on our behalf. As merchants become even larger (such as the largest tech companies), we may have to increase the amount of incentives and/or concessions we provide to them. We also face the risk of losing a merchant relationship that could materially adversely affect our network volumes, ability to retain current Card Members and attract new Card Members and therefore, our business and results of operations.
Our merchant discount rates have been impacted by regulatory changes affecting competitor pricing in certain international countries and may in the future be impacted by pricing regulation. We have also experienced erosion of our merchant discount rates as we increase merchant acceptance. We may not be successful in significantly expanding merchant acceptance or offsetting rate erosion with volumes at new merchants. In addition, the regulatory environment and differentiated payment models and technologies from non-traditional players in the alternative payments space could pose challenges to our traditional payment model and adversely impact our merchant discount rates. Some merchants, including large tech companies and other large merchants, continue to invest in their own payment and financing solutions, such as proprietary-branded mobile wallets, using both traditional and new technology platforms. If merchants are able to drive broad consumer adoption and usage, it could adversely impact our merchant discount rates and network and loan volumes.A continuing priority of ours is to drive greater and differentiated value to our merchants that, if not successful, could negatively impact our discount revenue and financial results. We may not succeed in maintaining merchant discount rates or offsetting the impact of declining merchant discount rates, for the reasons discussed above and others, which could materially and adversely affect our revenues and profitability, and therefore our ability to invest in innovation and in value-added services for merchants, business partners and Card Members.Surcharging or steering by merchants could materially adversely affect our business and results of operations.
In certain countries, such as Australia, Canada (other than in Quebec) and certain Member States in the EU, and in certain states in the United States, merchants are permitted by law to surcharge certain card purchases. In jurisdictions allowing surcharging, we have seen merchant surcharging on American Express cards in certain merchant categories, and in some cases, either the surcharge is greater than that applied to Visa and Mastercard cards or Visa and Mastercard cards are not surcharged at all (practices that are known as differential surcharging), even though there are many cards issued on competing networks that have an equal or greater cost of acceptance for the merchant.
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We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of payment or otherwise seek to suppress use of our cards or certain of our cards, which could become more prevalent with the existence of debit cards on the American Express network. Our Card Members value the ability to use their cards where and when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American Express brand by prohibiting discrimination through provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, subject to local legal requirements. We have increasingly relied on merchant acquirers, aggregators and processors to manage certain aspects of our merchant relationships. When we work with such third parties, we are dependent on them to promote and support the acceptance and usage of our cards, but they may have business interests, strategies or goals that are inconsistent with ours.
New products, such as debit cards on the American Express network, could fail to gain market acceptance and American Express cards could become less desirable to consumers and businesses generally due to surcharging, steering or other forms of discrimination, which could result in a decrease in cards-in-force, coverage and transaction volumes. The impact could vary depending on such factors as: the industry or manner in which a surcharge is levied; how Card Members are surcharged or steered to other card products or payment forms at the point of sale; the ease and speed of implementation for merchants, merchant acquirers, aggregators, processors or other merchant service providers, including as a result of new or emerging technologies; the size and recurrence of the underlying charges; and whether and to what extent these actions are applied to other forms of payment, including whether it varies depending on the type of card (e.g., credit or debit), product, network, acquirer or issuer. Discrimination against American Express cards could have a material adverse effect on our business, financial condition and results of operations, particularly where it only or disproportionately impacts credit card usage or card usage generally, our Card Members or our business.
We may not be successful in our efforts to promote card usage or attract new Card Members, including through marketing and promotion, merchant acceptance and Card Member rewards and services, or to effectively control the costs of such investments, both of which may materially impact our profitability.
Revenue growth is dependent on increasing consumer and business spending on our cards, growing loan balances and increasing fee revenue. We have been investing in a number of growth initiatives, including to attract new Card Members, retain existing Card Members and capture a greater share of customers’ total spending and borrowings. There can be no assurance that our investments will continue to be effective, particularly as consumer and business behaviors continue to change. In addition, if we develop new products or offers that attract customers looking for short-term incentives rather than incentivize long-term loyalty, Card Member attrition and costs could increase. Increasing spending on our cards also depends on our continued expansion of merchant acceptance of our cards. If we are unable to continue growing merchant acceptance and perceptions of coverage or merchants decide to no longer accept American Express cards, our business could suffer. Expanding our service offerings, adding customer acquisition channels and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements, fail to resonate with customers, adversely impact our merchant discount rates or dilute our brand.
Another way we invest in customer value is through our Membership Rewards program, as well as other Card Member benefits. Any significant change in, or failure by management to reasonably estimate, actual redemptions of Membership Rewards points and associated redemption costs could adversely affect our profitability. We rely on third parties for certain redemption options and may not be able to continue to offer such redemption options in the future, which could diminish the value of the program for our Card Members. Our two largest redemption partners are Amazon and Delta. In addition, many credit card issuers have instituted rewards and cobrand programs and other benefits and services that are similar to ours and may be more attractive. An inability to differentiate our products and services could materially adversely affect us.
We may not be able to cost-effectively manage and expand Card Member benefits, including containing the growth of marketing, promotion, rewards and Card Member services expenses in the future. If such expenses increase beyond our expectations, we will need to find ways to offset the financial impact by increasing other areas of revenues such as fee-based revenues, decreasing operating expenses or other investments in our business, or both. We may not succeed in doing so, particularly in the current competitive and regulatory environment. In addition, increased costs as a result of inflation, colleague retention and recruitment, supply chain issues and shortages of materials such as chips for our cards may require that we reduce investments in other areas.
Our brand and reputation are key assets of our Company, and our business may be materially affected by how we are perceived in the marketplace.
Our brand and its attributes are key assets, and we believe our continued success depends on our ability to preserve, grow and realize the benefits of the value of our brand. Our ability to attract and retain consumer and small business Card Members and corporate clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, privacy and data protection, management, workplace culture, merchant acceptance, financial condition, response to political and social issues or catastrophic events and other subjective qualities. Negative perceptions or publicity regarding these matters — even if related to seemingly isolated incidents and whether or not factually correct—could erode trust and confidence and damage our reputation among existing and potential Card Members, corporate clients, merchants and partners, which could make it difficult for us to attract new customers and maintain existing ones. Negative public opinion could result from actual or alleged conduct in any number of activities or circumstances, including card practices, regulatory compliance, the use and protection of26
Table of Contentscustomer information, conduct by our colleagues and policy engagement, including activities of the American Express Company Political Action Committee, and from actions taken by regulators or others in response thereto. Discussion about such matters in social media channels can also cause rapid, widespread reputational harm to our brand.
Our brand and reputation may also be harmed by actions taken by third parties that are outside our control. For example, any shortcoming of or controversy related to a third-party service provider, business partner, merchant acquirer or network partner may be attributed by Card Members and merchants to us, thus damaging our reputation and brand value. Our brand may also be negatively impacted by acceptance of American Express cards by merchants in certain industries, when American Express cards are used for payment for legal, but controversial, products and services or any government inquiries or legislative scrutiny related to card acceptance or usage. The lack of acceptance, suppression of card usage or surcharging by merchants can also negatively impact perceptions of our brand and our products, lower overall transaction volume and increase the attractiveness of other payment products or systems. Adverse developments with respect to our industry, including the creation and implementation of new merchant categories codes, may also negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us. Furthermore, as a corporation with headquarters and operations located in the United States and a brand name referring to the United States, a negative perception of the United States arising from its political or other positions could harm the perception of our company and our brand. These risks to our brand and reputation, as well as other risks described in this Risk Factors section, are heightened by the increasing sophistication and availability of artificial intelligence technology that can assist with the creation of deepfakes and increase the velocity of distribution of disinformation. Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our business volumes, revenues and profitability.
We may face increased scrutiny related to our ESG goals and initiatives, which could result in litigation and other adverse consequences. There can be no assurance that we will achieve our ESG goals, which depend in part on third-party performance or data that is outside of our control, or that any such achievements will have the desired results. Further, our ESG goals and the methodologies for reporting may change over time and we may be subject to new legal and regulatory requirements related to ESG matters. Our failure or perceived failure to achieve progress in these areas on a timely basis, if at all, or inaccurate perceptions or misrepresentations of our ESG goals and initiatives could impact our reputation, colleague hiring and retention and public perceptions of our business.
If we are not able to successfully invest in, and compete with respect to, technological developments and new products and services across all our businesses, our revenue and profitability could be materially adversely affected.
Our industry is subject to rapid and significant technological changes. In order to compete in our industry, we need to continue to invest in technology across all areas of our business, including in transaction processing, data management and analytics, machine learning and artificial intelligence, customer interactions and communications, open banking and alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement and risk management and compliance systems. Incorporating new technologies into our products and services, including developing the appropriate governance and controls consistent with regulatory expectations, requires substantial expenditures and takes considerable time, and ultimately may not be successful. We expect that new technologies in the payments industry will continue to emerge, and these new technologies may be superior to, or render obsolete, our existing technology.
The process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively. Adoption by consumers, merchants and other service providers is a key competitive factor and our competitors may develop products, platforms or technologies that become more widely adopted than ours. In addition, we may underestimate the resources needed and overestimate our ability to develop new products and services, particularly beyond our traditional card products and travel-related services. The use of artificial intelligence and machine learning technologies, including generative artificial intelligence, has increased rapidly with increasing complexity and changes in the nature of the technology. Our use of artificial intelligence and machine learning is subject to various risks including the use of personal information, flaws in our models or datasets that may result in biased or inaccurate results, ethical considerations regarding artificial intelligence, and our ability to safely deploy and implement governance and controls for artificial intelligence systems. Additionally, laws and regulations related to automated decision making, artificial intelligence and machine learning are still evolving and there is uncertainty as to new laws and regulations that will be adopted and the application of existing laws and regulations, which may restrict or impose burdensome and costly requirements on our ability to use artificial intelligence and machine learning. Adverse consequences of these risks related to artificial intelligence and machine learning could undermine the decisions, predictions or analysis such technologies produce and subject us to competitive harm, legal liability, heightened regulatory scrutiny and brand or reputational harm.
Our ability to adopt new technologies may be inhibited by the emergence of industry-wide standards, a changing legislative and regulatory environment, an inability to develop appropriate governance and controls, a lack of internal product and engineering expertise, resistance to change from Card Members, merchants or service providers, lack of appropriate change management processes or the complexity of our systems. In addition, our adoption of new technologies and our introduction of new products and services may expose us to new or enhanced risks, particularly in areas where we have less experience or our existing governance and control systems may be insufficient, which could require us to make substantial expenditures or subject us to legal liability, heightened regulatory scrutiny and brand or reputational harm.27
Table of ContentsWe may not be successful in realizing the benefits associated with our acquisitions, strategic alliances, joint ventures and investment activity, and our business and reputation could be materially adversely affected.We have acquired a number of businesses and have made a number of strategic investments, and continue to evaluate potential transactions. There is no assurance that we will be able to successfully identify suitable candidates, value potential investment or acquisition opportunities accurately, negotiate acceptable terms for those opportunities, or complete proposed acquisitions and investments. The process of integrating an acquired company, business or technology could create unforeseen operating difficulties and expenditures, including in integrating systems and personnel or further developing the acquired business or technology, result in unanticipated liabilities, including legal claims, violations of laws, commercial disputes and information security vulnerabilities or breaches (including from not integrating the acquired company, business or technology quickly or appropriately, from activities that occurred prior to the acquisition, from inadequate systems or controls of the acquired company, and from exposure to third party relationships of the acquired company or business or new laws and regulations), and harm our business generally. It may take us longer than expected to fully realize the anticipated benefits of these transactions, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could materially adversely affect our business and operating results, including as a result of write-downs of goodwill and other intangible assets.
Joint ventures, including our joint ventures in China and Switzerland, and minority investments in companies such as GBTG inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the joint venture or minority investment, including as a result of being subject to different laws or regulations. Joint ventures and other partnerships or minority investments operating in foreign jurisdictions may also face risks from adverse regulatory actions, which could adversely affect their operations or our investment. In addition, we may be dependent on joint venture partners, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours and we have been and may in the future be involved in litigation with our joint venture partners and other shareholders and parties related to the joint ventures and investments. We have extensive commercial arrangements with GBTG, including, among other things, a long-term trademark license agreement pursuant to which GBTG uses the American Express brand, GBTG’s support of our partnerships, GBTG negotiations with travel suppliers on our behalf and a strategic relationship between GBTG and our Commercial Services business. Business decisions or other actions or omissions of a joint venture partner, other shareholders or management of our joint ventures and companies in which we have minority investments may adversely affect the value of our investment, result in litigation or regulatory action against us and otherwise damage our reputation and brand. In addition, trade secrets and other proprietary information we may provide to a joint venture may become available to third parties beyond our control. The ability to enforce intellectual property and contractual rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions.Additionally, from time to time we may decide to divest certain businesses or assets. These divestitures may involve significant uncertainty and execution complexity, which may cause us not to achieve our strategic objectives, realize expected cost savings or obtain other benefits from the divestiture and may result in unexpected losses of colleagues or harm to our brand, customers or other partners. Further, during the pendency of a divestiture, we may be subject to risks such as that the transaction may not close or the business to be divested may decline, and if a divestiture is not completed, we may not be able to find another acquiror on similar terms.
Operational and Compliance/Legal Risks
We may not be able to effectively manage the operational and compliance risks to which we are exposed.We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment (e.g., natural disasters). Operational risk includes, among others, the risk that error or misconduct could result in a material financial misstatement, a failure to monitor a third party’s compliance with regulatory or legal requirements, a failure to adequately monitor and control access to, or use of, data in our systems we grant to third parties or a failure to satisfy our obligations to our customers with respect to our products and services. As processes or organizations are changed or become more complex, we grow in size, new products and services are introduced, such as new lending features, debit products, checking accounts and digital collectibles, or we become subject to more stringent or complicated regulatory requirements, we may not identify or address new operational risks. Through human error, fraud or malfeasance, conduct risk can result in harm to customers, legal liability, fines, sanctions, customer remediation and brand damage.
Compliance risk arises from violations of, or failure to conform or comply with, laws, rules, regulations, internal policies and procedures and ethical standards. We need to continually update and enhance our control environment to address operational and compliance risks. Operational and compliance failures, deficiencies in our control environment or an inability to maintain high standards of business conduct can expose us to reputational and legal risks as well as fines, civil money penalties or payment of damages and can lead to diminished business opportunities and diminished ability to expand key operations.
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Table of ContentsA major information or cybersecurity incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our products and services.
We and third parties collect, process, transfer, host, store, analyze, retain, provide access to and dispose of account information, payment transaction information, and certain types of personally identifiable and other information pertaining to our customers and colleagues in connection with our cards and other products and in the normal course of our business.Global financial institutions like us, as well as our customers, colleagues, regulators, service providers and other third parties, have experienced a significant increase in information security and cybersecurity risk in recent years and will likely continue to be the target of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing, impersonation and identity takeover attempts), artificial intelligence-assisted deepfake attacks and disinformation campaigns, corporate espionage, hacking, website defacement, denial-of-service attacks, exploitation of vulnerabilities and other attacks and similar disruptions from the misconfiguration or unauthorized use of or access to computer systems. These threats can arise from external parties, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities. There are a number of motivations for cyber threat actors, including criminal activities such as fraud, identity theft and ransom, corporate or nation-state espionage, political agendas, public embarrassment with the intent to cause financial or reputational harm, intent to disrupt information technology systems and supply chains, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites. Cyber threat actors have increasingly demonstrated advanced capabilities, including the rapid integration of new technology such as advanced forms of artificial intelligence and quantum computing. Cyber threats, including attacks from state sponsored or nation-state actors, can increase during periods of diplomatic or armed conflict, such as the ongoing Russia-Ukraine and Israel-Hamas wars.
Our networks and systems are subject to constant attempts to disrupt our business operations and capture, destroy, manipulate or expose various types of information relating to corporate trade secrets, customer information, including Card Member, travel and loyalty program data, colleague information and other sensitive business information, including acquisition activity, non-public financial results and intellectual property. For example, we and other U.S. financial services providers have been the target of distributed denial-of-service attacks. We develop and maintain systems and processes aimed at detecting and preventing information security and cybersecurity incidents and fraudulent activity, which require significant investment, maintenance and ongoing monitoring and updating as technologies and regulatory requirements change, new vulnerabilities and exploits are discovered and as efforts to overcome security measures become more sophisticated. In addition, we maintain cyber crisis response procedures and regularly test our procedures to remain prepared and reduce the risk of harm to our business operations, customers and third parties in the event of an information or cybersecurity incident.
Despite our efforts and the efforts of third parties that process, transmit or store our data and data of our customers and colleagues or support our operations, such as service providers, merchants and regulators, the possibility of information, operational and cybersecurity incidents, malicious social engineering, password mismanagement, corporate espionage, fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will evolve as new and emerging technology is deployed, including quantum computing and the increasing use of platforms that are outside of our network and control environments. For example, we are aware that certain of our third-party service providers have been the victims of ransomware and other cyberattacks, in some instances that affected our data or the services they provide to us. In addition, new products and services, such as checking accounts and non-card lending, may lead to an increase in the number or types of cyber attacks and our exposure to fraud and other malfeasance. Risks associated with such incidents and activities include theft of funds and other monetary loss, disruption of our operations and the unauthorized disclosure, release, gathering, monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other information (including account data information). An incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered. Our ability to address incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies.
Information, operational or cybersecurity incidents, fraudulent activity and other actual or perceived failures to maintain confidentiality, integrity, availability of services, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory investigations and intervention (such as mandatory card reissuance), consent decrees, increased litigation (including class action litigation), response costs (including notification and remediation costs), fines, negative assessments of us and our subsidiaries by banking regulators and rating agencies, reputational and financial damage to our brand, negative impacts to our partner relationships, and reduced usage of our products and services, all of which could have a material adverse impact on our business. The disclosure of sensitive company information could also undermine our competitive advantage and divert management attention and resources.
Successful cyberattacks, data breaches, disruptions or other incidents related to the actual or perceived failures to maintain confidentiality, integrity, data availability, privacy and/or security at other large financial institutions, large retailers, travel and hospitality companies, government agencies or other market participants, whether or not we are impacted, could lead to a general loss of customer confidence that could negatively affect us, including harming the market perception of the effectiveness of our security measures or harming the reputation of the financial system in general, which could result in reduced use of our products and services. Such events could also result in legislation and additional regulatory requirements. Although we maintain cyber insurance, there can be no assurance that liabilities or losses we may incur will be covered under such policies or that the amount of insurance will be adequate.29
Table of ContentsThe uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations.Our information technology systems and those of our third parties upon which we rely, including our transaction authorization, clearing and settlement systems, and data centers, have experienced and may continue to experience service disruptions or degradation, which may result from technology malfunction, sudden increases in processing or other volumes, natural disasters and weather events, fires, accidents, technology change management issues, power outages, internet outages, telecommunications failures, fraud, denial-of-service, ransomware and other cyberattacks, inadequate infrastructure in lesser-developed markets, technology capacity management issues, terrorism, computer viruses, vulnerabilities in hardware or software, physical or electronic break-ins, or similar events. Service disruptions or degradations can prevent access to our online services and account information, compromise or limit access to company or customer data, impede or prevent transaction processing, communications to customers and financial reporting, disrupt ordinary business operations, result in contractual penalties or obligations, trigger regulatory reporting obligations, and lead to regulatory investigations and fines, increased regulatory oversight, and litigation (including class action litigation). Any such service disruption or degradation could adversely affect the perception of the reliability of our products and services and materially adversely affect our overall business, reputation and results of operations.Our business is subject to evolving and comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition.We are subject to evolving and comprehensive government regulation and supervision in jurisdictions around the world, which significantly affects our business and requires continual enhancement of our compliance efforts. Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with Card Members, partners, merchants, service providers and other third parties. New laws or regulations could similarly affect our business, increase the costs and complexity of doing business, impact what we are able to charge for, or offer in connection with, our products and services, impose conflicting obligations, and require us to change certain of our business practices and invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition. Legislators and regulators around the world are aware of each other’s approaches to the regulation of the financial services industry. Consequently, a development in one country, state or region may influence regulatory approaches in another.
If we fail to satisfy regulatory requirements or maintain our financial holding company status, our financial condition and results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions (such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which could compromise our competitive position. Additionally, our banking regulators have wide discretion in the examination and the enforcement of applicable banking statutes and regulations and may restrict our ability to engage in certain business activities or acquisitions or require us to maintain more capital. In response to recent bank failures and stress in the banking sector, legislators and regulators have increased their scrutiny of financial institutions and are proposing new measures and regulations, including those related to capital levels, liquidity standards, deposit concentrations and risk management practices, as well as increased deposit assessments. As we continue to grow, we expect to become subject to heightened regulatory expectations and more stringent regulatory requirements, such as becoming a Category III or Category II firm for purposes of the U.S. federal bank regulatory agencies’ enhanced prudential standards, which may increase our compliance costs and adversely affect our business.
Legislators and regulators continue to focus on the operation of card networks, including interchange fees paid to card issuers in payment networks such as Visa and Mastercard, network routing practices and the fees merchants are charged to accept cards. Even where we are not directly regulated, regulation of bankcard fees significantly negatively impacts the discount revenue derived from our business, including as a result of downward pressure on our discount rate from decreases in competitor pricing in connection with caps on interchange fees. In some cases, regulations also extend, or may extend, to certain aspects of our business, such as network and cobrand arrangements, new products or services we may offer, or the terms of card acceptance for merchants, including terms relating to non-discrimination and honor-all-cards. For example, we have exited our network licensing businesses in the EU and Australia as a result of regulation in those jurisdictions. In addition, there is uncertainty as to when or how interchange fee caps and other provisions of payments legislation might apply when we work with cobrand partners and agents in the EU. In a ruling issued on February 7, 2018, the EU Court of Justice confirmed the validity of fee capping and other provisions in circumstances where three-party networks issue cards with a cobrand partner or through an agent, although the ruling provided only limited guidance as to when or how the provisions might apply in such circumstances and remains subject to differing interpretations by regulators and participants in cobrand arrangements. On August 29, 2023, the Dutch Trade and Industry Appeals Tribunal referred questions to the EU Court of Justice on the interpretation of the application of the interchange fee caps in connection with an administrative proceeding by the Netherlands Authority for Consumers and Markets regarding our cobrand relationship with KLM Royal Dutch Airlines. Given differing interpretations by regulators and participants in cobrand arrangements, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU. Legislators and regulators have also increased their focus on limiting fees associated with card and banking products, such as the recent proposed rule by the CFPB related to credit card fees for late payments, which could negatively impact our fee revenue.30
Table of ContentsLegislators and regulators also continue to focus on consumer protection, including product design and pricing constructs, account management and security, credit bureau reporting, disclosure rules, marketing and debt collection practices. Any new requirements or increased enforcement of existing requirements may result in increased scrutiny of our pricing, underwriting and account management practices, the imposition of fines and customer remediation, higher compliance costs, restrictions on our ability to issue cards, appropriately price for the value of our products or partner with other financial institutions and otherwise result in changes to our business practices, which could materially and adversely impact our revenue growth and profitability.
We are subject to significant supervision and regulation with respect to compliance with AML/CFT laws and sanctions regimes in numerous jurisdictions. As regulators increase their focus in these areas, new technologies such as digital currencies develop, near real-time money movement solutions are adopted, we introduce new products like checking accounts and geopolitical tensions increase, we face increased costs related to oversight, supervision and potential fines. Our AML/CFT programs have become the subject of heightened scrutiny in some countries, including certain Member States in the EU. Any errors, failures or delays in complying with AML/CFT and sanctions laws, perceived deficiencies in our related compliance programs or association of our business with money laundering, terrorist financing, tax fraud or other illicit activities or sanctioned persons, entities, governments or countries can give rise to significant supervisory, criminal and civil proceedings and lawsuits, which could result in significant penalties and forfeiture of assets, loss of licenses or restrictions on business activities, or other enforcement actions, and our reputation may suffer due to our customers’ association with certain countries, persons or entities or the existence of any such transactions.See “Supervision and Regulation” under “Business” for more information about certain laws and regulations to which we are subject and their impact on us.Litigation and regulatory actions could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business and results of operations.At any given time, we are involved in a number of legal proceedings, including class action lawsuits, mass arbitrations and similar actions. Many of these actions include claims for substantial compensatory or punitive damages and require us to incur significant costs for legal representation, arbitration fees or other legal or related services. While we have historically relied on our arbitration clause in agreements with customers to limit our exposure to class action litigation, there can be no assurance that we will continue to be successful in enforcing our arbitration clause in the future, including as a result of possible regulation that would require that our consumer arbitration clause not apply to cases filed in court as class actions, and claims of the type we previously arbitrated could be subject to the complexities, risks and costs associated with class action cases. The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions. Given the inherent uncertainties involved in litigation, and the very large or indeterminate damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate liability we may incur from litigation.We expect that financial institutions, such as us, will continue to face significant regulatory scrutiny, with regulators taking formal enforcement actions against financial institutions in addition to addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on our activities, among other limitations, that could adversely affect our business. In addition, a violation of law or regulation by another financial institution could give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. Further, a single event may give rise to numerous and overlapping investigations and proceedings. External publicity concerning investigations can increase the scope and scale of investigations and lead to further regulatory inquiries.We are also involved at any given time with governmental and regulatory inquiries, investigations and proceedings. Regulatory scrutiny has continued to increase in a number of areas, and regulatory action could subject us to significant fines, penalties or other requirements resulting in Card Member reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our reputation and our brand, all of which could materially adversely affect our business and results of operations. For example, as previously disclosed and described in more detail in Note 12 to the “Consolidated Financial Statements,” we are cooperating with governmental investigations related to certain of our historical sales practices and have already paid a civil money penalty pursuant to a settlement with the OCC with respect to its investigation. Other investigations of our historical sales practices are ongoing.Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, changes to our merchant agreements and/or business practices, substantial monetary damages and damage to our reputation and brand.We are, and have been in the past, a defendant in a number of actions, including legal proceedings and proposed class actions, challenging certain provisions of our card acceptance agreements. See Note 12 to the “Consolidated Financial Statements” for a description of certain outstanding legal proceedings.
An adverse outcome in these proceedings could have a material adverse effect on our business and results of operations, require us to change our merchant agreements in a way that could expose our cards to increased merchant steering and other forms of discrimination that could impair the Card Member experience, result in additional litigation and/or arbitrations, impose substantial monetary damages and damage our reputation and brand. Even if we were not required to change our merchant agreements,
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changes in Visa’s and Mastercard’s policies or practices as a result of legal proceedings, lawsuit settlements or regulatory actions pending against them could result in changes to our business practices and materially and adversely impact our profitability.We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services integral to the operations of our businesses. These third parties may act in ways that could materially harm our business.
We rely on third-party service providers, cobrand partners, merchants, affiliate marketing firms, processors, aggregators, network partners and other third parties for services that are integral to our operations and are subject to the risk that activities of such third parties may adversely affect our business. As outsourcing, specialization of functions, third-party digital services and technology innovation within the payments industry increase (including with respect to mobile technologies, tokenization, big data, artificial intelligence and cloud-based solutions), more third parties are involved in processing card transactions, handling our data and supporting our operations. For example, we rely on third parties for the timely transmission of accurate information across our global network, card acquisition and provision of services to our customers.We have experienced in certain limited circumstances and may continue to experience disruptions or other events at our third parties or our third parties’ service providers, including their failure to fulfill their obligations and the information, cybersecurity and operational incidents described above. Such disruptions could interrupt or compromise the quality of our services to customers, impact the confidentiality, integrity, availability and security of our data, lead to fraudulent transactions on our cards or other products, impact our business, cause brand or reputational damage, and lead to costs associated with responding to such a disruption, including notification and remediation costs, costs to switch service providers or move operations in house, regulatory investigations and fines and increased regulatory oversight and litigation. Third parties may also act in other ways that are inconsistent with our interests or contrary to our strategic or technological initiatives, such as ceasing to provide data to us or using our data in a way that was not authorized or diminishes the value of the transaction data we receive through our integrated payments platform.
The management and oversight of an increasing number of third parties increases our operational complexity and governance challenges and decreases our control. Additionally, third-party oversight and practices related to third parties such as outsourcing have become subject to heightened regulatory scrutiny both in the United States and internationally. A failure to exercise adequate oversight over third parties, including compliance with service level agreements or regulatory or legal requirements, could result in regulatory actions, fines, litigation, sanctions or economic and reputational harm to us. In addition, we may not be able to effectively monitor or mitigate operational risks relating to our third-party providers’ service providers. We are also exposed to the risk that a service disruption at a service provider common to our third parties could impede their ability to provide services to us. Notwithstanding any attempts to diversify our reliance on third parties, in certain cases there may be limited alternatives or high costs for diversification, and we also may not be able to effectively mitigate operational risks relating to the service providers of our third-party providers.
Our success is dependent on maintaining a culture of integrity and respect, the resilience of our colleagues through changes in the working environment, and upon our executive officers and other key personnel, and misconduct by or loss of personnel could materially adversely affect our business.
We rely upon our colleagues not only for business success, but also to act with integrity and promote a culture of respect. To the extent our colleagues behave in a manner that does not comport with our company’s values, the consequences to our brand and reputation could be severe and could negatively affect our financial condition and results of operations. The changing nature of the office environment, such as changes in the prevalence of remote and hybrid working and expectations regarding such arrangements, may result in increased costs and present operational and workplace culture challenges and difficulties in attracting, developing and retaining personnel that may also adversely affect our business.
The market for qualified, highly motivated individuals with diverse perspectives and reflecting the diversity of our communities is highly competitive, with elevated levels of turnover in recent years, and we may not be able to attract and retain such individuals. We have and may continue to experience increased costs related to compensation and other benefits necessary to attract and retain such individuals, however the compensation and benefits we offer may still be viewed as less favorable than that offered by our competitors. Changes in immigration and work permit laws and regulations or the administration or enforcement of such laws or regulations or other changes in the legal or regulatory environment can also impair our ability to attract and retain qualified personnel, or to employ colleagues in the location(s) of our choice. Our compensation practices are subject to review and oversight by the Federal Reserve and the compensation practices of AENB are subject to review and oversight by the OCC. This regulatory review and oversight could further affect our ability to attract and retain our executive officers and other key personnel. Our inability to attract, develop and retain highly skilled, motivated and diverse personnel could materially adversely affect our business and our culture.
Regulation in the areas of privacy, data protection, data governance, resiliency, data transfer, third party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity could increase our costs and affect or limit our business opportunities and how we collect and/or use personal information.
Legislators and regulators in the United States and other countries in which we operate are increasingly adopting or revising privacy, data protection, data governance, resiliency, data transfer, third party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity laws, including data localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across32
Table of Contentsjurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate data governance, data management, data protection, incident management, resiliency, third party management, data transfer, security controls, account access mechanisms and controls related to artificial intelligence and machine learning are in place.
Compliance with current or future privacy, data protection, data governance, resiliency, data transfer, third party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity laws could significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or colleague information and could restrict our ability to fully maximize our closed-loop capability or provide certain products and services or work with certain service providers, which could materially and adversely affect our profitability. Our failure to comply with such laws or to maintain sufficient governance and control structures could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, customer attrition, decreases in the use or acceptance of our cards and damage to our reputation and our brand. In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information security and cybersecurity in the United States, the EU and various other countries in which we operate and our data protection and governance programs have become the subject of heightened scrutiny.
For more information on regulatory and legislative activity in this area, see “Supervision and Regulation — Privacy, Data Protection, Data Governance, Information Security and Cybersecurity” under “Business.”If we are not able to protect our intellectual property, or successfully defend against any infringement or misappropriation assertions brought against us, our revenue and profitability could be negatively affected.We rely on a variety of measures to protect our intellectual property and control access to, and distribution of, our trade secrets and other proprietary information. These measures may not prevent infringement of our intellectual property rights or misappropriation of our proprietary information and a resulting loss of competitive advantage. The ability to enforce intellectual property rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions. In addition, competitors or other third parties may allege that our products, systems, processes or technologies infringe on their intellectual property rights. Given the complex, rapidly changing and competitive technological and business environments in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a future assertion of an infringement or misappropriation claim against us could cause us to lose significant revenues, incur significant defense, license, royalty or technology development expenses, and/or pay significant monetary damages.
Tax legislative initiatives or assessments could adversely affect our results of operations and financial condition.
We are subject to income and other taxes in the United States and in various foreign jurisdictions. The laws and regulations related to tax matters are extremely complex and subject to varying interpretations. Although management believes our positions are reasonable, we are subject to audit by the Internal Revenue Service in the United States and by tax authorities in all the jurisdictions in which we conduct business operations. We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain transactions. While we believe we comply with all applicable VAT and other tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or apply existing laws and regulations more broadly, which could result in a significant increase in liabilities for taxes and interest in excess of accrued liabilities.
Legislative action or inaction in the countries in which we have operations could increase our effective tax rate. For example, new guidelines issued by the Organization for Economic Cooperation and Development (OECD) will impact how multinational enterprises (MNEs) are taxed on their global profits. In particular, the OECD’s guidelines on a global minimum tax of 15 percent will impact the effective tax rate for many MNEs. Several countries are beginning to implement these minimum tax guidelines, with effectiveness commencing in 2024, and if all OECD member countries were to implement these minimum tax guidelines in their current form, we expect that it would result in a significant increase to our effective tax rate. In addition to legislative changes, actions by tax authorities, including an increase in tax audit activity, could have an adverse impact on our tax liabilities.
Jurisdictions may also make changes related to the tax treatment of card transactions, such as imposing taxes on Card Member rewards, which could decrease the value we provide to customers and adversely impact our business.
Our operations, business, customers and partners could be adversely affected by climate change.
There are increasing and rapidly evolving concerns over the risks of climate change and related environmental sustainability matters. We face physical risks related to climate change, including rising average global temperatures, rising sea levels and an increase in the frequency and severity of extreme weather events and natural disasters. Such events and disasters could disrupt our operations or the operations of customers or third parties on which we rely and could result in market volatility or negatively impact our customers’ spending behaviors or ability to pay outstanding loans. Additionally, we may face risks related to the transition to a low-carbon economy. Changes in consumer preferences, travel patterns and legal requirements could impact our revenues or expenses or otherwise adversely affect our business, our customers and partners. We and other parties in our value chain are expected to be subject to additional climate and other environmental-related obligations arising from legislation and regulation in the United States and abroad, including those that may impose inconsistent or conflicting requirements. Banking regulators and other governmental authorities and stakeholders are increasingly focused on the issue of climate risk at financial institutions, and several of the U.S. federal bank regulatory agencies have issued principles designed to provide a framework for the management of climate-related risks. Legislators and regulators have begun to mandate, or are considering mandating,33
Table of Contentsdisclosure of additional climate-related information by companies, even as the availability and quality of such information remains limited. We could also be required to change our business and management practices and experience increased expenses resulting from strategic planning, litigation and changes to our technology, operations, products and services, as well as reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced stakeholder confidence, due to our response to climate change and our efforts relating to the Advancing Climate Solutions pillar of our ESG strategy. Our risk management framework may not be effective in identifying, measuring and controlling our exposure to climate-related risks, particularly given that the timing, nature and severity of the impacts of climate change may not be predictable.
Market, Funding & Liquidity, Credit and Model Risks
Our risk management policies and procedures, including our use of models to manage risk, may not be effective.
Our risk management framework seeks to identify and mitigate risk and appropriately balance risk and return. Although we have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in the future, these policies and procedures, as well as our risk management techniques, such as our hedging strategies, may not be fully effective. There may also be risks that exist, or develop in the future, that we have not appropriately identified or mitigated. As regulations, technology and competition continue to evolve, our risk management framework may not always keep sufficient pace with those changes. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.
Management of our risks in some cases depends upon the use of analytical and/or forecasting models. Although we have a governance framework for model development and independent model validation, the modeling methodology or key assumptions could be erroneous or the models could be misused. In addition, issues with the quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, could result in ineffective or inaccurate model outputs and reports. For example, models based on historical data sets might not be accurate predictors of future outcomes, such as because of changes in the credit profile of our Card Members, and they may not be able to predict future outcomes. Our models also may not be able to function properly in the current geopolitical and macroeconomic environment given the lack of recent precedent. The CECL methodology requires measurement of expected credit losses for the estimated life of certain financial instruments, not only based on historical experience and current conditions, but also by including forecasts incorporating forward-looking information. If our business decisions or estimates for credit losses are based on incorrect or misused models and assumptions or we fail to manage data inputs effectively and to aggregate or analyze data in an accurate and timely manner, our results of operations and financial condition may be materially adversely affected.
We are exposed to credit risk and trends that affect Card Member spending and the ability of customers and partners to pay us, which could have a material adverse effect on our results of operations and financial condition.
We are exposed to both individual credit risk, principally from consumer and small business Card Member loans and receivables, and institutional credit risk, principally from corporate Card Member loans and receivables, merchants, network partners, loyalty coalition partners and treasury and investment counterparties. Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors, such as gross domestic product, unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses. A customer’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but also by a customer’s other payment obligations, and increasing leverage can result in a higher risk that customers will default or become delinquent in their obligations to us.
We rely principally on the customer’s creditworthiness for repayment of loans or receivables and therefore often have no other recourse for collection. Our ability to assess creditworthiness may be impaired as a result of changes in our underwriting practices or if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could have a negative impact on our results of operations. This may be exacerbated to the extent information we have historically relied upon to make credit decisions does not accurately portray a customer’s creditworthiness, including as a result of the current high rates of inflation and economic slowdown. Further, our pricing strategies, particularly for new lending features and non-card lending products, may not offset the negative impact on profitability caused by increases in delinquencies and losses; thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of loans and receivables, these estimates may not be accurate. In addition, the information we use in managing our credit risk may be inaccurate or incomplete.
We have experienced higher delinquency and write-off rates for the year ended December 31, 2023, as compared to the year ended December 31, 2022, and such rates are expected to continue to increase. Rising delinquencies and rising rates of bankruptcy are often precursors of future write-offs and may require us to increase our reserve for credit losses. Higher write-off rates and the resulting increase in our reserves for credit losses adversely affect our profitability and the performance of our securitizations, and may increase our cost of funds.
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries, countries and regions that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, minimum payment regulations and re-age guidance). Increased credit risk, whether resulting from underestimating the credit losses inherent in our34
Table of Contentsportfolio of loans and receivables, deteriorating economic conditions (particularly in the United States where, for example, U.S. Card Members were responsible for approximately 87 percent of our total Card Member loans outstanding as of December 31, 2023), increases in the level of loan balances, changes in our mix of business or otherwise, could require us to increase our provisions for losses and could have a material adverse effect on our results of operations and financial condition.Interest rate changes could materially adversely affect our earnings.Our interest expense was approximately $6.8 billion for the year ended December 31, 2023. If the rate of interest we pay on our borrowings increases more or decreases less than the rate of interest we earn on our loans, our net interest yield, and consequently our net interest income, could decrease. We expect the rates we pay on our deposits will change as benchmark interest rates change. For example, the Federal Reserve and other central banks have raised interest rates in response to heightened inflationary pressures. In addition, interest rate changes may affect customer behavior, such as impacting the loan balances Card Members carry on their credit cards or their ability to make payments as higher interest rates lead to higher payment requirements, further impacting our results of operations. For a further discussion of our interest rate risk, see “Risk Management ― Market Risk Management Process” under “MD&A.”We are subject to capital adequacy and liquidity rules, and if we fail to meet these rules, our business would be materially adversely affected.Failure to meet current or future capital or liquidity requirements could compromise our competitive position and could result in restrictions imposed by the Federal Reserve, or the OCC with respect to AENB, including limiting our ability to pay dividends, repurchase our capital stock, invest in our business, expand our business or engage in acquisitions. Some elements of the capital and liquidity regimes are not yet final and certain developments could significantly impact the requirements applicable to financial institutions. For example, if the capital rule proposal by the U.S. federal bank regulatory agencies is adopted as proposed, it would result in significantly higher regulatory capital requirements for us, as discussed in “Supervision and Regulation — Capital and Liquidity Regulation” under “Business”. The U.S. federal bank regulatory agencies have also issued a proposed rule that would require us and AENB to issue and/or maintain minimum amounts of eligible long-term debt with specific terms. In addition, it may be necessary for us to hold additional capital because of an increase in the SCB requirement based on results from a supervisory stress test.
Compliance with capital adequacy and liquidity rules requires a material investment of resources. An inability to meet regulatory expectations regarding our compliance with applicable capital adequacy and liquidity rules may also negatively impact the assessment of us and AENB by federal banking regulators. Additionally, changes in our regulatory tailoring category, such as becoming a Category III or Category II firm, would subject us to more stringent capital and liquidity requirements.For more information on capital adequacy requirements, see “Supervision and Regulation — Capital and Liquidity Regulation” under “Business.”We are subject to restrictions that limit our ability to pay dividends and repurchase our capital stock. Our subsidiaries are also subject to restrictions that limit their ability to pay dividends to us, which may adversely affect our liquidity.
We are limited in our ability to pay dividends and repurchase capital stock by our regulators, who have broad authority to prohibit any action that would be considered an unsafe or unsound banking practice. We are subject to a requirement to submit capital plans to the Federal Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock. As part of the capital planning and stress testing process, our proposed capital actions are assessed against our ability to satisfy applicable capital requirements in the event of a stressed market environment. If we fail to satisfy applicable capital requirements, including the stress capital buffer, our ability to undertake capital actions may be restricted.
Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last preceding dividend period of our preferred stock.
We rely on dividends from our subsidiaries for liquidity, and such dividends may be limited by law, regulation or supervisory policy. For example, AENB is subject to various statutory and regulatory limitations on its declaration and payment of dividends. These limitations may hinder our ability to access funds we may need to make payments on our obligations, make dividend payments or otherwise achieve strategic objectives.
Any future reduction or elimination of our common stock dividend or share repurchase program could adversely affect the market price of our common stock and market perceptions of American Express. For more information on bank holding company and depository institution dividend restrictions, see “Supervision and Regulation — Stress Testing and Capital Planning” and “— Dividends and Other Capital Distributions” under “Business,” as well as “Consolidated Capital Resources and Liquidity — Dividends and Share Repurchases” under “MD&A” and Note 22 to the “Consolidated Financial Statements.”
Adverse market conditions may significantly affect our access to, and cost of, capital and ability to meet liquidity needs.Our ability to obtain financing in the debt capital markets for unsecured term debt and asset securitizations is dependent on financial market conditions. Disruptions, uncertainty or volatility across the financial markets, as well as adverse developments affecting our competitors and the financial industry generally, could negatively impact market liquidity and limit our access to funding required to operate our business. Such market conditions may also limit our ability to replace, in a timely manner,
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maturing liabilities, satisfy regulatory capital requirements and access the funding necessary to grow our business. In some circumstances, we may incur an unattractive cost to raise capital, which could decrease profitability and significantly reduce financial flexibility. Additional factors affecting the extent to which we may securitize loans and receivables in the future include the overall credit quality of our loans and receivables, the costs of securitizing our loans and receivables, the demand for credit card asset-backed securities and the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally. Our liquidity and cost of funds would also be adversely affected by the occurrence of events that could result in the early amortization of our existing securitization transactions. For a further discussion of our liquidity and funding needs, see “Consolidated Capital Resources and Liquidity” under “MD&A.”Any reduction in our credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
Ratings of our long-term and short-term debt and deposits are based on a number of factors, including financial strength, as well as factors not within our control, including conditions affecting the financial services industry, and the macroeconomic environment. Our ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding. Our ability to raise funding through the securitization market also depends, in part, on the credit ratings of the securities we issue from our securitization trusts. If we are not able to satisfy rating agency requirements to confirm the ratings of our asset-backed securities, it could limit our ability to access the securitization markets.Adverse currency fluctuations and foreign exchange controls could decrease earnings we receive from our international operations and impact our capital.
During 2023, approximately 22 percent of our total revenues net of interest expense were generated from activities outside the United States. We are exposed to foreign exchange risk from our international operations, and accordingly the revenue we generate outside the United States is subject to unpredictable fluctuations if the values of other currencies change relative to the U.S. dollar, which could have a material adverse effect on our results of operations.
Foreign exchange regulations or capital controls might restrict or prohibit the conversion of other currencies into U.S. dollars or our ability to transfer them. Political and economic conditions in other countries could also cause fluctuations in the values of their currencies, such as the devaluation of the Argentinian peso, and impact the availability of foreign exchange for the payment to us by the local card issuer for obligations arising out of local Card Members’ spending outside such country and for the payment by Card Members who are billed in a currency other than their local currency. Substantial and sudden devaluation of local Card Members’ currency can also affect their ability to make payments to the local issuer of the card in connection with spending outside the local country. The occurrence of any of these circumstances could further impact our results of operations.An inability to accept or maintain deposits due to market demand or regulatory constraints could materially adversely affect our liquidity position and our ability to fund our business.Our U.S. bank subsidiary, AENB, accepts deposits and uses the proceeds as a source of funding, with our direct retail deposits becoming a larger proportion of our funding over time. We continue to face strong competition with regard to deposits, and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances. To the extent we offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted. Additionally, a decrease in confidence in the soundness of us or in the banking sector more broadly, such as following the occurrence of bank failures, or in the level of insurance available on deposits may cause rapid deposit withdrawals or an unwillingness to maintain deposits with us, which could materially adversely affect us and our ability to fund our business. The use of social media and similar channels has the potential to intensify and accelerate such a decrease in confidence in soundness.Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on AENB’s capital levels. The FDIA’s brokered deposit provisions and related FDIC rules in certain circumstances prohibit banks from accepting or renewing brokered deposits and apply other restrictions, such as a cap on interest rates that can be paid. Additionally, our regulators can adjust applicable capital requirements at any time and have authority to place limitations on our deposit businesses. An inability to attract or maintain deposits in the future could materially adversely affect our ability to fund our business.
The value of our investments may be adversely impacted by economic, political or market conditions.Market risk includes the loss in value of portfolios and financial instruments due to adverse changes in market variables, which could negatively impact our financial condition. We have experienced realized and unrealized losses in our Amex Ventures equity investments and may experience further losses in the future. As of December 31, 2023, we held approximately $2.2 billion of investment securities, primarily consisting of debt securities, and equity investments, including certain equity method investments, totaling approximately $2.0 billion. Negative market conditions, changes in valuations or increases in default rates or bankruptcies with respect to these investments, due to economic conditions, business performance or otherwise, could have a material adverse impact on the value of our investments, potentially resulting in impairment charges. Defaults, threats of defaults or economic disruptions, even in countries or territories in which we do not have material investment exposure, conduct business or have operations, could adversely affect us.
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FY 2024-12-31 (later)
ITEM 1A. RISK FACTORSThis section highlights certain risks that could affect us and our businesses, broadly categorized in accordance with the risk types identified in our Enterprise Risk Management (ERM) Framework: “Strategic & Business, Reputational and Country Risks,” “Operational and Compliance/Legal Risks” and “Model, Credit, Market and Funding & Liquidity Risks.” You should carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K, including in “Risk Management” under “MD&A,” which describes our approach to identifying, monitoring and managing the risks we assume in conducting our businesses and provides certain quantitative and qualitative disclosures about market risks. Although we have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in the future, these policies and procedures, as well as our risk management techniques, may not be fully effective in managing the risks to which we are exposed. For example, while we are currently conducting a comprehensive assessment and uplift of our risk management capabilities and control environment, the outcome may not meet our or our regulators’ expectations.
The risks and uncertainties we face are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.Strategic & Business, Reputational and Country Risks
Business and economic conditions are a major driver of our results of operations and difficult conditions in the business and economic environment may materially adversely affect our business.We offer a broad array of products and services to consumers, small businesses, mid-sized companies and large corporations and thus are very dependent upon the level of consumer and business activity and the demand for payment and financing products. Slow economic growth, economic contraction or shifts in broader consumer and business trends significantly impact customer behaviors, including spending on our cards, the ability and willingness of Card Members to borrow and pay amounts owed to us, demand for fee-based products and services and levels of customers’ deposits with us.
Factors such as consumer spending and confidence, household income and housing prices, unemployment rates, business investment and inventory levels, bankruptcies, geopolitical instability, public policy decisions, government spending, international trade relationships, tariffs, interest rates, taxes, inflation and deflation (including the effects of related governmental responses), energy costs and availability of capital and credit all affect the economic environment and, ultimately, our profitability. Additionally, sustained periods of high inflation may, among other things, increase certain of our expenses and erode consumer purchasing power, confidence and spending. An economic downturn or recession may result in higher unemployment and lower household income, consumer spending, corporate earnings and business investment, which may negatively impact spending on our cards and demand for our products, and increase delinquencies and write-off rates.
Spending by our premium consumer Card Members, for example, is sensitive to personal discretionary spending levels and tends to decline during general economic downturns. Likewise, spending by small business and corporate clients, which comprised approximately 42 percent of our worldwide billed business during 2024, depends in part on the economic environment and a favorable climate for continued business investment and new business formation. The consequences of negative circumstances impacting us or the economic environment generally can be sudden and severe and can impact customer types and geographies in which we operate in very different ways.Our business is subject to the effects of geopolitical conditions, weather, natural disasters and other catastrophic events.Geopolitical conditions, terrorist attacks, military conflicts, supply chain issues, natural disasters, severe weather, widespread health emergencies or pandemics, information or cybersecurity incidents (including intrusion into or degradation or unavailability of systems or technology by cyberattacks), operational incidents and other catastrophic events can have a material adverse effect on our business. Political and social conditions, including geopolitical instability (such as from tensions involving China and the U.S.), fiscal and monetary policies (including developments related to the U.S. federal deficit, debt ceiling, government shutdowns and other budgetary issues), trade wars and tariffs, labor shortages, regional or domestic hostilities, economic sanctions and the prospect or occurrence of more widespread conflicts could also negatively affect our business, operations and partners, consumer and business spending, including travel patterns and business investment, and demand for credit. Pandemics and other health emergencies can have widespread and unpredictable impacts on global society, economic conditions and consumer and business behavior, which may reoccur or occur over an extended duration, such as the macroeconomic and behavioral impacts during the COVID-19 pandemic. Because we derive a portion of our revenues from travel-related spending and many of our partners’ businesses relate to travel, our business is sensitive to impacts to travel and tourism, such as health and safety concerns and limitations on travel and mobility. In addition, disruptions in air travel and other forms of travel can result in the payment of claims under travel protection products we offer.
A number of actions are taking place across the globe that impact geopolitical stability. Several countries are considering or have implemented tariffs or other trade barriers or restrictions, as well as other measures affecting cross-border commerce and the flow of information, which could have broad economic consequences, impact global supply chains and negatively affect our business, customers and partners. There are multiple ongoing military conflicts (such as the Russia-Ukraine and Middle East conflicts) and geopolitical tensions may result in additional conflicts or escalate existing conflicts. Following the Russian invasion of Ukraine, we announced that we suspended business operations in Russia and Belarus, and these conflicts have led to economic uncertainty and market disruptions, including the imposition of sanctions and export controls. The broader consequences remain uncertain, but geopolitical conditions may adversely affect macroeconomic conditions and our business in a number of ways, including regional
23Table of Contentsinstability, increased prevalence and sophistication of cyberattacks, potential retaliatory action against companies such as us, further sanctions activity and related regulatory scrutiny, increased inflation, further increases or fluctuations in commodity and energy prices, decreases in global travel and further disruptions to the global supply chain. If international political instability and geopolitical tensions continue or increase, our business and results of operations could be harmed.
Hurricanes, wildfires and other natural disasters have impacted, and may continue to impact, spending and credit performance in the areas affected. For example, there can be no assurance as to the ultimate impact of the Los Angeles area wildfires on spending levels and credit performance. Disasters and catastrophic events, and the impact of such events on certain industries or the overall economy, could have a negative effect on our business, results of operations and infrastructure, including our technology and systems. Climate-related risks may exacerbate certain of these threats, including the frequency and severity of weather-related events. Card Members in California, Florida, New York, Texas, Georgia and New Jersey account for a significant portion of U.S. consumer and small business billed business and Card Member loans, and our results of operations could be impacted by events or conditions that disproportionately or specifically affect one or more of those states.Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry.The payments industry is highly competitive, and we compete with networks, issuers, acquirers, and other payment service providers and methods of payment, including paper-based transactions (e.g., cash and checks) and electronic transfers (e.g., wire transfers and ACH), as well as evolving and growing alternative mechanisms, systems and products (e.g., web- and mobile-based payment platforms). If we are not able to differentiate ourselves from our competitors, develop compelling value propositions for our customers and/or effectively grow in areas such as digital payments and emerging technologies, we may not be able to compete effectively.We believe Visa and Mastercard are larger than we are in most countries based on purchase volume. As a result, card issuers and acquirers on the Visa and Mastercard networks may be able to benefit from the dominant position, scale, resources, marketing and pricing of those networks. Our business may also be negatively affected if we are unable to continue increasing merchant acceptance (including by merchants that accept cards on the Visa and Mastercard networks) and perceptions of coverage, or if our Card Members do not experience welcome acceptance of our cards.Some of our competitors have substantially greater scale and resources than we have and may offer richer value propositions or a wider range of programs and services than we offer or may use more effective strategies to acquire and retain more customers, capture a greater share of spending and borrowings, develop more attractive cobrand card and other partner programs, obtain more favorable terms with merchants and maintain greater merchant acceptance than we have. Competition may also intensify as participants in the payments industry merge or enter into joint ventures or other business combinations that compete with our products and services. Government actions or initiatives may also provide competitors with increased opportunities to derive competitive advantages and may create new competitors, including in some cases a government entity. We may not be able to compete effectively against these threats or respond or adapt to changes in consumer spending and borrowing or merchant acceptance as effectively as our competitors. Costs such as Card Member rewards and Card Member services expenses could continue to increase as we evolve our value propositions, including in response to increased competition.
Spending on our cards could continue to be impacted by increasing usage of credit and debit cards issued on other networks and real-time settlement transactions, such as bank transfers, as well as adoption of alternative payment mechanisms, systems and products. The fragmentation of customer spending, such as to take advantage of different merchant or card incentives, as a result of point-of-sale practices that impact merchant acceptance (e.g., surcharging or differential acceptance) or for convenience with technological solutions, may continue to increase. Revolving credit balances on our cards could also be impacted by alternative financing providers, such as point-of-sale lenders and buy now, pay later products. To the extent other payment and financing mechanisms, systems and products continue to successfully expand, our discount revenues earned from Card Member spending and our net interest income earned from Card Member borrowing could be negatively impacted. In addition, companies that control access to consumer and merchant payment method choices at the point of sale or through digital wallets, commerce-related experiences, mobile applications or other technologies could choose not to accept, suppress use of, or degrade the experience of using our products or could restrict our access to our customers and transaction data. Such companies could also require payments from us to participate in such digital wallets, experiences or applications or negotiate incentives or pricing concessions, impacting our profitability on transactions.
The competitive value of our data and demand for our products and services may also be diminished as traditional and non-traditional competitors use other, new data sources and technologies to derive similar insights and by certain regulations. Open banking initiatives that are increasingly being promoted by governments and regulators may result in a number of challenges to our business model, such as disintermediating us from our customers, steering customers away from our products and services or decreasing our attractiveness to partners. Competitors have also sought to create their own integrated payments platforms, and may have competitive advantages in doing so as compared to our business.
To the extent we expand into, or further grow in, new business areas, such as new products and services that complement our card products, and new geographic regions, we will face competitors with more experience and more established relationships with relevant customers, regulators and industry participants, which could adversely affect our ability to compete. Laws and business practices that favor local competitors, require card transactions to be routed over domestic networks or prohibit or limit foreign ownership of certain businesses could limit our growth in international regions.We may face additional compliance and regulatory risks to the extent that we expand into new business areas, and we may need to dedicate more expense, time and resources to comply with regulatory requirements than our competitors, particularly those that are not regulated financial institutions.24
Table of ContentsMany of our competitors are subject to different, and in some cases, less stringent, legislative and regulatory regimes, and some may have lower cost structures and more agile business models and systems. More restrictive laws and regulations that do not apply to all of our competitors can put us at a disadvantage, including prohibiting us from engaging in certain transactions, regulating our business practices or adversely affecting our cost structure.
We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations.In the ordinary course of our business we enter into different types of contractual arrangements with business partners in a variety of industries. For example, we work with partners such as Delta, Hilton, Marriott and British Airways to offer cobranded cards for consumers and small businesses, and with partners in many industries, including Delta, to offer benefits and rewards to Card Members. See “Partners and Relationships” under “Business” for additional information on our business partnerships, including with Delta.
Competition for relationships with key business partners is very intense and there can be no assurance we will be able to grow or maintain these partner relationships or that they will remain as profitable or valued by our customers. Establishing and retaining attractive cobrand card partnerships is particularly competitive among card issuers and networks as these partnerships typically appeal to high-spending loyal customers. All of our cobrand portfolios in the aggregate accounted for approximately 25 percent of our worldwide billed business for the year ended December 31, 2024. Card Member loans related to our cobrand portfolios accounted for approximately 36 percent of our worldwide Card Member loans as of December 31, 2024.
Cobrand arrangements are entered into for a fixed period, generally ranging from five to ten years, and will terminate in accordance with their terms, including at the end of the fixed period unless extended or renewed at the option of the parties, or upon early termination as a result of an event of default or otherwise. We face the risk that we could lose partner relationships, even after we have invested significant resources in the relationships. Additionally, partners may make changes to the products and services they offer or otherwise become less desirable to our customers, which may lower the value of our products, such as the cobranded cards we issue to our customers. We may also choose not to renew certain cobrand relationships. Billed business could decline and Card Member attrition could increase, in each case, significantly as a result of the termination of one or more cobrand partnership relationships. In addition, some of our cobrand arrangements provide that, upon expiration or termination, the cobrand partner may purchase or designate a third party to purchase the loans generated with respect to such cobranded card portfolio, which could result in the loss of the card accounts and a significant decline in our Card Member loans outstanding.We regularly seek to extend or renew cobrand arrangements in advance of the end of the contract term and face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms that are acceptable to us, as competition for such relationships continues to increase. We make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The amount we pay to our cobrand partners has increased, particularly in the United States, and may continue to increase as arrangements are renegotiated due to increasingly intense competition for cobrand partners among card issuers and networks.
The loss of exclusivity arrangements with business partners, the loss of the partner relationship altogether (whether by non-renewal at the end of the contract period, such as the end of our relationship with Costco in the United States in 2016, or as the result of a merger, legal or regulatory action or otherwise) or the renegotiation of existing partnerships with terms that are significantly worse for us could have a material adverse impact on our business and results of operations. See “ Our business is subject to evolving and comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition ” above for information on the uncertainty regarding our cobrand and agent relationships in the EU. In addition, any publicity associated with the loss of any of our key business partners could harm our reputation, making it more difficult to attract and retain Card Members and merchants, and could weaken our negotiating position with our remaining and prospective business partners.Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings, consolidations and outages, and the possible obligation to make payments to our partners.
Our success is, in many ways, dependent on the success of our partners. From customer acquisition to cobranding arrangements, from participation in our rewards programs to facilitating B2B supplier payments for our corporate clients, we rely on our business partners across many aspects of our company and our arrangements with business partners represent a significant portion of our business. For example, our two largest redemption partners are Amazon and Delta. Some of our partners manage certain aspects of our customer relationships, such as our OptBlue partners. To the extent any of our partners fail to effectively promote and support our products, experience a slowdown in their business, operational disruptions, reputational issues or loss of consumer confidence, or are otherwise unable to meet our expectations or those of their other stakeholders, our business may be materially negatively impacted. For example, the operational rights relating to our prepaid reloadable and gift card business are owned by a business partner and the reloadable operations have experienced disruptions and compliance issues that impacted the ability of our prepaid customers to load and use their cards. If such operations are interrupted, suspended, terminated or otherwise experience further issues in the future, it could further negatively impact our customers’ experience, result in additional costs, litigation and regulatory action, and harm our business and reputation. We also face the risk that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on terms that are acceptable to us. In addition, we may be obligated to make or accelerate payments to certain business partners such as cobrand partners upon the occurrence of certain triggering events such as a shortfall in certain performance and revenue levels. If we are not able to effectively manage these triggering events, we could unexpectedly have to make payments to these partners, which could have a negative effect on our
25Table of Contentsfinancial condition and results of operations. See Note 12 to the “Consolidated Financial Statements” for additional information on financial commitments related to agreements with certain cobrand partners.
Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings, consolidations, operational outages, cybersecurity incidents and other similar events that may occur in any industry representing a significant portion of our billed business, which could negatively impact particular card products and services (and volumes generally) and our financial condition and results of operations. We have previously and may in the future pre-purchase loyalty points from certain of our cobrand partners, the value of which may diminish to the extent such partners cease operations or such points become less desirable to our customers. We could also be materially impacted if we were obligated or elected to reimburse Card Members for products and services purchased from merchants that have ceased operations or stopped accepting our cards. For example, we are exposed to credit risk in the airline industry to the extent we protect Card Members against non-delivery of purchases, such as where we have remitted payment to an airline for a Card Member purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the airline, we may bear the loss for the amount credited to the Card Member. Spending at airline merchants accounted for approximately 7 percent of our worldwide billed business for the year ended December 31, 2024.
For additional information relating to operational risks of our business partners, see “ We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services integral to the operations of our businesses. These third parties may act in ways that could materially harm our business ” below.We face continued intense competitive pressure that may materially impact the prices we charge for accepting our cards for payment, as well as the risk of losing merchant relationships, which could have a material adverse impact on our business and results of operations.We face pressure from competitors that primarily rely on sources of revenue other than discount revenue or have lower costs that can make their pricing for card acceptance more attractive. Merchants, business partners and third-party merchant acquirers, aggregators and processors are also able to negotiate incentives, pricing concessions and other favorable contractual provisions from us as a condition to accepting our cards, being cobrand partners, offering benefits to our Card Members or signing merchants to accept American Express cards. As these parties become even larger (such as the largest tech companies), we may have to increase the amount of incentives and/or concessions we provide to them. We also face the risk of losing relationships with these parties or that they limit acceptance of our cards, which could materially adversely affect spending on our cards and our ability to retain current Card Members and attract new Card Members and therefore, our business and results of operations.
Our merchant discount rates have been impacted by regulatory changes affecting competitor pricing in certain international countries and U.S. states and may in the future be impacted by pricing regulation. We have also experienced erosion of our merchant discount rates as we increase merchant acceptance. We may not be successful in significantly expanding merchant acceptance or offsetting rate erosion with volumes at new merchants. In addition, the regulatory environment and differentiated payment models and technologies from non-traditional players in the alternative payments space could pose challenges to our traditional payment model and adversely impact our merchant discount rates. Some merchants, including large tech companies and other large merchants, continue to invest in their own payment and financing solutions, such as proprietary-branded digital wallets, using both traditional and new technology platforms. If merchants are able to drive broad consumer adoption and usage, it could adversely impact our merchant discount rates and network and loan volumes.A continuing priority of ours is to drive greater and differentiated value to our merchants that, if not successful, could negatively impact our discount revenue and financial results. We may not succeed in maintaining merchant discount rates or offsetting the impact of declining merchant discount rates, for the reasons discussed above and others, which could materially and adversely affect our revenues and profitability, and therefore our ability to invest in innovation and in value-added services for merchants, business partners and Card Members.Surcharging, steering or other differential acceptance practices by merchants could materially adversely affect our business and results of operations.
In certain countries, such as Australia, Canada (other than in the Province of Quebec) and certain Member States in the EU, and in certain states in the United States, merchants are permitted by law to engage in surcharging, steering or other differential acceptance practices for certain card purchases and certain merchants and merchant organizations continue to push for these practices in other jurisdictions. In jurisdictions allowing surcharging, we have seen an increase in merchant surcharging on American Express cards, particularly in certain merchant categories, and in some cases, either the surcharge is greater than that applied to Visa and Mastercard cards or Visa and Mastercard cards are not surcharged at all (practices that are known as differential surcharging), even though there are many cards issued on competing networks that have an equal or greater cost of acceptance for the merchant.
We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of payment or otherwise seek to suppress use of our cards or certain of our cards, such as limiting the use of our cards for certain transactions. Our Card Members value the ability to use their cards where and when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American Express brand by prohibiting discrimination through provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, subject to local legal requirements. We have increasingly relied on merchant acquirers, aggregators and processors to manage certain aspects of our merchant relationships. When we work with such third parties, we are dependent on them to promote and support the acceptance and usage of our cards, but they may have business interests, strategies or goals that are inconsistent with ours.
Recently introduced products, such as debit cards on the American Express network, could fail to gain market acceptance and American Express cards could become less desirable to consumers and businesses generally due to surcharging, steering or other26
Table of Contentsforms of discrimination, which could result in a decrease in cards-in-force, coverage and transaction volumes. The impact could vary depending on such factors as: the industry or manner in which a surcharge is levied; how Card Members are surcharged or steered to other card products or payment forms at the point of sale; the ease and speed of implementation for merchants, merchant acquirers, aggregators, processors or other merchant service providers, including as a result of new or emerging technologies; the size and recurrence of the underlying charges; and whether and to what extent these actions are applied to other forms of payment, including whether it varies depending on the type of card (e.g., credit or debit), product, network, acquirer or issuer. Discrimination against American Express cards could have a material adverse effect on our business, financial condition and results of operations, particularly where it only or disproportionately impacts credit card usage or card usage generally, our Card Members or our business.
We may not be successful in our efforts to promote card usage or attract new Card Members, including through marketing and promotion, merchant acceptance and Card Member rewards and services, or to effectively control the costs of such investments, all of which may materially impact our profitability.
Revenue growth is dependent on increasing consumer and business spending on our cards, growing loan balances and increasing fee revenue. We have been investing in a number of growth initiatives, including to attract new Card Members, retain existing Card Members and capture a greater share of customers’ total spending and borrowings. There can be no assurance that our investments will continue to be effective, particularly as consumer and business behaviors continue to change. In addition, to the extent our products or offers attract customers looking for short-term incentives rather than incentivize long-term loyalty, Card Member attrition and costs could increase. Increasing spending on our cards also depends on our continued expansion of merchant acceptance of our cards. If we are unable to continue growing merchant acceptance and perceptions of coverage, or if merchants decide to no longer accept American Express cards or more greatly engage in surcharging, steering or other differential acceptance practices, our business could suffer. Expanding our product and service offerings, adding customer acquisition channels and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements, fail to resonate with customers, adversely impact our merchant discount rates or dilute our brand.
Another way we invest in customer value is through our Membership Rewards program, as well as other Card Member benefits. Any significant change in, or failure by management to reasonably estimate, actual redemptions of Membership Rewards points and associated redemption costs could adversely affect our profitability. We rely on third parties for certain redemption options, Card Member offers and other rewards and benefits, and we may modify or not be able to continue to offer such rewards and benefits in the future, which could diminish the value of the program for our Card Members. In addition, many credit card issuers and certain other companies have instituted rewards and cobrand programs and other benefits and services that are similar to ours and may be more attractive. An inability to differentiate our products and services could materially adversely affect us.
We may not be able to cost-effectively manage and expand Card Member benefits, including containing the growth of marketing, promotion, rewards and Card Member services expenses in the future, and our ability to do so will depend in part on our ability to attract value from partners. If such expenses increase beyond our expectations, we will need to find ways to offset the financial impact by increasing other areas of revenues such as fee-based revenues, decreasing operating expenses or other investments in our business, or both. We may not succeed in doing so, particularly in the current competitive and regulatory environment, which has included heightened scrutiny on credit card rewards programs. In addition, increased costs as a result of business and economic conditions may require that we reduce investments in other areas.
Our brand and reputation are key assets of our Company, and our business may be materially affected by how we are perceived in the marketplace.
Our brand and its attributes are key assets, and we believe our continued success depends on our ability to preserve, grow and realize the benefits of the value of our brand. Our ability to attract and retain consumer and small business Card Members and corporate clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, privacy and data protection, management, workplace culture, merchant acceptance, financial condition, response to political and social issues or catastrophic events and other subjective qualities. Negative perceptions or publicity regarding these matters — even if related to seemingly isolated incidents and whether or not factually correct—could erode trust and confidence and damage our reputation among existing and potential Card Members, corporate clients, merchants and partners, which could make it difficult for us to attract new customers and maintain existing ones, and could subject us to heightened legal and regulatory scrutiny. Negative public opinion could result from actual or alleged conduct in any number of activities or circumstances, including card practices, regulatory compliance, the use and protection of customer information, conduct by our colleagues and policy engagement, including activities of the American Express Company Political Action Committee, and from actions taken by regulators or others in response thereto. Moreover, the speed with which information spreads through social media, enhanced technology and other news sources and the ease with which customers transact may amplify the onset and negative effects from such perceptions.
Our brand and reputation may also be harmed by actions taken by third parties that are outside our control. For example, any shortcoming of or controversy related to a third-party service provider, business partner, merchant acquirer or network partner may be attributed by Card Members and merchants to us, thus damaging our reputation and brand value. Our brand may also be negatively impacted by acceptance of American Express cards by merchants in certain industries, when American Express cards are used for payment for legal, but controversial, products and services or any government inquiries or legislative scrutiny related to card acceptance or usage. The lack of acceptance, suppression of card usage or surcharging by merchants can also negatively impact perceptions of our brand and our products, lower overall transaction volume and increase the attractiveness of other payment products or systems. Adverse developments with respect to our industry, including the creation and implementation of new merchant categories codes, may also negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us. Furthermore, as a corporation with headquarters and operations located in the United States and a brand name27
Table of Contentsreferring to the United States, a negative perception of the United States arising from its political or other positions could harm the perception of our company and our brand. These risks to our brand and reputation, as well as other risks described in this Risk Factors section, are heightened by the increasing sophistication and availability of artificial intelligence technology, including by assisting with the creation of deepfakes and increasing the velocity of distribution of disinformation. Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our business volumes, revenues and profitability.
We face increased scrutiny from stakeholders who have diverging views related to business practices and company activities, which could result in reputational harm, litigation, enforcement actions and other adverse consequences. In addition, we are subject to increasing regulatory requirements and legal risks related to environmental, social and governance topics, such as those arising from new disclosure requirements in certain jurisdictions. Inaccurate perceptions or mischaracterizations of disclosures on these topics, or our goals and initiatives, while outside of our control, could impact our reputation, colleague hiring and retention and public perceptions of our business.
If we are not able to successfully invest in, and compete with respect to, technological developments and new products and services across all our businesses, our revenue and profitability could be materially adversely affected.
Our industry is subject to rapid and significant technological changes. In order to compete in our industry, we need to continue to invest in technology across all areas of our business, including in transaction processing, data management and analytics, machine learning and artificial intelligence, customer interactions and communications, open banking and alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement and risk management and compliance systems. Incorporating new technologies into our products and services, including developing the appropriate governance and controls consistent with regulatory expectations, requires substantial expenditures and takes considerable time, and may have unintended consequences or ultimately be unsuccessful. We expect that new technologies in the payments industry will continue to emerge, and these new technologies may be superior to, or render obsolete, our existing technology.
The process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively. Our competitors may develop products, platforms or technologies that become more widely adopted by consumers, merchants or service providers than ours, including as a result of increased involvement by technology companies in the payments industry and our competitors’ greater scale or ability to pursue and adopt new technologies. In addition, we may underestimate the resources needed and overestimate our ability to develop new products and services, particularly beyond our traditional card products and travel-related services.
The use of artificial intelligence and machine learning technologies, including generative artificial intelligence, has increased rapidly with the increasing sophistication and applications of the technology. Our and our partners’ use of artificial intelligence and machine learning is subject to various risks including flaws in models or datasets that may result in biased or inaccurate results, unintended or unexpected outcomes, ethical considerations regarding artificial intelligence, infringement of intellectual property rights, exposure of proprietary or personal information, heightened security risks and the ability to safely deploy and implement governance and controls for artificial intelligence systems. The complexity of these technologies can make it difficult to assess proper operation, reduce error, or understand and explain their outputs. Adverse consequences of artificial intelligence and machine learning remain uncertain but could include flaws in the decisions, predictions, outputs or analysis such technologies produce and subjecting us to competitive harm, legal liability, heightened regulatory scrutiny and brand or reputational harm.
Our ability to adopt new technologies may be inhibited by the emergence of industry-wide standards, a changing legislative and regulatory environment, an inability to develop appropriate governance and controls, a lack of internal product and engineering expertise, resistance to change from Card Members, merchants or service providers, lack of appropriate change management processes or the complexity of our systems. In addition, our adoption of new technologies and our introduction of new products and services may increase operational complexity and risk, and expose us to new or enhanced risks, particularly in areas where we have less experience or our existing governance and control systems may be insufficient, which could require us to make substantial expenditures or subject us to legal liability, heightened regulatory scrutiny and brand or reputational harm.We may not be successful in realizing the benefits associated with our acquisitions, strategic alliances, joint ventures and investment activity, and our business and reputation could be materially adversely affected.We have acquired a number of businesses and have made a number of strategic investments, and continue to evaluate potential transactions. There is no assurance that we will be able to successfully identify suitable candidates, value potential investment or acquisition opportunities accurately, negotiate acceptable terms for those opportunities, or complete proposed acquisitions and investments. The process of integrating an acquired company, business or technology could create unforeseen operating difficulties and expenditures, including in integrating systems and personnel or further developing the acquired business or technology, result in unanticipated liabilities, including legal claims, violations of laws, commercial disputes and information security vulnerabilities or breaches (including from not integrating the acquired company, business or technology quickly or appropriately, from activities that occurred prior to the acquisition, from inadequate systems or controls of the acquired company, and from exposure to third party relationships of the acquired company or business or new laws and regulations), and harm our business generally. Expanding to new businesses, geographies or customer types through acquisitions may subject us to new risks and we may not have the relevant expertise or business structure to achieve the desired results. It may take us longer than expected to fully realize the anticipated benefits of these transactions, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could materially adversely affect our business and operating results, including as a result of write-downs of goodwill and other intangible assets.
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Joint ventures, including our joint ventures in China, the Middle East and Switzerland, and minority investments in companies such as GBTG inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the joint venture or minority investment, including as a result of being subject to different laws or regulations. Joint ventures and other partnerships or minority investments operating in foreign jurisdictions may also face risks from adverse regulatory actions, which could adversely affect their operations or our investment. In addition, we may be dependent on joint venture partners, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours and we have been and may in the future be involved in litigation with our joint venture partners and other shareholders and parties related to the joint ventures and investments. We have commercial arrangements with GBTG, including, among other things, a long-term trademark license agreement pursuant to which GBTG uses select American Express marks. GBTG also supports certain of our strategic partnerships and our Commercial Services business. Business decisions or other actions or omissions of a joint venture partner, other shareholders or management of our joint ventures and companies in which we have minority investments may adversely affect the value of our investment or any commercial benefit to us from the relationship, result in litigation or regulatory action against us and otherwise damage our reputation and brand. In addition, trade secrets and other proprietary information we may provide to a joint venture may become available to third parties beyond our control. The ability to enforce intellectual property and contractual rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions.Additionally, from time to time we may decide to divest certain businesses or assets. These divestitures may involve significant uncertainty and execution complexity, which may cause us not to achieve our strategic objectives, realize expected cost savings or obtain other benefits from the divestiture and may result in unexpected losses of colleagues or harm to our brand, customers or other partners. Further, during the pendency of a divestiture, we may be subject to risks such as that the transaction may not close or the business to be divested may decline, and if a divestiture is not completed, we may not be able to find another acquiror on similar terms.
Operational and Compliance/Legal Risks
We may not be able to effectively manage the operational and compliance risks to which we are exposed.We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment, including failures to comply with laws and regulations as well as impacts from relationships with third parties. Operational risk includes, among others, the risk that error or misconduct could result in a material financial misstatement, a failure to monitor a third party’s compliance with regulatory or legal requirements, a failure to adequately monitor and control access to, or use of, data in our systems we grant to third parties or a failure to satisfy our obligations to our customers with respect to our products and services (e.g., rewards and benefits). As processes or organizations are changed or become more complex, we grow in size, new products and services are introduced, such as new lending features, banking products, dining capabilities and digital collectibles, or we become subject to more stringent or complicated regulatory requirements, we may not identify or address new operational risks. Through human error, fraud or malfeasance, conduct risk can result in harm to customers, legal liability, fines, sanctions, customer remediation and brand damage.
Compliance risk arises from violations of, or failure to conform or comply with, laws, rules, regulations, internal policies and procedures and ethical standards. We need to continually update and enhance our control environment to address operational and compliance risks, and our control environment and related systems have in certain instances not sufficiently detected, and may in the future not sufficiently detect, errors or omissions. Operational and compliance failures, deficiencies in our control environment or an inability to maintain high standards of business conduct can expose us to reputational and legal risks as well as fines, civil money penalties or payment of damages and can lead to diminished business opportunities and diminished ability to expand key operations.A major information or cybersecurity incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our products and services.
We and third parties collect, process, transfer, host, store, analyze, retain, provide access to and dispose of account information, payment transaction information, and certain types of personally identifiable and other information pertaining to our customers and colleagues in connection with our cards and other products and in the normal course of our business.Global financial institutions like us, as well as our customers, colleagues, regulators, service providers and other third parties, have experienced a significant increase in information security and cybersecurity risk in recent years and will likely continue to be the target of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing, impersonation and identity takeover attempts), artificial intelligence-assisted deepfake attacks and disinformation campaigns, corporate espionage, hacking, website defacement, denial-of-service attacks, exploitation of vulnerabilities and other attacks and similar disruptions from the misconfiguration or unauthorized use of or access to computer systems and company accounts. These threats have arisen from external parties, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities. There are a number of motivations for cyber threat actors, including criminal activities such as fraud, identity theft and ransom, corporate or nation-state espionage, political agendas, public embarrassment with the intent to cause financial or reputational harm, intent to disrupt information technology systems and supply chains, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites. Cyber threat actors, including state-sponsored and nation state actors, have rapidly evolved their techniques and increasingly utilize advanced capabilities, including the integration of advanced forms of artificial intelligence and other new technology, which can increase the efficacy, severity, frequency and ease of execution of cyberattacks.29
Table of ContentsOur and our partners’ networks and systems are subject to constant attempts to disrupt business operations and capture, destroy, manipulate or expose various types of information relating to corporate trade secrets, customer information (including Card Member, travel and loyalty program data), colleague information and other sensitive business information (including acquisition activity, non-public financial results and intellectual property). For example, we and other U.S. financial services providers have been the target of attacks, such as denial of service attacks, social engineering and the impersonation of current or prospective employees and contractors. We develop and maintain systems and processes aimed at detecting and preventing information security and cybersecurity incidents and fraudulent activity, including our cyber crisis response procedures, which require significant investment, maintenance and ongoing monitoring and updating as technologies and regulatory requirements change, new vulnerabilities and exploits are discovered and as efforts to overcome security measures become more sophisticated.
Despite our efforts and the efforts of third parties that process, transmit or store our data and data of our customers and colleagues or support our operations, such as service providers, merchants and regulators, the possibility of information, operational and cybersecurity incidents, malicious social engineering, password mismanagement, corporate espionage, fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will evolve as new and emerging technology is deployed by threat actors, including the use of artificial intelligence and quantum computing, and we increasingly use platforms that are outside of our network and control environments. For example, we are aware that certain of our third-party service providers and joint ventures have been the victims of ransomware and other cyberattacks, in some instances that affected our data or services provided to us. In addition, recently introduced products and services, such as checking accounts and non-card lending, may lead to an increase in the number or types of cyberattacks and our exposure to fraud and other malfeasance. Risks associated with such incidents and activities include theft of funds and other monetary loss, disruption of our operations and the unauthorized disclosure, release, gathering, monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other information (including account data information). An incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered. We are subject to varied cybersecurity regulations and incident reporting requirements, which could require us to disclose incidents that may not have been resolved or fully investigated at the time of disclosure, leading to customer confusion, regulatory scrutiny and negative publicity and exacerbating risks related to the incident itself. Our ability to address incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies.
Information, operational or cybersecurity incidents, fraudulent activity and other actual or perceived failures to maintain confidentiality, integrity, availability of services and data, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory investigations and intervention (such as mandatory card reissuance), consent decrees, increased litigation (including class action litigation), response costs (including notification and remediation costs), fines, negative assessments of us and our subsidiaries by banking regulators and rating agencies, reputational and financial damage to our brand, negative impacts to our partner relationships, and reduced usage of our products and services, all of which could have a material adverse impact on our business. The disclosure of sensitive company information could also undermine our competitive advantage and divert management attention and resources.
Successful cyberattacks, data breaches, disruptions or other incidents related to the actual or perceived failures to maintain confidentiality, integrity, availability of services and data, privacy and/or security at other large financial institutions, large retailers, travel and hospitality companies, government agencies or other market participants, whether or not we are impacted, could lead to a general loss of customer confidence that could negatively affect us, including harming the market perception of the effectiveness of our security measures or harming the reputation of the financial system in general, which could result in reduced use of our products and services. Such events could also result in legislation and additional regulatory requirements. Although we maintain cyber insurance, there can be no assurance that liabilities or losses we may incur will be covered under such policies or that the amount of insurance will be adequate.The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations.We rely extensively on our information technology systems and those of our third parties, including our transaction authorization, clearing and settlement systems, and data centers, which have experienced and may continue to experience service disruptions or degradation that may result from technology malfunction, sudden increases in processing or other volumes, natural disasters and weather events, fires, accidents, technology change management issues, power outages, internet outages, telecommunications failures, fraud, denial-of-service, ransomware and other cyberattacks, inadequate infrastructure in lesser-developed markets, technology capacity management issues, terrorism, computer viruses, vulnerabilities or failures in hardware or software, physical or electronic break-ins, or similar events. Due to the interconnectivity and complexity of information systems and their reliance on common systems, software and vendors, disruptions or degradations have had, and will likely continue to have, wide-reaching consequences, including the potential to disrupt the overall financial system and other key systems in the global economy. Service disruptions or degradations impacting us or our partners can prevent access to online services and account information, compromise or limit access to company or customer data, impede or prevent transaction processing, communications to customers and financial reporting, disrupt ordinary business operations, result in contractual penalties or obligations, trigger regulatory reporting obligations, and lead to regulatory investigations and fines, increased regulatory oversight, and litigation (including class action litigation). Any such service disruption or degradation could adversely affect the perception of the reliability of our products and services and materially adversely affect our overall business, reputation and results of operations.Our business is subject to evolving and comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition.We face significantly heightened regulatory expectations and scrutiny in the U.S. and globally, which significantly affects our business and requires continual enhancement of our compliance efforts. Supervision efforts and the enforcement of existing laws30
Table of Contentsand regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with Card Members, partners, merchants, service providers and other third parties. New laws or regulations could similarly affect our business, increase the costs and complexity of doing business, impact what we are able to charge for, or offer in connection with, our products and services, impose conflicting obligations, and require us to change certain of our business practices and invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition. Political developments can result in legislative and regulatory uncertainty and changes to supervisory and enforcement priorities. In addition, legislators and regulators around the world are aware of each other’s approaches to the regulation of the financial services industry. Consequently, a development in one country, state or region may influence regulatory approaches in another.
If we fail to satisfy regulatory requirements or maintain our financial holding company status, our financial condition and results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions (such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which could compromise our competitive position. Additionally, our banking regulators have wide discretion in the examination and the enforcement of applicable banking statutes and regulations and may restrict our ability to engage in certain business activities or acquisitions or require us to maintain more capital. In 2024, we became a Category III firm for purposes of the U.S. federal bank regulatory agencies’ tailoring framework, resulting in us becoming subject to heightened regulatory expectations and more stringent regulatory requirements. As we continue to grow, these expectations and requirements may further increase, such as if we become a Category II firm, which may increase our compliance costs and adversely affect our business.
Legislators and regulators continue to focus on the operation of card networks, including interchange fees paid to card issuers in payment networks such as Visa and Mastercard, network routing practices and the fees merchants are charged to accept cards. While in some cases our business is subject to exemptions related to certain of these regulations, there is no guarantee that such exemptions will continue to be available and even where we are not directly regulated, regulation of bankcard fees significantly negatively impacts the discount revenue derived from our business, including as a result of downward pressure on our discount rate from decreases in competitor pricing in connection with caps on interchange fees. In some cases, regulations also extend, or may extend, to certain aspects of our business, such as network and cobrand arrangements, new products or services we may offer, or the terms of card acceptance for merchants, including terms relating to non-discrimination and honor-all-cards. For example, we have exited our network licensing businesses in the EU and Australia as a result of regulation in those jurisdictions. In addition, there is uncertainty as to when or how interchange fee caps and other provisions of payments legislation might apply when we work with cobrand partners and agents in the EU. See “Supervision and Regulation — Payments Regulation” under “Business” for more information. Given differing interpretations by regulators and participants in cobrand arrangements, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU. In addition, a number of federal and state laws to regulate various aspects of network operations are being considered or have passed, including regarding information associated with electronic transactions (such as the use of specific merchant categories codes or limitations on the use of transaction data) and pricing of electronic transactions (such as interchange fees on sales tax or gratuities).
Legislators and regulators also continue to focus on consumer protection, including product design and pricing constructs, account management and security, credit bureau reporting, disclosure rules, marketing and debt collection practices. This focus has included fees associated with card and banking products, such as a rule issued by the CFPB related to credit card fees for late payments (which is currently stayed); interest rates, such as recent proposals to cap credit card interest rates; rewards programs, such as the recent inquiries by the CFPB and DOT focused on credit card and airline rewards programs; and factors considered by financial institutions in providing services, such as “fair access” laws. Any new requirements or increased enforcement of existing requirements could materially and adversely impact our revenue growth and profitability, including, as a result of increased scrutiny of our pricing, underwriting and account management practices; the imposition of fines and customer remediation; higher compliance costs; reputational harm; restrictions on our ability to issue cards, appropriately price for the value of our products or work with certain business partners; and changes to our business practices generally.
We are subject to significant supervision and regulation with respect to compliance with AML/CFT laws, sanctions regimes and anti-corruption laws in numerous jurisdictions. As regulators increase their focus in these areas, new technologies such as digital currencies develop, near real-time money movement solutions are adopted, we introduce new products like checking accounts and geopolitical tensions increase, we face increased costs related to oversight, supervision and potential fines. Our AML/CFT, sanctions and anti-corruption compliance programs have become the subject of heightened scrutiny, and we are working to make enhancements to our existing programs, policies and procedures and to identify and remediate deficiencies. For example, we recently voluntarily reported certain transactions and accounts to OFAC, some of which related to Iran, as described in “Supervision and Regulation — Anti-Money Laundering, Countering the Financing of Terrorism, Economic Sanctions and Anti-Corruption Compliance” under “Business.” Errors, failures or delays in complying with AML/CFT, sanctions and anti-corruption laws, deficiencies in our related compliance programs or association of our business with money laundering, terrorist financing, tax fraud or other illicit activities or sanctioned persons, entities, governments or countries can give rise to significant supervisory, criminal and civil proceedings and lawsuits, which could result in significant penalties and forfeiture of assets, loss of licenses or restrictions on business activities, or other enforcement actions, and our reputation may suffer due to our customers’ association with certain countries, persons or entities or the existence of any such transactions. Additionally, our AML/CFT, sanctions and anti-corruption compliance programs may limit our ability to pursue certain business opportunities or affect our relationships with certain partners, service providers and other third parties.See “Supervision and Regulation” under “Business” for more information about certain laws and regulations to which we are subject and their impact on us.31
Table of ContentsLitigation and regulatory actions could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business and results of operations.At any given time, we are involved in a number of legal proceedings, including class action lawsuits, mass arbitrations and similar actions. Many of these actions include claims for substantial compensatory or punitive damages and require us to incur significant costs for legal representation, arbitration fees or other legal or related services. While we have historically relied on our arbitration clause in agreements with customers to limit our exposure to class action litigation, there can be no assurance that we will continue to be successful in enforcing our arbitration clause in the future, including as a result of legal challenges to, and new regulations affecting, our arbitration provisions, and claims of the type we previously arbitrated could be subject to the complexities, risks and costs associated with class action cases. The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions. Given the inherent uncertainties involved in litigation, and the very large or indeterminate damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate liability we may incur from litigation.We expect that financial institutions, such as us, will continue to face significant regulatory scrutiny, with regulators taking formal enforcement actions against financial institutions in addition to addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on our activities, among other limitations, that could adversely affect our business. In addition, a violation of law or regulation by another financial institution could give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us. Further, a single event may give rise to numerous and overlapping investigations and proceedings. External publicity concerning investigations can increase the scope and scale of investigations and lead to further regulatory inquiries.We are also involved at any given time with governmental and regulatory inquiries, investigations and proceedings. Regulatory scrutiny has continued to increase in a number of areas, and regulatory action could subject us to significant fines, penalties or other requirements resulting in Card Member reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our reputation and our brand, all of which could materially adversely affect our business and results of operations. For example, as previously disclosed, we entered into agreements to resolve governmental investigations related to historical sales practices for certain U.S. small business customers, which are described in more detail in Note 12 to the “Consolidated Financial Statements.” In addition, we are cooperating with ongoing regulatory inquiries concerning our rewards and benefits programs, as described in “Supervision and Regulation” under “Business.”Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, changes to our merchant agreements and/or business practices, substantial monetary damages and damage to our reputation and brand.We are, and have been in the past, a defendant in a number of actions, including legal proceedings, arbitrations and proposed class actions, challenging certain provisions of our card acceptance agreements. See Note 12 to the “Consolidated Financial Statements” for a description of certain outstanding legal proceedings.
An adverse outcome in these proceedings could have a material adverse effect on our business and results of operations, require us to change our merchant agreements in a way that could expose our cards to increased merchant steering and other forms of discrimination that could impair the Card Member experience, result in additional litigation and/or arbitrations, impose substantial monetary damages and damage our reputation and brand. Even if we were not required to change our merchant agreements, changes in Visa’s and Mastercard’s policies or practices as a result of legal proceedings, lawsuit settlements or regulatory actions pending against them could result in changes to our business practices and materially and adversely impact our profitability. For example, in 2024 Visa and Mastercard proposed a lawsuit settlement agreement that would have, among other things, required reductions and caps on interchange fees and streamlined requirements for merchants who wish to impose a surcharge on credit transactions. While the settlement agreement was not approved by the court, Visa and Mastercard may ultimately agree or be subject to changes in policies or practices that result in greater surcharging generally or downward pressure on our merchant discount rates from decreases in competitor pricing in connection with reductions and caps on interchange fees.We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services integral to the operations of our businesses. These third parties may act in ways that could materially harm our business.
We rely on third-party service providers, cobrand partners, merchants, affiliate marketing firms, processors, aggregators, network partners and other third parties for services that are integral to our operations and are subject to the risk that activities of such third parties may adversely affect our business. As outsourcing, specialization of functions, third-party digital services and technology innovation within the payments industry increase (including with respect to mobile technologies, tokenization, big data, artificial intelligence and cloud-based solutions), more third parties are involved in processing card transactions, handling our data and supporting our operations. For example, we rely on third parties for the timely transmission of accurate information across our global network, card acquisition and provision of services to our customers.We have experienced in certain limited circumstances and may continue to experience disruptions or other events at our third parties or our third parties’ service providers, including their failure to fulfill their obligations and the information, cybersecurity and operational incidents described above. Such disruptions or other events could interrupt or compromise the quality of our services to customers, impact the confidentiality, integrity, availability and security of our data, lead to fraudulent transactions on our cards or other products, impact our business, cause brand or reputational damage, and lead to costs associated with responding to such a disruption, including notification and remediation costs, costs to switch service providers or move operations in house, regulatory investigations and fines and increased regulatory oversight and litigation. Third parties may face similar or greater risks as us, including as a result of their relationship with us; however, they may be less prepared to mitigate those risks and may be32
Table of Contentstargeted by bad actors as a result, which can result in greater disruptions and other risk events. Third parties may also act in other ways that are inconsistent with our interests or contrary to our strategic or technological initiatives, such as ceasing to provide data to us or using our data in a way that was not authorized or diminishes the value of the transaction data we receive through our integrated payments platform.
The management and oversight of an increasing number of third parties increases our operational complexity and governance challenges and decreases our control. Additionally, third-party oversight and practices related to third parties such as outsourcing have become subject to heightened regulatory scrutiny both in the United States and internationally, including in some cases restricting or requiring approval for outsourcing. A failure to exercise adequate oversight over third parties, including compliance with service level agreements or regulatory or legal requirements, could result in regulatory actions, fines, litigation, sanctions or economic and reputational harm to us. In addition, we may not be able to effectively monitor or mitigate operational risks relating to our third-party providers’ service providers. We are also exposed to the risk that a service disruption at a service provider common to our third parties could impede their ability to provide services to us. Notwithstanding any attempts to diversify our reliance on third parties, in certain cases there may be limited alternatives or high costs for diversification, and we also may not be able to effectively mitigate operational risks relating to the service providers of our third-party providers.
Our success is dependent on maintaining a culture of integrity and respect and upon our executive officers and other key personnel, and misconduct by or loss of personnel could materially adversely affect our business.
We rely upon our colleagues not only for business success, but also to act with integrity and promote a culture of respect. To the extent our colleagues behave in a manner that does not comport with our company’s values, the consequences to our brand and reputation could be severe and could negatively affect our financial condition and results of operations.
The market for qualified, highly motivated individuals with diverse perspectives is highly competitive and we may not be able to attract and retain such individuals. The unexpected loss of key personnel could disrupt our business and have an adverse impact on our future performance. Changes in immigration and work permit laws and regulations or the administration or enforcement of such laws or regulations or other changes in the legal or regulatory environment can also impair our ability to attract and retain qualified personnel, or to employ colleagues in the location(s) of our choice. Our compensation practices are subject to review and oversight by the Federal Reserve and the compensation practices of AENB are subject to review and oversight by the OCC. This regulatory review and oversight could further affect our ability to attract and retain our executive officers and other key personnel. Our inability to attract, develop and retain highly skilled, motivated and diverse personnel could materially adversely affect our business and our culture.
Regulation in the areas of privacy, data protection, data management, resiliency, data transfer, third party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity could increase our costs and affect or limit our business opportunities and how we collect and/or use personal information.
Legislators and regulators in the United States and other countries in which we operate are increasingly adopting or revising privacy, data protection, data management, resiliency, data transfer, third party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity laws, including data localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate privacy, data protection, data management, incident management, resiliency, third party management, data transfer, security controls, account access mechanisms and controls related to artificial intelligence and machine learning are in place. Additionally, new laws and regulations related to automated decision making, artificial intelligence and machine learning as well as the application of existing laws and regulations to these technologies may restrict or impose burdensome and costly requirements on our ability to use them or impact other aspects of our business.
Compliance with current or future laws in the aforementioned areas could significantly impact our business operations, including our collection, use, sharing, retention and safeguarding of consumer and/or colleague information and could restrict our ability to fully maximize our integrated payments platform or provide certain products and services or work with certain service providers, which could materially and adversely affect our profitability. Our failure to comply with such laws or to maintain sufficient governance and control structures could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, customer attrition, decreases in the use or acceptance of our cards and damage to our reputation and our brand. In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection, data management, artificial intelligence and machine learning and information security and cybersecurity in the United States, the EU and various other countries in which we operate and our data protection and governance programs have become the subject of heightened scrutiny.
For more information on regulatory and legislative activity in this area, see “Supervision and Regulation — Privacy, Data Protection, Data Management, Artificial Intelligence, Resiliency, Information Security and Cybersecurity” under “Business.”If we are not able to protect our intellectual property, or successfully defend against any infringement or misappropriation assertions brought against us, our revenue and profitability could be negatively affected.We rely on a variety of measures to protect our intellectual property and control access to, and distribution of, our trade secrets and other proprietary information. These measures may not prevent infringement of our intellectual property rights or misappropriation of our proprietary information and a resulting loss of competitive advantage. The ability to enforce intellectual property rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions. In addition, competitors or other third parties may allege that our products, systems, processes or technologies infringe on their intellectual property rights. Given the complex, rapidly changing and competitive technological and business environments in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a future assertion of an infringement or33
Table of Contentsmisappropriation claim against us could cause us to lose significant revenues, incur significant defense, license, royalty or technology development expenses, and/or pay significant monetary damages. Furthermore, given intellectual property ownership and license rights surrounding artificial intelligence, such as generative artificial intelligence, are currently not fully addressed by courts or regulators, we may not be able to protect our intellectual property against infringing use and our use or adoption of artificial intelligence may result in exposure to claims by third parties.
Tax legislative initiatives or assessments could adversely affect our results of operations and financial condition.
We are subject to income and other taxes in the United States and in various foreign jurisdictions. The laws and regulations related to tax matters are extremely complex, require significant judgment and are subject to varying interpretations. Although management believes our positions are reasonable, they are subject to challenge by the Internal Revenue Service in the United States and by tax authorities in other jurisdictions in which we conduct business operations, which could have an adverse impact on our tax liabilities. Refer to Note 20 to the “Consolidated Financial Statements” for information on the U.S. federal income tax audit of transfer pricing arrangements between our U.S. and foreign subsidiaries.
We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain transactions. While we believe we comply with all applicable VAT and other tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or apply existing laws and regulations more broadly, which could result in a significant increase in liabilities for taxes and interest in excess of accrued liabilities.
Legislative action or inaction in the countries in which we have operations could increase our effective tax rate. For example, new guidelines issued by the Organization for Economic Cooperation and Development (OECD) will impact how multinational enterprises (MNEs) are taxed on their global profits. In particular, the OECD’s guidelines on a global minimum tax of 15 percent will impact the effective tax rate for many MNEs. Many countries have already implemented these minimum tax guidelines, with effective dates commencing in 2024. We expect that these minimum tax guidelines in their current form would increase our effective tax rate in future years. Furthermore, various provisions of the Tax Cut and Jobs Act will expire in 2025 unless extended. As a result, U.S. Congress may seek to enact significant tax legislation in the new session of Congress, which could result in higher levels of U.S. tax on our global operations, increasing our effective tax rate.
Jurisdictions may also make changes related to the tax treatment of card transactions, such as imposing taxes on Card Member rewards or prohibiting interchange fees on sales tax, which could decrease the value we provide to customers and adversely impact our business.
Our operations, business, customers and partners could be adversely affected by climate-related risks.
There are increasing and rapidly evolving concerns over climate-related risks and related environmental sustainability and recovery matters. We face physical risks related to climate, including rising average global temperatures, rising sea levels and an increase in the frequency and severity of extreme weather events and natural disasters. Such events and disasters could disrupt our operations or the operations of customers or third parties on which we rely and could result in market volatility or negatively impact our customers’ spending behaviors or ability to pay outstanding loans. Additionally, we may face risks related to the transition to a low-carbon economy. Changes in consumer preferences, travel patterns and legal requirements could impact our revenues or expenses or otherwise adversely affect our business, our customers and partners.
We may not be able to effectively identify, measure or control our exposure to climate-related risks, particularly given that the timing, nature and severity of the impacts of these risks may not be predictable. We could be criticized for the timing, scope or nature of our climate-related initiatives and goals. There can be no assurance that we will achieve these goals, which depend in part on third-party performance, data that is outside of our control and methodologies that may evolve over time. We could be required to change our business, management practices and partnerships, incur expenses from changes to our technology, operations, products and services, and experience reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced stakeholder confidence, due to our response or perceived lack of response to climate and environmental issues.
Model, Credit, Market and Funding & Liquidity Risks
Our use of models to manage risk and make business decisions may not be effective.
We use models and automation throughout our business, including to inform and support decision making, manage risks and estimate financial values. Although we have a governance framework for model development and independent model validation, the modeling methodology or key assumptions could be erroneous or the models could be misused. In addition, issues with the quality or effectiveness of our data aggregation and validation procedures, as well as the quality and integrity of data inputs, could result in ineffective or inaccurate model outputs and reports. For example, models based on historical data sets might not be accurate predictors of future outcomes, such as because of changes in the credit profile of our Card Members, and they may not be able to predict future outcomes. Additionally, we increasingly use models that leverage artificial intelligence, which are subject to additional risks such as biased or inaccurate results or lowered interpretability. Our models also may not be able to function properly in the current geopolitical and macroeconomic environment given the lack of recent precedent. Certain models, such as models for credit loss accounting under Current Expected Credit Loss (CECL) and Membership Rewards liability, require us to make difficult, subjective and complex judgments, and utilize forward-looking information. If our business decisions or financial estimates are based on incorrect or misused models and assumptions or we fail to manage data inputs effectively and to aggregate or analyze data in an accurate and timely manner, our results of operations and financial condition may be materially adversely affected.34
Table of ContentsWe are exposed to credit risk and trends that affect Card Member spending and the ability of customers and partners to pay us, which could have a material adverse effect on our results of operations and financial condition.
We are exposed to both individual credit risk, principally from consumer and small business Card Member loans and receivables, and institutional credit risk, principally from corporate Card Member loans and receivables, merchants, network partners, loyalty coalition partners and treasury and investment counterparties. Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors, such as recession, unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses. A customer’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but also by a customer’s other payment obligations, and increasing leverage can result in a higher risk that customers will default or become delinquent in their obligations to us.
We rely principally on the customer’s creditworthiness for repayment of loans or receivables and therefore often have no other recourse for collection. Our ability to assess creditworthiness may be impaired as a result of changes in our underwriting practices or if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could have a negative impact on our results of operations. This may be exacerbated to the extent information we have historically relied upon to make credit decisions does not accurately portray a customer’s creditworthiness, including as a result of the current interest rate and economic conditions. Further, our pricing strategies, particularly for new lending features and non-card lending products, may not offset the negative impact on profitability caused by increases in delinquencies and losses; thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of loans and receivables, these estimates may not be accurate. In addition, the information we use in managing our credit risk may be inaccurate or incomplete.
Rising delinquencies and rising rates of bankruptcy are often precursors of future write-offs and may require us to increase our reserve for credit losses. Higher write-off rates and the resulting increase in our reserves for credit losses adversely affect our profitability and the performance of our securitizations, and may increase our cost of funds.
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries, countries and regions that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, minimum payment regulations and re-age guidance) or changes in customer behavior (such as the increased use of debt settlement companies). Increased credit risk, whether resulting from underestimating the credit losses inherent in our portfolio of loans and receivables, deteriorating economic conditions (particularly in the United States, as U.S. Card Members were responsible for approximately 88 percent of our total Card Member loans outstanding as of December 31, 2024), increases in the level of loan balances, changes in our mix of business or otherwise, could require us to increase our provisions for losses and could have a material adverse effect on our results of operations and financial condition.Interest rate changes could materially adversely affect our earnings.We had net interest income of approximately $15.5 billion for the year ended December 31, 2024. If the rate of interest we pay on our borrowings increases more or decreases less than the rate of interest we earn on our loans, our net interest yield, and consequently our net interest income, could decrease. We expect the rates we pay on our deposits will change as benchmark interest rates change. For example, the Federal Reserve and other central banks have raised interest rates in response to heightened inflationary pressures. In addition, interest rate changes may affect customer behavior, such as impacting the loan balances Card Members carry on their credit cards or their ability to make payments as higher interest rates lead to higher payment requirements, further impacting our results of operations. For a further discussion of our interest rate risk, see “Risk Management ― Market Risk Management Process” under “MD&A.”We are subject to capital adequacy and liquidity rules, and if we fail to meet these rules, our business would be materially adversely affected.Failure to meet current or future capital or liquidity requirements could compromise our competitive position and could result in restrictions imposed by the Federal Reserve, or the OCC with respect to AENB, including limiting our ability to pay dividends, repurchase our capital stock, invest in our business, expand our business or engage in acquisitions. Some elements of the capital and liquidity regimes are not yet final and certain developments could significantly impact the requirements applicable to financial institutions. For example, in 2023 the U.S. federal bank regulatory agencies proposed capital rules that would result in significantly higher regulatory capital requirements for us and rules that would require us and AENB to issue and/or maintain minimum amounts of eligible long-term debt with specific terms. In addition, it may be necessary for us to hold additional capital because of an increase in the SCB requirement based on results from a supervisory stress test.
Compliance with capital adequacy and liquidity rules requires a material investment of resources. An inability to meet regulatory expectations regarding our compliance with applicable capital adequacy and liquidity rules or supervisory expectations regarding capital and liquidity risk management capabilities and practices may also negatively impact the assessment of us and AENB by federal banking regulators. Additionally, we are subject to more stringent capital and liquidity requirements as a result of becoming a Category III firm, which may further increase if we grow to become a Category II firm.For more information on capital adequacy requirements, see “Supervision and Regulation — Capital and Liquidity Regulation” under “Business.”35
Table of ContentsWe are subject to restrictions that limit our ability to pay dividends and repurchase our capital stock. Our subsidiaries are also subject to restrictions that limit their ability to pay dividends to us, which may adversely affect our liquidity.
We are limited in our ability to pay dividends and repurchase capital stock by our regulators, who have broad authority to prohibit any action that would be considered an unsafe or unsound banking practice. We are subject to a requirement to submit capital plans to the Federal Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock. As part of the capital planning and stress testing process, our proposed capital actions are assessed against our ability to satisfy applicable capital requirements in the event of a stressed market environment. If we fail to satisfy applicable capital requirements, including the stress capital buffer, our ability to undertake capital actions may be restricted.
Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last preceding dividend period of our preferred stock.
We rely on dividends from our subsidiaries for liquidity, and such dividends may be limited by law, regulation or supervisory policy. For example, AENB is subject to various statutory and regulatory limitations on its declaration and payment of dividends. These limitations may hinder our ability to access funds we may need to make payments on our obligations, make dividend payments or otherwise achieve strategic objectives.
Any future reduction or elimination of our common stock dividend or share repurchase program could adversely affect the market price of our common stock and market perceptions of American Express. For more information on bank holding company and depository institution dividend restrictions, see “Supervision and Regulation — Stress Testing and Capital Planning” and “— Dividends and Other Capital Distributions” under “Business,” as well as “Consolidated Capital Resources and Liquidity — Dividends and Share Repurchases” under “MD&A” and Note 22 to the “Consolidated Financial Statements.”
Adverse market conditions may significantly affect our access to, and cost of, capital and ability to meet liquidity needs.Our ability to obtain financing in the debt capital markets for unsecured term debt and asset securitizations is dependent on financial market conditions. Disruptions, uncertainty or volatility across the financial markets, as well as adverse developments affecting our competitors and the financial industry generally, could negatively impact market liquidity and limit our access to funding required to operate our business. Such market conditions may also limit our ability to replace, in a timely manner, maturing liabilities, satisfy regulatory capital requirements and access the funding necessary to grow our business. In some circumstances, we may incur an unattractive cost to raise capital, which could decrease profitability and significantly reduce financial flexibility. Additional factors affecting the extent to which we may securitize loans and receivables in the future include the overall credit quality of our loans and receivables, the costs of securitizing our loans and receivables, the demand for credit card asset-backed securities and the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally. Our liquidity and cost of funds would also be adversely affected by the occurrence of events that could result in the early amortization of our existing securitization transactions. For a further discussion of our liquidity and funding needs, see “Consolidated Capital Resources and Liquidity” under “MD&A.”Any reduction in our credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
Ratings of our long-term and short-term debt and deposits are based on a number of factors, including financial strength, as well as factors not within our control, including conditions affecting the financial services industry, and the macroeconomic environment. Our ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding. Our ability to raise funding through the securitization market also depends, in part, on the credit ratings of the securities we issue from our securitization trusts. If we are not able to satisfy rating agency requirements to confirm the ratings of our asset-backed securities, it could limit our ability to access the securitization markets.Adverse currency fluctuations and foreign exchange controls could decrease earnings we receive from our international operations.
During 2024, approximately 22 percent of our total revenues net of interest expense were generated from activities outside the United States. We are exposed to foreign exchange risk from our international operations, and accordingly the revenue we generate outside the United States is subject to unpredictable fluctuations if the values of other currencies change relative to the U.S. dollar, which could have a material adverse effect on our results of operations.
Political and economic conditions could continue to cause changes in the values of currencies and a further strengthening of the U.S. dollar will negatively impact our net revenues. Substantial and sudden devaluation of local Card Members’ currency can also affect their ability to make payment to us. Foreign exchange regulations or capital controls might restrict or prohibit the conversion of other currencies into U.S. dollars or our ability to transfer them and the availability of foreign exchange could further impact our results of operations.An inability to accept or maintain deposits due to market demand or regulatory constraints could materially adversely affect our liquidity position and our ability to fund our business.Our U.S. bank subsidiary, AENB, accepts deposits and uses the proceeds as a source of funding, with our direct retail deposits becoming a larger proportion of our funding over time. We continue to face strong competition with regard to deposits, and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances. To the extent we offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted. Additionally, a decrease in confidence in the soundness of us or in the banking sector more broadly, such as following the occurrence of bank failures, or in the level of insurance available on deposits may cause rapid deposit withdrawals or an unwillingness to maintain deposits with us,
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which could materially adversely affect us and our ability to fund our business. The use of social media and similar channels has the potential to intensify and accelerate such a decrease in confidence in soundness.Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on AENB’s capital levels. The FDIA’s brokered deposit provisions and related FDIC rules in certain circumstances prohibit banks from accepting or renewing brokered deposits and apply other restrictions, such as a cap on interest rates that can be paid. Additionally, our regulators can adjust applicable capital requirements at any time and have authority to place limitations on our deposit businesses. An inability to attract or maintain deposits in the future could materially adversely affect our ability to fund our business.
The value of our investments may be adversely impacted by economic, political or market conditions.Market risk includes the loss in value of portfolios and financial instruments due to adverse changes in market variables, which could negatively impact our financial condition. We have experienced realized and unrealized losses in our Amex Ventures ™ equity investments and may experience further losses in the future. As of December 31, 2024, we held approximately $1.2 billion of investment securities, primarily consisting of debt securities, and equity investments, including certain equity method investments, totaling approximately $2.0 billion. Negative market conditions, changes in valuations or increases in default rates or bankruptcies with respect to these investments, due to economic conditions, business performance or otherwise, could have a material adverse impact on the value of our investments, potentially resulting in impairment charges. Defaults, threats of defaults or economic disruptions, even in countries or territories in which we do not have material investment exposure, conduct business or have operations, could adversely affect us.
37Table of Contents
Item 7 · Management's Discussion & Analysis
+491 paragraphs −476 paragraphs ~476 changed
FY 2023-12-31 (earlier)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
We are a globally integrated payments company with four reportable operating segments: U.S. Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS) and Global Merchant and Network Services (GMNS). Corporate functions and certain other businesses and operations are included in Corporate & Other.
Our range of products and services includes:
• Credit card, charge card, banking and other payment and financing products• Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants• Network services• Other fee services, including fraud prevention services and the design and operation of customer loyalty programs
• Expense management products and services• Travel and lifestyle servicesOur various products and services are offered globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are offered through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams and direct response advertising.The following types of revenue are generated from our various products and services:• Discount revenue, our largest revenue source, represents the amount we earn and retain from the merchant payable for facilitating transactions between Card Members and merchants on payment products issued by American Express. The amount of fees charged for accepting our cards as payment, or merchant discount, varies with, among other factors, the industry in which the merchant conducts business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the card acceptance agreement between the merchant and us (e.g., local or global) and the transaction amount. In some instances, an additional flat transaction fee is assessed as part of the merchant discount, and additional fees may be charged such as a variable fee for “non-swiped” card transactions or for transactions using cards issued outside the United States at merchants located in the United States;• Interest income, principally represents interest earned on outstanding loan balances;
• Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account;• Service fees and other revenue, primarily represent service fees earned from merchants and other customers, travel commissions and fees, Card Member delinquency fees, foreign currency-related fees charged to Card Members, and income (losses) from our investments in which we have significant influence; and• Processed revenue, primarily represents revenues related to network partnership agreements, comprising royalties, fees and amounts earned for facilitating transactions on cards issued by network partners.Refer to the “Glossary of Selected Terminology” below for the definitions of certain key terms and related information appearing within this Form 10-K.NON-GAAP MEASURES
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included within this report constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.42Table of Contents
TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE
Years Ended December 31, Change Change(Millions, except percentages, per share amounts and where indicated) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Selected Income Statement DataTotal revenues net of interest expense $ 60,515 $ 52,862 $ 42,380 $ 7,653 14 % $ 10,482 25 %Provisions for credit losses4,923 2,182 (1,419) 2,741 # 3,601 #Total expenses45,079 41,095 33,110 3,984 10 7,985 24
Pretax income 10,513 9,585 10,689 928 10 (1,104) (10)
Income tax provision 2,139 2,071 2,629 68 3 (558) (21)
Net income 8,374 7,514 8,060 860 11 (546) (7)
Earnings per common share — diluted (a)
$ 11.21 $ 9.85 $ 10.02 $ 1.36 14 % $ (0.17) (2) %Selected Balance Sheet DataCash and cash equivalents $ 46,596 $ 33,914 $ 22,028 $ 12,682 37 % $ 11,886 54 %
Card Member receivables 60,411 57,613 53,645 2,798 5 3,968 7
Card Member loans 125,995 107,964 88,562 18,031 17 19,402 22
Customer deposits 129,144 110,239 84,382 18,905 17 25,857 31
Long-term debt $ 47,866 $ 42,573 $ 38,675 $ 5,293 12 % $ 3,898 10 %
Common Share Statistics (b)
Cash dividends declared per common share $ 2.40 $ 2.08 $ 1.72 $ 0.32 15 % $ 0.36 21 %Average common shares outstanding:Basic 735 751 789 (16) (2) % (38) (5) %
Diluted 736 752 790 (16) (2) % (38) (5) %Selected Metrics and RatiosNetwork volumes (Billions)
$ 1,680.1 $ 1,552.8 $ 1,284.2 $ 127 8 % $ 269 21 %
Billed business (Billions)
$ 1,459.6 $ 1,338.3 $ 1,089.8 $ 121 9 % $ 249 23 %Card Member loans and receivablesNet write-off rate — principal, interest and fees (c)
2.0 % 1.0 % 0.8 %
Net write-off rate — principal only - consumer and small business (c)(d)
1.8 % 0.9 % 0.7 %
30+ days past due as a % of total - consumer and small business (e)
1.3 % 1.1 % 0.7 %
Effective tax rate 20.3 % 21.6 % 24.6 %
Return on average equity (f)
31.5 % 32.3 % 33.7 %
Common Equity Tier 1 10.5 % 10.3 % 10.5 %# Denotes a variance of 100 percent or more(a) Represents net income, less (i) earnings allocated to participating share awards of $64 million, $57 million and $56 million for the years ended December 31, 2023, 2022 and 2021, respectively, (ii) dividends on preferred shares of $58 million, $57 million and $71 million for the years ended December 31, 2023, 2022 and 2021, respectively, and (iii) equity-related adjustments of $16 million related to the redemption of preferred shares for the year ended December 31, 2021. Refer to Note 16 and Note 21 to the “Consolidated Financial Statements” for further details on preferred shares and earnings per common share (EPS), respectively.
(b) Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP.
(c) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(d) A net write-off rate based on principal losses only is not available for corporate receivables due to system constraints.
(e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. Refer to Table 12 for 90+ days past billing metrics for corporate receivables.
(f) Return on average equity (ROE) is calculated by dividing (i) net income for the period by (ii) average shareholders’ equity for the period.
43Table of ContentsBUSINESS ENVIRONMENT
Our results for the year reflect the engagement and loyalty of our customers, the success of the investments we have made to refresh and expand our product offerings and our focus on effective risk management and expense discipline. The successful execution of our growth strategy, along with the strength of our premium customer base and differentiated business model, drove net income of $8.4 billion, or $11.21 per share, compared with net income of $7.5 billion, or $9.85 per share, a year ago.
Billed business, the most significant driver of our financial results, increased 9 percent year-over-year. Billed business growth was particularly strong in the first quarter, in part reflecting the negative impacts of the Omicron variant in the prior year, with a softer spend environment towards the end of the year. Goods & Services (G&S) spend increased 6 percent year-over-year. T&E spend grew by 19 percent on a full-year basis, reflecting ongoing demand from our premium customers, while airline spend growth slowed sequentially in the fourth quarter. USCS billed business grew by 10 percent year-over-year, with the largest portion of this growth coming from our Millennial and Gen-Z Card Members. ICS billed business grew by 17 percent year-over-year, driven by continued growth in spend across all regions and customer types outside the United States. CS billed business grew by 3 percent on a year-over-year basis, reflecting the continued modest growth from U.S. SME Card Members and decelerating growth for U.S. large and global corporate clients.
Total revenues net of interest expense increased 14 percent year-over-year, reflecting growth in all our revenue lines. The growth in billed business drove a 9 percent increase in Discount revenue, our largest revenue line. Net card fees increased 20 percent year-over-year, reflecting the high levels of new card acquisition and Card Member retention, as well as our cycle of product refreshes. Service fees and other revenues increased 11 percent year-over-year, driven in part by higher travel-related revenues. Net interest income increased 33 percent versus the prior year, primarily reflecting growth in our revolving loan balances, which moderated over the course of the year, as well as net yield expansion versus the prior year.
Total loans and Card Member receivables increased 13 percent year-over-year, as our Card Members continue to spend and rebuild balances. Provisions for credit losses increased, primarily driven by higher net write-offs and a higher net reserve build in the current year, reflecting the growth in total loans and higher delinquencies. Net write-off and delinquency rates remained best-in-class, supported by our premium global customer base, our strong focus on risk management and disciplined growth strategy.
Card Member rewards, Card Member services and Business development expenses are generally correlated to volumes or are variable based on usage and increased year-over-year primarily due to the growth in billed business and higher usage of travel-related benefits. Marketing expense decreased 4 percent year-over-year, primarily driven by lower levels of spend on customer acquisition. Operating expenses increased 8 percent year-over-year, primarily driven by higher compensation expense and technology costs to support business growth. We remain focused on driving marketing and operating expense efficiencies, while continuing to increase investments in our growth strategy.
During the year, we maintained our capital ratios within our current target range of 10 to 11 percent and returned $5.3 billion of capital to our shareholders in the form of share repurchases and common stock dividends. We plan to continue to return to shareholders the excess capital we generate while managing our CET1 capital ratio within our target range and supporting balance sheet growth. We also expect to increase the regular quarterly dividend on common shares outstanding by 17 percent beginning with the first quarter 2024 dividend declaration. Our robust capital, funding and liquidity positions provide us with significant flexibility to maintain a strong balance sheet.
On January 16, 2024, we announced that we signed an agreement to sell fraud prevention solutions provider Accertify Inc., a wholly owned subsidiary we acquired in 2010, and whose operations are reported within the GMNS segment. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2024. Upon closing, we expect to recognize a sizeable pre-tax gain, which will be recorded as a reduction to Other expense and is expected to be substantially reinvested back into our business.
Our performance continues to give us confidence in our business model and while we recognize the uncertainty of the geopolitical and macroeconomic environment, we remain committed to executing on our strategy to deliver sustainable and profitable long-term growth.See “Supervision and Regulation” under “Business” for information on legislative and regulatory changes that could have a material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for information on potential impacts of macroeconomic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business.44Table of Contents
CONSOLIDATED RESULTS OF OPERATIONSThe discussions in the “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the year ended December 31, 2023 compared to the year ended December 31, 2022, as presented in the accompanying tables. For a discussion of the financial condition and results of operations for 2022 compared to 2021, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 10, 2023.TABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY
Years Ended December 31, Change Change(Millions, except percentages) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021
Discount revenue $ 33,416 $ 30,739 $ 24,563 $ 2,677 9 % $ 6,176 25 %
Net card fees 7,255 6,070 5,195 1,185 20 875 17
Service fees and other revenue 5,005 4,521 3,316 484 11 1,205 36
Processed revenue 1,705 1,637 1,556 68 4 81 5
Total non-interest revenues 47,381 42,967 34,630 4,414 10 8,337 24
Total interest income 19,983 12,658 9,033 7,325 58 3,625 40
Total interest expense 6,849 2,763 1,283 4,086 # 1,480 #
Net interest income 13,134 9,895 7,750 3,239 33 2,145 28
Total revenues net of interest expense $ 60,515 $ 52,862 $ 42,380 $ 7,653 14 % $ 10,482 25 %# Denotes a variance of 100 percent or more
TOTAL REVENUES NET OF INTEREST EXPENSEDiscount revenue increased, primarily driven by an increase in billed business of 9 percent. See Tables 5 and 6 for more details on billed business performance.
Net card fees increased, primarily driven by growth in our premium card portfolios. See Table 5 for more details on proprietary cards-in-force and average fee per card.
Service fees and other revenue increased, primarily driven by foreign exchange related revenues associated with Card Member cross-currency spending and growth in delinquency fees.
Processed revenue increased, primarily driven by an increase in network partner volumes, partially offset by a decrease in volumes associated with the decommission of one of our alternative payment solutions. See Tables 5 and 6 for more details on processed volume performance.
Interest income increased, primarily driven by higher interest rates and growth in revolving loan balances.
Interest expense increased, primarily driven by higher interest rates paid on customer deposits.
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TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY
Years Ended December 31, Change Change(Millions, except percentages) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Card Member loansNet write-offs $ 2,486 $ 1,066 $ 879 $ 1,420 # % $ 187 21 %Reserve build (release) (a)1,353 448 (2,034) 905 # 2,482 #
Total 3,839 1,514 (1,155) 2,325 # 2,669 #Card Member receivablesNet write-offs 937 462 129 475 # 333 #
Reserve (release) build (a)
(57) 165 (202) (222) # 367 #
Total 880 627 (73) 253 40 700 #OtherNet write-offs — Other loans (b)
107 22 21 85 # 1 5
Net write-offs — Other receivables (c)
25 15 33 10 67 (18) (55)
Reserve build (release) — Other loans (a)(b)
67 7 (185) 60 # 192 #
Reserve build (release) — Other receivables (a)(c)
5 (3) (60) 8 # 57 95
Total 204 41 (191) 163 # 232 #Total provisions for credit losses$ 4,923 $ 2,182 $ (1,419) $ 2,741 # % $ 3,601 # %# Denotes a variance of 100 percent or more
(a) Refer to the “Glossary of Selected Terminology” below for a definition of reserve build (release).(b) Relates to Other loans of $7.1 billion, $5.4 billion and $2.9 billion less reserves of $126 million, $59 million and $52 million, as of December 31, 2023, 2022 and 2021, respectively.
(c) Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $3.7 billion, $3.1 billion and $2.7 billion, less reserves of $27 million, $22 million and $25 million as of December 31, 2023, 2022 and 2021, respectively.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was primarily driven by an increase in loans outstanding, higher delinquencies and deterioration in the macroeconomic outlook at that time, partially offset by a reduction in COVID-19 pandemic-driven reserves.
Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding.
Other provisions for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in non-card loans outstanding. The reserve build in the prior year was primarily driven by an increase in non-card loans outstanding, partially offset by improved credit performance.
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TABLE 4: EXPENSES SUMMARY
Years Ended December 31, Change Change(Millions, except percentages) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Card Member rewards$ 15,367 $ 14,002 $ 11,007 $ 1,365 10 % $ 2,995 27 %
Business development 5,657 4,943 3,762 714 14 1,181 31
Card Member services 3,968 2,959 1,993 1,009 34 966 48
Marketing 5,213 5,458 5,291 (245) (4) 167 3
Salaries and employee benefits 8,067 7,252 6,240 815 11 1,012 16Other, net6,807 6,481 4,817 326 5 1,664 35
Total expenses $ 45,079 $ 41,095 $ 33,110 $ 3,984 10 % $ 7,985 24 %EXPENSESCard Member rewards expense increased, primarily driven by increases in Membership Rewards and cash back rewards expenses, collectively, of $680 million and cobrand rewards expense of $685 million, all of which were primarily driven by higher billed business. The increase in Membership Rewards expense was also driven by a larger proportion of spend in categories that earn higher levels of rewards, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products.
The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded down) at both December 31, 2023 and 2022.
Business development expense increased, primarily due to increased partner payments driven by higher contractual rates and network volumes.
Card Member services expense increased, primarily due to higher usage of travel-related benefits.
Marketing expense decreased, primarily reflecting lower levels of spending on customer acquisitions.
Salaries and employee benefits expense increased, primarily driven by higher compensation costs reflecting the continued investment in our colleagues to support business growth and changes in the value of deferred compensation.
Other, net expenses increased, primarily driven by higher technology costs, foreign exchange losses related to the devaluation of the Argentine peso, a reserve associated with a merchant exposure for Card Member purchases and the FDIC special assessment described in “Supervision and Regulation — Other Banking Regulations” under “Business”, all of which were partially offset by lower net losses on Amex Ventures investments and lower professional services expenses.
INCOME TAXES
The effective tax rate was 20.3 percent and 21.6 percent for 2023 and 2022, respectively. The reduction in the effective tax rate primarily reflected changes in the geographic mix of income. The tax rates in both years reflected discrete tax benefits related to the resolution of prior-year tax items.
47Table of ContentsTABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION
Change ChangeYears Ended December 31, 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Network volumes (billions)$ 1,680.1 $ 1,552.8 $ 1,284.2 8 % 21 %
Billed business $ 1,459.6 $ 1,338.3 $ 1,089.8 9 23
Processed volumes $ 220.5 $ 214.5 $ 194.4 3 10Cards-in-force (millions)141.2 133.3 121.7 6 10
Proprietary cards-in-force 80.2 76.7 71.4 5 7Basic cards-in-force (millions)118.7 111.5 100.7 6 11
Proprietary basic cards-in-force 61.7 59.1 54.7 4 8Average proprietary basic Card Member spending (dollars)$ 24,059 $ 23,496 $ 20,392 2 15Average fee per card (dollars) (a)$ 92 $ 82 $ 74 12 % 11 %Discount revenue as a % of Billed business2.29% 2.30% 2.25%(a) Average fee per card is computed on an annualized basis based on proprietary Net card fees divided by average proprietary total cards-in-force.
TABLE 6: NETWORK VOLUMES-RELATED STATISTICAL INFORMATION2023 2022Year over Year Percentage Increase (Decrease) Percentage Increase (Decrease) Assuming No Changes in FX Rates (a)
Year over Year Percentage Increase (Decrease) Percentage Increase (Decrease)
Assuming No Changes in FX Rates (a)Network volumes 8 % 9 % 21 % 24 %
Total billed business 9 9 23 25
U.S. Consumer Services 10 24
Commercial Services 3 3 21 22
International Card Services 17 18 23 36
Processed volumes 3 6 10 18Merchant industry billed business metricsG&S spend (72% and 75% of billed business for 2023 and 2022, respectively)
6 6 13 16
T&E spend (28% and 25% of billed business for 2023 and 2022, respectively)
19 19 64 67
Airline spend (7% and 6% of billed business for 2023 and 2022, respectively)
23 % 24 % 119 % 125 %(a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of conversion into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply to the corresponding prior-year period against which such results are being compared).48Table of Contents
TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Card Member loans and receivables:
Net write-off rate — principal, interest and fees (a)2.0 % 1.0 % 0.8 %
Net write-off rate — principal only - consumer and small business (a)(b)
1.8 % 0.9 % 0.7 %
30+ days past due as a % of total - consumer and small business (c)
1.3 % 1.1 % 0.7 %Card Member loans:Card Member loans (billions)
$ 126.0 $ 108.0 $ 88.6 17 % 22 %Credit loss reserves:Beginning balance $ 3,747 $ 3,305 $ 5,344 13 (38)
Provisions — principal, interest and fees 3,839 1,514 (1,155) # #
Net write-offs — principal less recoveries (2,043) (837) (672) # 25
Net write-offs — interest and fees less recoveries (443) (229) (207) 93 11Other (d)18 (6) (5) # (20)
Ending balance $ 5,118 $ 3,747 $ 3,305 37 13
% of loans 4.1 % 3.5 % 3.7 %
% of past due 297 % 348 % 555 %
Average loans (billions)
$ 114.8 $ 95.4 $ 76.1 20 25Net write-off rate — principal, interest and fees (a)2.2 % 1.1 % 1.2 %Net write-off rate — principal only (a)1.8 % 0.9 % 0.9 %30+ days past due as a % of total1.4 % 1.0 % 0.7 %Card Member receivables:Card Member receivables (billions)
$ 60.4 $ 57.6 $ 53.6 5 7Credit loss reserves:Beginning balance $ 229 $ 64 $ 267 # (76)Provisions — principal and fees880 627 (73) 40 #
Net write-offs — principal and fees less recoveries (e)
(937) (462) (129) # #Other (d)2 — (1) — #
Ending balance $ 174 $ 229 $ 64 (24) % # %
% of receivables 0.3 % 0.4 % 0.1 %
Net write-off rate — principal and fees (a)(e)
1.6 % 0.8 % 0.3 %
Net write-off rate — principal only - consumer and small business (a)(b)
1.8 % 0.9 % 0.3 %
30+ days past due as a % of total - consumer and small business (c)
1.1 % 1.3 % 0.6 %# Denotes a variance of 100 percent or more
(a) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(b) A net write-off rate based on principal losses only is not available for corporate receivables due to system constraints.
(c) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. Refer to Table 12 for 90+ days past billing metrics for corporate receivables.
(d) Other includes foreign currency translation adjustments.(e) The net write-off rate for the year ended December 31, 2021 includes a $37 million partial recovery in Card Member receivables related to a corporate client bankruptcy, which had resulted in a write-off in the year ended December 31, 2020 in the ICS segment.
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TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS
Years Ended December 31,(Millions, except percentages and where indicated) 2023 2022 2021
Net interest income $ 13,134 $ 9,895 $ 7,750Exclude:
Interest expense not attributable to our Card Member loan portfolio (a)2,943 1,268 738Interest income not attributable to our Card Member loan portfolio (b)(2,896) (1,023) (379)Adjusted net interest income (c)$ 13,181 $ 10,140 $ 8,109
Average Card Member loans (billions)
$ 114.8 $ 95.4 $ 76.0Net interest income divided by average Card Member loans (c)11.4 % 10.4 % 10.2 %Net interest yield on average Card Member loans (c)11.5 % 10.6 % 10.7 %(a) Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables.
(b) Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment portfolios.
(c) Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to the “Glossary of Selected Terminology” below for the definitions of these terms. We believe adjusted net interest income is useful to investors because it represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net interest yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a GAAP measure, includes elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not representative of net interest yield on average Card Member loans.50Table of Contents
BUSINESS SEGMENT RESULTS OF OPERATIONS
We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and “Business” for additional discussion of products and services that comprise each segment.Effective as of the second quarter of 2023, our U.S. travel and lifestyle services (TLS) results, which were previously reported within the USCS segment, are now reported within both USCS and CS segments, allocated based on customer usage.Results of the reportable operating segments generally treat each segment as a stand-alone business. The management reporting process that derives these results allocates revenue and expense using various methodologies as described below.
TOTAL REVENUES NET OF INTEREST EXPENSE
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the USCS, CS and ICS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue being allocated.
Net card fees, processed revenue and certain other revenues are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.
PROVISIONS FOR CREDIT LOSSES
The provisions for credit losses are directly attributable to the segment in which they are reported.
EXPENSES
Card Member rewards and Card Member services expenses are included in each segment based on the actual expenses incurred. Business development and Marketing expenses are included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue.
Salaries and employee benefits and other expenses reflect both costs incurred directly within each segment, as well as allocated expenses. The allocated expenses include service costs, which primarily reflect salaries and benefits associated with our technology and customer servicing groups, and overhead expenses. Service costs are allocated based on activities directly attributable to the segment, and overhead expenses are allocated based on the relative levels of revenue and Card Member loans and receivables. As a proportion of Salaries and employee benefits and other expenses, allocated costs remain relatively consistent from period to period. Increases in expenses year-over-year driven by allocated costs primarily reflect the changes in salaries and employee benefit costs and other costs related to our technology or servicing organizations and the growth in business volume within our operating segments.51Table of Contents
U.S. CONSUMER SERVICES
TABLE 9: USCS SELECTED INCOME STATEMENT DATA
Years Ended December 31, Change Change(Millions, except percentages) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021RevenuesNon-interest revenues $ 18,464 $ 16,440 $ 12,989 $ 2,024 12 % $ 3,451 27 %
Interest income 12,336 8,457 6,328 3,879 46 2,129 34
Interest expense 2,684 983 395 1,701 # 588 #
Net interest income 9,652 7,474 5,933 2,178 29 1,541 26
Total revenues net of interest expense 28,116 23,914 18,922 4,202 18 4,992 26
Provisions for credit losses 2,855 1,021 (919) 1,834 # 1,940 #
Total revenues net of interest expense after provisions for credit losses 25,261 22,893 19,841 2,368 10 3,052 15ExpensesCard Member rewards, business development, Card Member services and marketing
15,393 13,535 10,665 1,858 14 2,870 27Salaries and employee benefits and other operating expenses4,435 3,958 3,218 477 12 740 23
Total expenses 19,828 17,493 13,883 2,335 13 3,610 26
Pretax segment income $ 5,433 $ 5,400 $ 5,958 $ 33 1 % $ (558) (9) %# Denotes a variance of 100 percent or moreUSCS issues a wide range of proprietary consumer cards and provides services to U.S. consumers, including travel and lifestyle services as well as banking and non-card financing products.TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees.Discount revenue increased 10 percent, primarily driven by an increase in U.S. consumer billed business. See Tables 5, 6 and 10 for more details on billed business performance.
Net card fees increased 21 percent, primarily driven by growth in our premium card portfolios.
Service fees and other revenue increased 5 percent, primarily driven by higher travel commissions and fees from our consumer travel business and growth in delinquency fees, partially offset by the change in the allocation of TLS revenues described above.
Interest income increased, primarily driven by higher interest rates and growth in revolving loan balances.
Interest expense increased, primarily driven by a higher cost of funds.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was driven by an increase in loans outstanding, higher delinquencies and changes in macroeconomic forecasts at that time, partially offset by the release of COVID-19 pandemic-driven reserves.
Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies and a decrease in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding.
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EXPENSESTotal expenses increased, primarily driven by higher Card Member rewards expense, Business development expense, and Card Member services expense.
Card Member rewards expense increased, primarily driven by higher billed business. The increase was also driven by a larger proportion of spend in categories that earn higher levels of rewards, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products.
Business development expense increased, primarily due to increased partner payments driven by higher contractual rates and billed business.
Card Member services expense increased, primarily due to higher usage of travel-related benefits.
Marketing expense decreased, reflecting lower levels of spending on customer acquisitions.
Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, partially offset by the change in the allocation of TLS servicing costs described above.
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TABLE 10: USCS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Billed business (billions)$ 610.8 $ 553.0 $ 444.2 10 % 24 %
Proprietary cards-in-force 43.8 41.7 39.0 5 7
Proprietary basic cards-in-force 30.7 29.2 27.3 5 7Average proprietary basic Card Member spending (dollars)$ 20,303 $ 19,514 $ 16,498 4 18
Total segment assets (billions)
$ 107.2 $ 94.4 $ 76.5 14 23Card Member loans:Total loans (billions)
$ 83.2 $ 72.7 $ 59.8 14 22
Average loans (billions)
$ 76.0 $ 63.7 $ 52.0 19 23Net write-off rate — principal, interest and fees (a)2.2 % 1.1 % 1.1 %Net write-off rate — principal only (a)1.7 % 0.9 % 0.8 %
30+ days past due as a % of total 1.4 % 1.0 % 0.7 %Calculation of Net Interest Yield on Average Card Member Loans:
Net interest income$ 9,652 $ 7,474 $ 5,933Exclude:
Interest expense not attributable to our Card Member loan portfolio (b)192 139 158Interest income not attributable to our Card Member loan portfolio (c)(386) (228) (110)Adjusted net interest income (d)$ 9,458 $ 7,385 $ 5,981
Average Card Member loans (billions)
$ 76.0 $ 63.7 $ 52.0Net interest income divided by average Card Member loans (d)12.7 % 11.7 % 11.4 %Net interest yield on average Card Member loans (d)12.4 % 11.6 % 11.5 %Card Member receivables:Total receivables (billions)
$ 14.8 $ 14.3 $ 14.7 3 % (3) %Net write-off rate — principal and fees (a)1.3 % 0.6 % 0.1 %Net write-off rate — principal only (a)1.2 % 0.6 % — %
30+ days past due as a % of total 0.8 % 0.9 % 0.4 %(a) Refer to Table 7 footnote (a).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).54Table of Contents
COMMERCIAL SERVICES
TABLE 11: CS SELECTED INCOME STATEMENT DATA
Years Ended December 31, Change Change(Millions, except percentages) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021RevenuesNon-interest revenues $ 12,931 $ 12,196 $ 9,833 $ 735 6 % $ 2,363 24 %
Interest income 3,328 2,070 1,408 1,258 61 662 47
Interest expense 1,483 697 330 786 # 367 #
Net interest income 1,845 1,373 1,078 472 34 295 27
Total revenues net of interest expense 14,776 13,569 10,911 1,207 9 2,658 24
Provisions for credit losses 1,313 565 (420) 748 # 985 #
Total revenues net of interest expense after provisions for credit losses 13,463 13,004 11,331 459 4 1,673 15ExpensesCard Member rewards, business development, Card Member services and marketing
7,422 7,238 5,762 184 3 1,476 26Salaries and employee benefits and other operating expenses3,180 2,886 2,633 294 10 253 10
Total expenses 10,602 10,124 8,395 478 5 1,729 21
Pretax segment income $ 2,861 $ 2,880 $ 2,936 $ (19) (1) % $ (56) (2) %# Denotes a variance of 100 percent or more
CS issues a wide range of proprietary corporate and small business cards and provides services to U.S. businesses, including payment and expense management, banking and non-card financing products. CS also issues proprietary corporate cards and provides services to select global corporate clients.
TOTAL REVENUES NET OF INTEREST EXPENSENon-interest revenues increased, primarily driven by higher Discount revenue and Service fees and other revenue.
Discount revenue increased 4 percent, primarily driven by an increase in commercial billed business. See Tables 5, 6 and 12 for more details on billed business performance.
Net card fees increased 18 percent, primarily driven by growth in our premium card portfolios.
Service fees and other revenue increased 53 percent, largely driven by the change in the allocation of TLS revenues described above, as well as growth in delinquency fees.
Interest income increased, primarily driven by higher interest rates and growth in revolving loan balances.
Interest expense increased, primarily driven by a higher cost of funds.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was driven by an increase in loans outstanding, higher delinquencies and changes in macroeconomic forecasts at that time, partially offset by the release of COVID-19 pandemic-driven reserves.
Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies and a decrease in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding.
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EXPENSESTotal expenses increased, primarily driven by higher Operating expenses and Card Member services expense.
Card Member rewards expense increased, primarily driven by a larger proportion of spend in categories that earn higher levels of rewards, as well as higher billed business, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products.
Business development expense increased, primarily due to increased partner payments, primarily driven by higher billed business.
Card Member services expense increased, primarily due to higher usage of travel-related benefits.
Marketing expense decreased, reflecting lower levels of spending on customer acquisitions.
Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, which includes an allocation of TLS servicing costs as described above.
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TABLE 12: CS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Billed business (billions)$ 516.0 $ 499.5 $ 411.6 3 % 21 %
Proprietary cards-in-force 15.4 14.9 13.4 3 11Average Card Member spending (dollars)$ 33,745 $ 35,202 $ 32,042 (4) 10
Total segment assets (billions)
$ 55.4 $ 51.4 $ 44.5 8 16Card Member loans:Total loans (billions)
$ 25.8 $ 21.4 $ 17.0 21 26
Average loans (billions)
$ 23.9 $ 19.3 $ 14.4 24 34Net write-off rate — principal, interest and fees (a)2.0 % 0.8 % 0.8 %Net write-off rate — principal only (a)1.7 % 0.7 % 0.6 %
30+ days past due as a % of total 1.4 % 0.9 % 0.5 %Calculation of Net Interest Yield on Average Card Member Loans:Net interest income $ 1,845 $ 1,373 $ 1,078Exclude:
Interest expense not attributable to our Card Member loan portfolio (b)711 430 251Interest income not attributable to our Card Member loan portfolio (c)(204) (89) (76)Adjusted net interest income (d)$ 2,352 $ 1,714 $ 1,253
Average Card Member loans (billions)
$ 23.9 $ 19.3 $ 14.4Net interest income divided by average Card Member loans (d)7.7 % 7.1 % 7.5 %Net interest yield on average Card Member loans (d)9.9 % 8.9 % 8.7 %Card Member receivables:Total receivables (billions)
$ 26.2 $ 26.9 $ 24.6 (3) % 9 %
Net write-off rate — principal and fees (e)
1.5 % 0.7 % 0.2 %
Net write-off rate — principal only (a) - small business
2.1 % 0.9 % 0.2 %
30+ days past due as a % of total - small business
1.5 % 1.6 % 0.8 %
90+ days past billing as a % of total (e) - corporate
0.4 % 0.6 % 0.3 %(a) Refer to Table 7 footnote (a).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).(e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.
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INTERNATIONAL CARD SERVICES
TABLE 13: ICS SELECTED INCOME STATEMENT DATA
Years Ended December 31, Change Change(Millions, except percentages) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021RevenuesNon-interest revenues $ 9,472 $ 8,262 $ 6,761 $ 1,210 15 % $ 1,501 22 %
Interest income 2,076 1,453 1,116 623 43 337 30
Interest expense 1,118 654 442 464 71 212 48
Net interest income 958 799 674 159 20 125 19
Total revenues net of interest expense 10,430 9,061 7,435 1,369 15 1,626 22
Provisions for credit losses 727 584 (43) 143 24 627 #
Total revenues net of interest expense after provisions for credit losses 9,703 8,477 7,478 1,226 14 999 13ExpensesCard Member rewards, business development, Card Member services and marketing
5,669 4,962 3,995 707 14 967 24Salaries and employee benefits and other operating expenses3,061 2,937 2,554 124 4 383 15
Total expenses 8,730 7,899 6,549 831 11 1,350 21
Pretax segment income $ 973 $ 578 $ 929 $ 395 68 % $ (351) (38) %
# Denotes a variance of 100 percent or more
ICS issues a wide range of proprietary consumer, small business and corporate cards outside the United States. ICS also provides services to our international customers, including travel and lifestyle services, and manages certain international joint ventures and our loyalty coalition businesses.TOTAL REVENUES NET OF INTEREST EXPENSENon-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees.
Discount revenue increased 17 percent, primarily reflecting an increase in billed business. See Tables 5, 6 and 14 for more details on billed business performance.
Net card fees increased 17 percent, primarily driven by growth in our premium card portfolios.
Service fees and other revenue increased 9 percent, primarily driven by foreign exchange related revenues associated with Card Member cross-currency spending and growth in delinquency fees.
Interest income increased, primarily driven by growth in revolving loan balances and higher interest rates.
Interest expense increased, primarily driven by a higher cost of funds.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding, partially offset by the performance of portfolios in certain international markets. The reserve build in the prior year was primarily driven by an increase in loans outstanding and higher delinquencies.
Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding. The reserve build in the prior year was primarily driven by an increase in receivables outstanding and higher delinquencies.
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EXPENSESTotal expenses increased, primarily driven by higher Card Member rewards expense and Card Member services expense.
Card Member rewards expense increased, primarily driven by higher billed business.
Business development expense decreased, primarily driven by a prior-year charge related to revenue allocated to a joint venture partner, partially offset by an increase in partner payment expenses driven by higher billed business.
Card Member services expense increased, primarily driven by higher usage of travel-related benefits.
Marketing expense decreased, reflecting lower levels of spending on customer acquisitions.
Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, partially offset by lower compensation costs.
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TABLE 14: ICS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021Billed business (billions)$ 329.5 $ 281.6 $ 228.2 17 % 23 %
Proprietary cards-in-force 21.0 20.1 19.0 4 6
Proprietary basic cards-in-force 15.6 14.9 13.9 5 7Average proprietary basic Card Member spending (dollars)$ 21,550 $ 19,519 $ 16,689 10 17
Total segment assets (billions)
$ 42.2 $ 36.9 $ 32.6 14 13Card Member loans - consumer and small business:Total loans (billions)
$ 17.0 $ 13.8 $ 11.6 23 19
Average loans (billions)
$ 15.0 $ 12.3 $ 9.6 22 28Net write-off rate — principal, interest and fees (a)2.5 % 1.4 % 2.1 %Net write-off rate — principal only (a)2.1 % 1.2 % 1.6 %
30+ days past due as a % of total 1.3 % 1.2 % 0.8 %Calculation of Net Interest Yield on Average Card Member Loans:Net interest income $ 958 $ 799 $ 674Exclude:
Interest expense not attributable to our Card Member loan portfolio (b)475 270 211Interest income not attributable to our Card Member loan portfolio (c)(62) (28) (11)Adjusted net interest income (d)$ 1,371 $ 1,041 $ 874
Average Card Member loans (billions)
$ 15.0 $ 12.4 $ 9.6Net interest income divided by average Card Member loans (d)6.4 % 6.5 % 7.0 %Net interest yield on average Card Member loans (d)9.2 % 8.4 % 9.1 %Card Member receivables:Total receivables (billions)
$ 19.4 $ 16.4 $ 14.3 18 % 15 %
Net write-off rate — principal and fees (e)(f)
2.1 % 1.3 % 0.6 %
Net write-off rate — principal only (a) - consumer and small business
2.2 % 1.4 % 0.8 %
30+ days past due as a % of total - consumer and small business
1.0 % 1.3 % 0.7 %
90+ days past billing as a % of total (e) - corporate
0.5 % 0.5 % 0.3 %(a) Refer to Table 7 footnote (a).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).
(e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.(f) Refer to Table 7 footnote (e).
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GLOBAL MERCHANT AND NETWORK SERVICES
TABLE 15: GMNS SELECTED INCOME STATEMENT AND OTHER DATA
Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022
2022 vs. 2021RevenuesNon-interest revenues $ 6,620 $ 6,123 $ 5,021 $ 497 8 % $ 1,102 22 %
Interest income 57 23 16 34 # 7 44
Interest expense (719) (329) (92) (390) # (237) #
Net interest income 776 352 108 424 # 244 #
Total revenues net of interest expense 7,396 6,475 5,129 921 14 1,346 26
Provisions for credit losses 27 7 (37) 20 # 44 #
Total revenues net of interest expense after provisions for credit losses 7,369 6,468 5,166 901 14 1,302 25ExpensesBusiness development, Card Member services and marketing
1,655 1,611 1,547 44 3 64 4Salaries and employee benefits and other operating expenses2,058 1,903 1,745 155 8 158 9
Total expenses 3,713 3,514 3,292 199 6 222 7
Pretax segment income 3,656 2,954 1,874 702 24 1,080 58Network volumes (billions)1,680.1 1,552.8 1,284.2 $ 127 8 $ 269 21
Total segment assets (billions)
$ 23.7 $ 20.0 $ 15.4 19 % 30 %# Denotes a variance of 100 percent or moreGMNS operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network. GMNS manages our partnership relationships with third-party card issuers (including our network partnership agreements in China), merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network.TOTAL REVENUES NET OF INTEREST EXPENSENon-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Service fees and other revenues.
Discount revenue increased 7 percent, primarily driven by an increase in billed business. See Tables 5 and 6 for more details on billed business performance.
Service fees and other revenue increased 14 percent, primarily due to higher foreign exchange related revenues associated with Card Member cross-currency spending.
Processed revenue increased 6 percent, primarily driven by higher processed volumes.
GMNS receives an interest expense credit relating to internal transfer pricing due to its merchant payables. Net interest income increased, primarily due to a higher interest expense credit, largely driven by higher interest rates.EXPENSESTotal expenses increased, primarily driven by higher Operating expenses.
Business development expense increased, primarily due to increased partner payments driven by higher network volumes.
Marketing expense increased, primarily driven by higher levels of spending on merchant engagement and other growth initiatives.
Salaries and employee benefits and other expenses increased, primarily due to a reserve associated with a merchant exposure for Card Member purchases, an increase in allocated service costs and higher compensation costs.
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CORPORATE & OTHER
Corporate functions and certain other businesses are included in Corporate & Other.Corporate & Other pretax loss was $2.4 billion and $2.2 billion in 2023 and 2022, respectively. The increase in the pretax loss was primarily driven by changes in the value of deferred compensation, higher current and incentive compensation costs and a contribution to the American Express Foundation, all of which were partially offset by lower net losses on Amex Ventures investments.CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
• A solid and flexible equity capital profile;
• A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
• Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period under a variety of adverse circumstances.
We continue to see volatility in the capital markets due to a variety of factors and manage our balance sheet to reflect evolving circumstances.
CAPITAL STRATEGYWe believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value. Our objective is to retain sufficient levels of capital generated through net income and other sources, such as the exercise of stock options by colleagues, to maintain a strong balance sheet, provide flexibility to support future business growth and distribute excess capital to shareholders through dividends and share repurchases. See “Dividends and Share Repurchases” below.The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy Assessment Process, which takes into account our business activities, as well as marketplace conditions and requirements or expectations of credit rating agencies, regulators and shareholders, among others. As a bank holding company, we are subject to regulatory requirements administered by the U.S. federal bank regulatory agencies. The Federal Reserve has established specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure to maintain minimum regulatory capital levels at American Express or our U.S. bank subsidiary, American Express National Bank (AENB), could affect our status as a financial holding company and cause the banking regulators with oversight of American Express or AENB to take actions that could limit our business operations.
We seek to maintain capital levels and ratios in excess of our minimum regulatory requirements, specifically within a 10 to 11 percent target range for American Express Company’s Common Equity Tier 1 (CET1) risk-based capital ratio.We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory requirements. These infused amounts can affect the capital and liquidity positions at the American Express parent company level or at our subsidiaries.We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating risk-weighted assets.On July 27, 2023, the U.S. federal bank regulatory agencies issued a notice of proposed rulemaking that would significantly revise U.S. regulatory capital requirements for large banking organizations, including American Express Company and AENB. See “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for more information.
62Table of ContentsThe following table presents our regulatory risk-based capital and leverage ratios and those of AENB, as of December 31, 2023:TABLE 16: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS
Effective Minimum (a)Ratios as of December 31, 2023Risk-Based Capital
Common Equity Tier 1 7.0 %
American Express Company 10.5 %
American Express National Bank 11.6
Tier 1 8.5American Express Company 11.3American Express National Bank 11.6
Total 10.5American Express Company 13.1
American Express National Bank 13.3
Tier 1 Leverage 4.0 %
American Express Company 9.9
American Express National Bank 9.5 %(a) Represents Basel III minimum requirements and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer (SCB) for American Express Company and the capital conservation buffer for AENB. Refer to “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” and Note 22 to the “Consolidated Financial Statements” for additional information.The following table presents American Express Company’s regulatory risk-based capital and risk-weighted assets as of December 31, 2023:TABLE 17: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS
American Express Company
($ in Billions)December 31, 2023Risk-Based CapitalCommon Equity Tier 1 $ 23.2
Tier 1 Capital 24.8Tier 2 Capital4.0
Total Capital 28.8
Risk-Weighted Assets 219.7
Average Total Assets to calculate the Tier 1 Leverage Ratio $ 249.6
The following are definitions for our regulatory risk-based capital ratios and leverage ratio, which are calculated as per standard regulatory guidance:
Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital adequacy guidelines. On- and off-balance sheet items are weighted for risk, with off-balance sheet items converted to balance sheet equivalents, using risk conversion factors, before being allocated a risk-adjusted weight. Off-balance sheet exposures comprise a minimal part of the total risk-weighted assets.
Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as CET1 capital, divided by risk-weighted assets. CET1 capital is common shareholders’ equity, adjusted for ineligible goodwill and intangible assets and certain deferred tax assets. CET1 capital is also adjusted for the Current Expected Credit Loss (CECL) final rules, as described below.
63Table of ContentsTier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital, divided by risk-weighted assets. Tier 1 capital is the sum of CET1 capital, preferred shares and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held by insurance subsidiaries. The minimum requirement for the Tier 1 risk-based capital ratio is 1.5 percent higher than the minimum for the CET1 risk-based capital ratio. We have $1.6 billion of preferred shares outstanding to help address a portion of the Tier 1 capital requirements in excess of common equity requirements. See Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.
Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets. Tier 2 capital is the sum of the allowance for credit losses adjusted for the CECL final rules (limited to 1.25 percent of risk-weighted assets), and $1,250 million of eligible subordinated notes, adjusted for capital held by insurance subsidiaries. The $1,250 million of eligible subordinated notes includes the $500 million subordinated debt issued in July 2023 and the $750 million subordinated debt issued in May 2022.
Tier 1 Leverage Ratio — Calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent quarter.
We elected to delay the recognition of $0.7 billion of reduction in regulatory capital from the adoption of the CECL methodology for two years, followed by a three-year phase-in period at 25 percent once per year beginning January 1, 2022, pursuant to rules issued by federal banking regulators (the CECL final rules). As of January 1, 2024, we have phased in 75 percent of such amount. Refer to “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for additional details.We continue to include accumulated other comprehensive income (loss) in regulatory capital.We were not subject to the Federal Reserve’s supervisory stress tests in 2023 and will be participating in the Federal Reserve’s supervisory stress tests in 2024. We submitted our annual capital plan to the Federal Reserve in April 2023. On July 27, 2023, the Federal Reserve confirmed our SCB of 2.5 percent, which resulted in a minimum CET1 ratio of 7 percent, effective October 1, 2023 to September 30, 2024.DIVIDENDS AND SHARE REPURCHASES
We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans.During the year ended December 31, 2023, we returned $5.3 billion to our shareholders in the form of common stock dividends of $1.8 billion and share repurchases of $3.5 billion. We repurchased 21.6 million common shares at an average price of $161.21 in 2023. These dividend and share repurchase amounts collectively represent approximately 62 percent of total capital generated during the year.
We plan to increase the regular quarterly dividend on our common shares outstanding by 17 percent, from 60 cents to 70 cents per share, beginning with the first quarter 2024 dividend declaration.
In addition, during the year ended December 31, 2023, we paid $58 million in dividends on non-cumulative perpetual preferred shares outstanding. Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.Our decisions on capital distributions depend on various factors, including: our capital levels and regulatory capital requirements; regulatory guidance or restrictions; actual and forecasted business results; economic and market conditions; revisions to, or revocation of, the Federal Reserve’s authorization of our capital plan; and the supervisory stress test process. We may conduct share repurchases through a variety of methods, including open market purchases, plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, privately negotiated transactions or other purchases, including block trades, accelerated share repurchase programs or any combination of such methods as market conditions warrant and at prices we deem appropriate.64Table of Contents
FUNDING STRATEGY
Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to finance our global businesses and to maintain a strong liquidity profile. Our funding strategy and activities are integrated into our asset-liability management activities. We have in place a funding policy covering American Express Company and all of our subsidiaries.
Our financing needs are in large part a consequence of our proprietary card-issuing businesses, where we generally pay merchants for card transactions prior to reimbursement by Card Members and therefore fund the merchant payments during the period Card Member loans and receivables are outstanding. In addition, we maintain a liquidity position to meet regulatory requirements and support our business activities.We aim to satisfy these financing needs with a diverse set of funding sources. The diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, mitigates the impact of disruptions in any one type of instrument, tenor or investor. We seek to achieve diversity and cost efficiency in our funding sources by maintaining scale and market relevance in deposits, unsecured debt and asset securitizations, and access to secured borrowing facilities and a committed bank credit facility. In particular, we are focused on continuing to grow our direct retail deposit program as a funding source.
Our funding plan is primarily driven by the size and mix of business asset growth, our liquidity position and choice of funding sources, as well as cash requirements generated by the redemptions of deposits by our customers, the maturities of debt outstanding and related interest payments. In executing our funding plan, we aim to maintain a balanced debt maturity profile with an appropriate mix of short-term and long-term refinancing requirements.FUNDING PROGRAMS AND ACTIVITIES
We had the following customer deposits and consolidated debt outstanding as of December 31:
TABLE 18: SUMMARY OF CUSTOMER DEPOSITS AND CONSOLIDATED DEBT(Billions) 2023 2022
Customer deposits $ 129.1 $ 110.2
Short-term borrowings 1.3 1.3
Long-term debt 47.9 42.6
Total customer deposits and debt $ 178.3 $ 154.1We may redeem from time to time certain debt securities prior to the original contractual maturity dates in accordance with the optional redemption provisions of those debt securities.Our funding plan for the full year 2024 includes, among other sources, approximately $4.0 billion to $8.0 billion of unsecured term debt issuance and approximately $2.0 billion to $6.0 billion of secured term debt issuance. Actual funding activities can vary from our plans due to various factors, such as future business growth, the impact of global economic, political and other events on market capacity and funding needs, demand for securities offered by us, regulatory changes, ability to securitize and sell loans and receivables, and the performance of loans and receivables previously sold in securitization transactions. Many of these factors are beyond our control.Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding strategy. Our asset securitization activities are rated separately.65Table of Contents
TABLE 19: UNSECURED DEBT RATINGS
American Express Entity Moody’s
S&P Fitch
American Express Company Long Term A2BBB+A
Short Term N/R
A-2
F1
Outlook Stable
Stable
Stable
American Express Travel Related Services Company, Inc. Long Term A2A-AShort Term P-1A-2F1
Outlook Stable
Stable
Stable
American Express National Bank Long Term A3A-AShort Term P-1A-2F1
Outlook Stable
Stable
Stable
American Express Credit Corporation Long Term A2A-AShort Term N/R
N/R
N/R
Outlook Stable
Stable
Stable
These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at the sole discretion of the rating organization.Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding costs, as well as higher fees related to borrowings under our unused credit facilities. Declines in credit ratings could also reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding mix, including the proportion of U.S. retail deposits insured by the FDIC to total funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs.
On August 29, 2023, the U.S. federal bank regulatory agencies issued a notice of proposed rulemaking that would require covered bank holding companies such as American Express Company to issue and maintain minimum amounts of eligible external long-term debt and certain insured depository institutions such as AENB to issue and maintain minimum amounts of eligible internal long-term debt. See “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for more information.DEPOSIT PROGRAMSWe offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to an amount that is at least $250,000 per account holder through the FDIC; as of December 31, 2023, approximately 92 percent of these deposits were insured. Our ability to obtain deposit funding and offer competitive interest rates is dependent on, among other factors, the capital level of AENB. Direct retail deposits offered by AENB is our primary deposit product channel, which makes FDIC-insured high-yield savings account, certificates of deposit (CDs), business checking and consumer rewards checking account products available directly to customers. As of December 31, 2023, our direct retail deposit program had approximately 2.4 million accounts. AENB also sources deposits through third-party distribution channels as needed to meet our overall funding objectives. CDs carry stated maturities while high-yield savings account, checking account and third-party sweep deposit products do not. We manage the duration of our maturing obligations, including CDs, to reduce concentration and refinancing risk.
As of December 31, 2023, we had $129.1 billion in deposits. Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits and scheduled maturities of certificates of deposits.
The following table sets forth the average interest rate we paid on different types of deposits during the years ended December 31, 2023, 2022 and 2021. Changes in the average interest rate we paid on our deposits were primarily due to the impact of higher market interest rates offered for retail deposits.TABLE 20: AVERAGE INTEREST RATES PAID ON DEPOSITS
Year ended December 31,2023 2022 2021(Millions, except percentages)
Average Balance Interest Expense Average Interest Rate Average Balance Interest Expense Average Interest Rate Average Balance Interest Expense Average Interest RateSavings and transaction accounts $ 86,102 $ 3,357 3.9 % $ 71,458 $ 967 1.4 % $ 65,694 $ 275 0.4 %Certificates of deposit:Direct 4,407 159 3.6 1,708 33 1.9 1,930 37 1.9
Third-party (brokered) 13,945 518 3.7 7,649 221 2.9 4,163 102 2.4
Sweep accounts — Third-party (brokered) 15,676 824 5.3 15,039 301 2.0 13,081 41 0.3
Total U.S. retail interest-bearing deposits
$ 120,130 $ 4,858 4.0 % $ 95,854 $ 1,522 1.6 % $ 84,868 $ 455 0.5 %
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SHORT-TERM FUNDING PROGRAMSShort-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less, as well as interest-bearing overdrafts with banks. Our short-term funding programs are used primarily to fund working capital needs, such as managing seasonal variations in receivables balances. The amount of short-term borrowings issued in the future will depend on our funding strategy, our needs and market conditions. We had no commercial paper outstanding at any point during 2023. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMSAs of December 31, 2023, we had $47.9 billion in long-term debt outstanding, including unsecured debt and asset-backed securities. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings and scheduled maturities of long-term debt obligations.We periodically securitize Card Member loans and receivables arising from our U.S. card business, as the securitization market provides us with cost-effective funding. Securitization of Card Member loans and receivables is accomplished through the transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to third-party investors. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset securitizations.
TABLE 21: DEBT ISSUANCES(Billions) 2023American Express Company:Fixed Rate Senior Notes (coupon of 4.90%)
$ 1.2
Floating Rate Senior Notes (compounded SOFR (a) plus weighted-average spread of 103 basis points)
0.9
Fixed-to-Floating Rate Senior Notes (weighted-average coupon of 5.54% during the fixed rate period and compounded SOFR (a) plus weighted-average spread of 137 basis points during the floating rate period)
7.4
Fixed-to-Floating Rate Subordinated Notes (coupon of 5.63% during the fixed rate period and compounded SOFR (a) plus spread of 193 basis points during the floating rate period)0.5
American Express Credit Account Master Trust:
Fixed Rate Class A Certificates (weighted-average coupon of 5.02%)3.5
Total $ 13.5(a) Secured overnight financing rate (SOFR).67Table of Contents
LIQUIDITY MANAGEMENT
Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to maintain liquidity sources in amounts sufficient to meet our expected future financial obligations and business requirements for liquidity for a period of at least twelve months under a variety of adverse circumstances. These include, but are not limited to, an event where we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions.
Our liquidity management strategy includes a number of elements, including, but not limited to:
• Maintaining diversified funding sources (refer to “Funding Strategy” above for more details);
• Maintaining unencumbered liquid assets and off-balance sheet liquidity sources;
• Projecting cash inflows and outflows under a variety of economic and market scenarios; and
• Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements.We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash and other liquid assets, secured borrowing facilities and a committed bank credit facility. Through our U.S. bank subsidiary, AENB, we also hold collateral eligible for use at the Federal Reserve’s discount window.
The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy include market-wide, firm-specific and combined liquidity stresses. Additionally, we anticipate becoming a Category III firm in 2024 and thus being subject to the regulatory requirements under LCR and NSFR rules. We consider other factors in determining the amount and type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations, growth in our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources and credit rating agency guidelines and requirements. We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements.
As of December 31, 2023 and 2022, we had $46.6 billion and $33.9 billion in Cash and cash equivalents, respectively. Refer to “Cash Flows” below for a discussion of the major drivers impacting cash flows for the year ended December 31, 2023. The investment income we receive on liquidity resources has historically been less than the interest expense on the sources of funding for these balances. From time to time, including during 2023, interest income may exceed the interest expense associated with the liquidity portfolio. Depending on the interest rate environment, our funding composition and the amount of liquidity resources we maintain, the level of future net interest income or expense associated with our liquidity resources will vary.
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Securitized Borrowing CapacityAs of December 31, 2023, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2026, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the American Express Issuance Trust II (the Charge Trust). We also maintained our committed, revolving, secured borrowing facility, with a maturity date of September 15, 2026, which gives us the right to sell up to $3.0 billion face amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust). These facilities enhance our contingent funding resources and are also used in the ordinary course of business to fund working capital needs. As of December 31, 2023, no amounts were drawn on the Charge Trust facility or the Lending Trust facility.Committed Bank Credit FacilityAs of December 31, 2023, we maintained a committed syndicated bank credit facility of $4.0 billion. During the quarter ended December 31, 2023, we extended this facility by two years to mature on October 20, 2026, and increased the maximum borrowing capacity from $3.5 billion to $4.0 billion. The availability of the credit facility is subject to our maintenance of a minimum CET1 risk-based capital ratio of 4.5 percent, with certain restrictions in relation to either accessing the facility or distributing capital to common shareholders in the event our CET1 risk-based capital ratio falls between 4.5 percent and 6.5 percent. It does not contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on our credit rating. As of December 31, 2023, we were in compliance with the covenants contained in the credit facility and no amount was drawn on the facility. This facility enhances our contingent funding resources and is also used in the ordinary course of business to fund working capital needs. Any undrawn portion of this facility could serve as a backstop for the amount of commercial paper outstanding.Other Sources of Liquidity
In addition to cash and other liquid assets and the secured borrowing facilities and committed bank credit facility described above, as an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco through the discount window against the U.S. credit card loans and charge card receivables that it pledged.As of December 31, 2023, AENB had available borrowing capacity of $60.4 billion based on the amount and collateral valuation of receivables that were pledged to the Federal Reserve Bank of San Francisco. Whether specific assets will be considered qualifying collateral and the amount that may be borrowed against the collateral remain at the discretion of the Federal Reserve. Following its regular annual review, the Federal Reserve updated the collateral margins for amounts pledged by its member banks, effective November 1, 2023, which reduced AENB’s available borrowing capacity through the discount window. Due to regulatory restrictions, liquidity generated by AENB can generally be used only to fund obligations within AENB, and transfers to the parent company or non-bank affiliates may be subject to prior regulatory approval.Off-balance Sheet Arrangements
We have certain off-balance sheet obligations that include guarantees, indemnifications and certain Card Member and partner arrangements that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, or liquidity and capital resources. For more information on these obligations, refer to Note 12, Note 15 and Note 23 to the “Consolidated Financial Statements.”69Table of Contents
CASH FLOWSThe following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating, investing and financing cash flows for the year ended December 31, 2023 compared to the year ended December 31, 2022:TABLE 22: CASH FLOWS(Billions) 2023 2022 2021Total cash provided by (used in):Operating activities $ 18.5 $ 21.1 $ 14.6
Investing activities (24.4) (33.7) (10.5)
Financing activities 18.4 24.5 (14.9)
Effect of foreign currency exchange rates on cash and cash equivalents 0.2 — (0.1)
Net increase (decrease) in cash and cash equivalents $ 12.7 $ 11.9 $ (10.9)Cash Flows from Operating Activities
Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.In 2023, the net cash provided by operating activities was primarily driven by cash generated from net income for the period and higher net operating liabilities, primarily driven by higher book overdrafts due to timing differences arising in the ordinary course of business, higher accounts payable to merchants and an increase in the Membership Rewards liability related to growth in billed business.
In 2022, the net cash provided by operating activities was primarily driven by cash generated from net income for the period and higher net operating liabilities, resulting from higher accounts payable to merchants and an increase in the Membership Rewards liability related to growth in billed business.Cash Flows from Investing ActivitiesOur cash flows from investing activities primarily include changes in Card Member loans and receivables, as well as changes in our available-for-sale investment securities portfolio.
In 2023, the net cash used in investing activities was primarily driven by higher Card Member loan and receivable balances, resulting from higher Card Member spending, partially offset by net maturities of investment securities.
In 2022, the net cash used in investing activities was primarily driven by higher Card Member loan and receivable balances, resulting from higher Card Member spending and net purchases of investment securities.Cash Flows from Financing Activities
Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term borrowings, as well as dividend payments and share repurchases.In both 2023 and 2022, the net cash provided by financing activities was primarily driven by growth in customer deposits and net proceeds from debt, partially offset by share repurchases and dividend payments.
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RISK MANAGEMENT
GOVERNANCE
Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit and Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of independent directors and provides regular reports to the full Board regarding matters reviewed at their committee. The committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance Officer, the Chief Audit Executive and other senior management with regard to our risk management processes, risk profile and performance, controls, talent and capabilities. The Board monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks.
We use our comprehensive Enterprise Risk Management (ERM) program to identify, aggregate, monitor, measure, report and manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer. The Risk Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Risk Officer and receives regular updates from the Chief Risk Officer on key risks and exposures.The Risk Committee of our Board of Directors provides oversight of our ERM framework, processes and methodologies. The Risk Committee approves our ERM policy. The ERM policy defines and governs risk governance, risk oversight and risk appetite, including credit risk (at both the individual and institutional levels), operational risk (e.g., operations and process, legal, conduct, third-party, information technology, information security, data management, privacy and people risks), compliance risk, reputational risk, market risk, funding and liquidity risk, model risk, strategic and business risk, country risk and emerging risks (e.g., climate risk). Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios. In addition, it establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for monitoring performance (including limits and escalation triggers) and assessing control programs. On an ongoing basis, the Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including significant risk exposures, risk trends in our portfolios and major risk concentrations.The Risk Committee also provides oversight of our compliance with Regulatory capital and liquidity standards, and our Internal Capital Adequacy Assessment Process, including the CCAR submissions.
The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include our Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of our Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of our internal audit services function, and the integrity of our systems of internal controls.
The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Audit Executive, who reports to the Audit and Compliance Committee, and approves Internal Audit’s annual audit plan, charter, policies, budget and staffing levels, and overall risk assessment methodology. The Audit and Compliance Committee also receives regular updates on the audit plan’s status and results, including significant reports issued by Internal Audit and the status of our corrective actions.The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our overall compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with business incentives and that business performance is achieved without taking imprudent or excessive risk. Our Chief Risk Officer is actively involved in setting risk goals for the Company. Our Chief Risk Officer also reviews the risk profiles of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the Compensation and Benefits Committee and attests whether performance goals and results have been achieved without taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to decide on our bonus pools and the compensation of senior executives.
71Table of ContentsThere are several internal management committees, including the Enterprise Risk Management Committee (ERMC), chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and is responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies company-wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, and provides guidance on the steps to monitor, control and report major risks. In addition, the Asset Liability Committee, chaired by our Chief Financial Officer, is responsible for managing our capital, funding and liquidity, investment, market risk and asset/liability activities in accordance with our policies and in compliance with applicable regulatory requirements.As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk taking. The Chief Executive Officer, business unit presidents and the Chief Financial Officer are part of the first line of defense. The second line comprises independent functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief Compliance Officer, the Chief Operational Risk Officer and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The global risk oversight team oversees the policies, strategies, frameworks, models, processes and capabilities deployed by the first line teams and provides challenges and independent assessments on how the first line of defense is managing risks. Our Internal Audit Group constitutes the third line of defense and provides independent assessments and effective challenge of the first and second lines of defense.
CREDIT RISK MANAGEMENT PROCESSWe define credit risk as loss due to default or changes in the credit quality of a customer, obligor or security. Our credit risks are divided into two broad categories: individual and institutional. Each has distinct risk management capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures of significant importance are supported by dedicated risk management teams, each led by a Chief Credit Officer.Individual Credit Risk
Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These portfolios consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk management capabilities, which span underwriting, customer management and collections. The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and gross domestic product (GDP) growth.
The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief Credit Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and enforcement of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and procedures and escalates to the ERMC as appropriate.
Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-date information on prospects and customers, such as spending and payment history and data feeds from credit bureaus. We have developed data-driven economic decision logic for customer interactions to better serve our customers.
Institutional Credit Risk
Institutional credit risk arises principally within our CS, ICS and GMNS businesses, as well as investment and liquidity management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large losses in any given year or over several years is not necessarily representative of the level of risk of institutional portfolios, given the infrequency of loss events in such portfolios.72Table of Contents
Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers. These officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for implementation and enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the credit officers of each business unit with substantial institutional credit risk exposures. The committee, along with the business unit Chief Credit Officers, makes investment decisions in core risk capabilities, ensures proper implementation of the underwriting standards and contractual rights for risk mitigation, monitors risk exposures, and determines risk mitigation actions. The IRMC formally reviews large institutional risk exposures to ensure compliance with ERMC guidelines and procedures and escalates them to the ERMC as appropriate. At the same time, the IRMC provides guidance to the business unit risk management teams to optimize risk-adjusted returns on capital. A centralized risk rating unit provides risk assessment of our institutional obligors.Exposure to the Airline and Travel Industry
We have multiple important cobrand, rewards, merchant acceptance and corporate payments arrangements with airlines. The ERM program evaluates the risks posed by our airline partners and the overall airline strategy company-wide through comprehensive business analysis of global airlines, and the travel industry more broadly, including cruise lines, travel agencies and tour operators. Our largest airline partner is Delta, and this relationship includes an exclusive cobrand credit card partnership and other arrangements including Membership Rewards redemption, merchant acceptance, travel and corporate payments. See “ We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations ” and “ Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners ” under “Risk Factors” for additional information.
Debt Exposure
As part of our ongoing risk management process, we monitor our financial exposure to both sovereign and non-sovereign customers and counterparties, and measure and manage concentrations of risk by geographic regions, as well as by economic sectors and industries. A primary focus area for monitoring is credit deterioration due to weaknesses in economic and fiscal profiles. We evaluate countries based on the market assessment of the riskiness of their sovereign debt and our assessment of the economic and financial outlook and closely monitor those deemed high risk. As of December 31, 2023, we considered our gross credit exposures to government entities, financial institutions and corporations in those countries deemed high risk to be individually and collectively not material.OPERATIONAL RISK MANAGEMENT PROCESS
We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment, including failures to comply with laws and regulations as well as impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory penalties.To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the ERMC. The Operational Risk Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups on effective risk assessments and controls. It also oversees the preventive, responsive and mitigation efforts by Operational Excellence teams in the business units and staff groups.
We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks. The framework includes programs established for risk management activities related to processes and the launch of new products and services. The framework also defines guidelines and risk management requirements for the (a) identification of operational risk events, (b) related control enhancements and (c) reporting of key trends and escalation of risks. Outcomes from the operational risk framework are discussed and escalated to various risk management committees and incorporated within our accountability framework for executive compensation.
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Table of ContentsInformation Security and Cybersecurity
We define information security and cybersecurity risk as the risk that the confidentiality, integrity or availability of American Express information and information systems are impacted by unauthorized or unintended access, use, disclosure, modification or destruction.
Our Technology Risk and Information Security (TRIS) program, which is our enterprise information security and cybersecurity program, is designed to (i) ensure the security, confidentiality, integrity and availability of our information and information systems; (ii) protect against any anticipated threats or hazards to the security, confidentiality, integrity or availability of such information; and (iii) protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to us, our colleagues or our customers. The program is built upon a foundation of advanced security technology, employs a highly trained team of experts, and is designed to operate in alignment with global regulatory requirements. The TRIS program includes controls designed to identify, protect, detect, respond to and recover from information security and cybersecurity incidents. We continue to assess the risks and changes in the cyber environment, invest in enhancements to our cybersecurity capabilities and engage in industry and government forums to promote advancements in our cybersecurity capabilities as well as the broader financial services cybersecurity ecosystem.
See “Cybersecurity” and “ A major information or cybersecurity incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our products and services ” under “Risk Factors” for additional information.Information Technology
We define information technology risk as the risk that events or circumstances could compromise the processing, stability, capacity, performance, or resilience of information technology and cause financial, reputational, and/or regulatory impacts.
We manage information technology risk through our policies, procedures, governance structure, and control framework to preserve the confidentiality, integrity, and availability of systems and processes across our Company.
See “ The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations ” under “Risk Factors” for additional information.
Privacy
We define privacy risk as the risk of financial loss, reputational damage, or regulatory or legal action resulting from decisions related to the violation of applicable laws, rules, regulations, contractual obligations, or the non-adherence to privacy policies, disclosures, or standards that apply to the processing of personal data.
The Global Privacy Policy, which establishes the privacy framework and defines the American Express Data Protection & Privacy Principles, governs the way we collect, use, store, share, transmit, delete or otherwise process our customer and colleague personal data globally. Chaired by the Chief Privacy Officer, the Privacy Risk Management Committee, a sub-committee of the ORMC, provides oversight and governance for our privacy program.
Data Management and Governance
We define data management and governance risk as the risk of financial, reputational, and/or regulatory impacts due to inadequate data governance and/or data management practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data throughout its lifecycle.
Our Enterprise Data Governance Policy establishes the framework for defining in-scope critical data and the requirements for managing such data effectively throughout its lifecycle as a critical corporate asset. This policy is approved by the ERMC.
Chaired by the Chief Data Officer, our Enterprise Data Committee, a sub-committee of the ERMC, provides governance and oversight for our enterprise-wide data governance and management activities.74
Table of ContentsThird Party Risk
We define third party risk as the risk that relationships with third parties (including their significant subcontractors) create unexpected outcomes and deviations from expectations or stated obligations. The Third Party Management Policy is approved by the Risk Committee of our Board and the ERMC. It sets forth the procurement, risk management, and contracting framework for managing third-party relationships commensurate with their risk and complexity. Our Third Party Lifecycle Management program sets guidelines for identifying, measuring, monitoring, and reporting the risk associated with third parties through the life cycle of the relationships, which includes planning, due diligence and third-party selection, contracting, ongoing monitoring and termination.
Conduct Risk
We define conduct risk as the risk that colleagues, intentionally or unintentionally, fail to fulfill their responsibilities to American Express, our customers, colleagues or stakeholders in a manner consistent with our Code of Conduct, policies and values as well as applicable laws and regulations. Conduct issues also have the potential to increase several other risk types, including reputational risk, which may undermine the integrity and trust upon which our brand is built.
The Conduct Risk Management Policy is approved by the ERMC. It establishes the governance framework for conduct risk across the Company. The policy requires annual risk assessments, implementation of detective and preventive controls, colleague training and timely escalations of conduct issues. It also provides guidance on consequence management for any substantiated cases of misconduct. The Conduct Risk Committee oversees conduct risk related topics and escalates such matters to the ERMC, as appropriate.COMPLIANCE RISK MANAGEMENT PROCESS
We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or other forms of sanction as a result of non-compliance with applicable laws and/or regulations, internal policies and procedures and related practices, or ethical standards.We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance Risk Management Committee (CRMC), chaired by the Chief Compliance Officer, is responsible for identifying, evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship directly to both the ERMC and the Audit and Compliance Committee.
We have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the appropriate government authorities. The program includes an independent risk assessment of the rules used by the Anti-Money Laundering team. In addition, the Internal Audit Group reviews the processes for practices consistent with regulatory guidance.REPUTATIONAL RISK MANAGEMENT PROCESS
We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner relationships, business activities and policies, management and workplace culture, or our response to unexpected events, could cause sustained critical media coverage, a decline in revenue or investment, talent attrition, litigation, or government or regulatory scrutiny.
We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of providing the world’s best customer experience and fundamental to our long-term success.
Our business leaders are responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring reputational risk considerations are included in the scope of appropriate subordinate risk policies and committees and properly reflected in all decisions escalated to the ERMC.75
Table of ContentsMARKET RISK MANAGEMENT PROCESS
We define market risk as the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include (i) interest rate risk due to changes in the relationship between the interest rates on our assets (such as loans, receivables and investment securities) and the interest rates on our liabilities (such as debt and deposits) and (ii) foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S. dollar.
Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and escalation triggers. These policies are approved by the ERMC, Asset Liability Committee or Market Risk Management Committee.Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an independent risk assessment and oversight over the policies and exposure management for market risk and Asset Liability Management activities, as well as overseeing compliance with associated regulatory requirements. Market risk management is also guided and governed by policies covering the use of derivative financial instruments, funding, liquidity and investments.Interest Rate Risk
We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on earnings and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over time as a result of, among other things, the proportion of our total funding provided by variable and fixed-rate debt and deposits compared to our Card Member loans and receivables. Interest rate swaps are used from time to time to effectively convert debt issuances to variable-rate from fixed-rate, or vice versa. Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative financial instruments.To measure the sensitivity of net interest income to interest rate changes, we first project net interest income over the following twelve-month time horizon considering forecasted business growth and anticipated future market interest rates. The impact from rate changes is then measured by instantaneously increasing or decreasing the anticipated future interest rates by the amounts set forth in Table 23 below. Our current net interest income sensitivity analysis shows higher interest rates would have a detrimental impact on our net interest income. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities that reprice within the twelve-month horizon generally reprice by the same magnitude, subject to applicable interest rate caps or floors, as benchmark rates change. It is further assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate movements, and the magnitude of this repricing in turn could depend on, among other factors, the direction of rate movements. These assumptions are consistent with historical deposit repricing experience in the industry and within our own portfolio. Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to changes in market interest rates.TABLE 23: SENSITIVITY ANALYSIS OF INTEREST RATE CHANGES ON ANNUAL NET INTEREST INCOME AS OF DECEMBER 31, 2023(Millions) Instantaneous Parallel Rate Shocks (a)
+200bps +100bps -100bps -200bps$ (276) $ (105) $ 74 $ 142(a) Negative values represent a reduction in net interest income.
We use economic value of equity to inform us of the potential impacts from interest rate changes on the net present value of our assets and liabilities under a variety of interest rate scenarios. Economic value of equity is calculated based on our existing assets, liabilities and derivatives, and does not incorporate projected changes in our balance sheet. Key assumptions used in this calculation include the term structure of interest rates, as well as deposit repricing and liquidation profiles used to inform duration and cash flow schedules. The economic value of equity is calculated under multiple interest rate scenarios, including baseline and immediate upward and immediate downward interest rate shocks, to assess its sensitivity to changes in interest rates. Our current sensitivity profile demonstrates that our economic value of equity generally decreases in a declining interest rate scenario and increases in an increasing interest rate scenario. The level of this sensitivity is managed within board-approved policy limits.
Foreign Exchange Risk
Foreign exchange exposures arise in four principal ways: (1) Card Member spending in currencies that are not the billing currency, (2) cross-currency transactions and balances from our funding activities, (3) cross-currency investing activities, such as in the equity of foreign subsidiaries, and (4) revenues generated and expenses incurred in foreign currencies, which impact earnings.These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2023, foreign currency derivative instruments with total notional amounts of approximately $39 billion were outstanding.
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With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward contracts outstanding, the impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been immaterial to projected earnings as of December 31, 2023. With respect to translation exposure of foreign subsidiary equity balances, including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2023. With respect to anticipated earnings denominated in foreign currencies for the next twelve months, the adverse impact on pretax income of a hypothetical 10 percent strengthening of the U.S. dollar would be approximately $242 million as of December 31, 2023.The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses.FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS
We define funding and liquidity risk as our inability to meet our ongoing financial and business obligations at a reasonable cost as they become due.
Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.
Funding and liquidity risk is managed by the Funding and Liquidity Committee. To manage this risk, we seek to maintain access to a diverse set of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business requirements and expected future financing obligations for at least a twelve-month period under a variety of adverse circumstances. These include, but are not limited to, an event where we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions. We consider the trade-offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having inadequate liquidity, which may result in financial distress during a liquidity event.
Funding and liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure that sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy those requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity resources required and monitors positions and determines any actions to be taken.Our liquidity risk management processes are designed in alignment with regulatory guidelines. As discussed in more detail under “Supervision and Regulation — Enhanced Prudential Standards” and “— Capital and Liquidity Regulation” under “Business,” we anticipate becoming a Category III firm in 2024 under U.S. federal bank regulatory agencies’ rules that tailor the application of enhanced prudential standards, which would result in heightened capital, liquidity and prudential requirements, including more stringent liquidity risk management requirements.MODEL RISK MANAGEMENT PROCESS
We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making, damage to our reputation or customer harm, from decisions based on incorrect or misused model outputs and outcomes.The Enterprise-Wide Model Risk Policy establishes the comprehensive framework for governing model risk. This policy is approved by the ERMC. The comprehensive risk management and governance framework includes procedures for model development, independent model validation, model risk reporting and change management capabilities that seek to minimize erroneous model methodology, outputs, and misuse. We also assess model performance and model- related issues on an ongoing basis and seek to address deficiencies in a timely manner. In addition, we utilize artificial intelligence and machine learning (AI/ML) models for a variety of business use cases. We perform extensive reviews and testing to reduce the risk that these AI/ML techniques result in adverse consequences.
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Table of ContentsSTRATEGIC AND BUSINESS RISK MANAGEMENT PROCESSWe define strategic and business risk as the risk related to our inability to achieve our business objectives due to poor strategic decisions, including decisions related to mergers, acquisitions, and divestitures, poor implementation of strategic decisions or declining demand for our products and services.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by committees and business leaders. Mergers, acquisitions and divestitures can only be approved following Executive Committee due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the Chief Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new and material changes to products and services are reviewed and approved by the New Products Committee and appropriate credit or risk committees.COUNTRY RISK MANAGEMENT PROCESS
We define country risk as the risk that economic, social, and/or political conditions and events in a country present. They might adversely impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate capital.
We manage country risk as part of the normal course of business. Policies and procedures establish country risk escalation thresholds to control and limit exposure, driven by processes that enable the monitoring of conditions in countries where we have exposure.CLIMATE-RELATED RISK
Environmental, social and governance (ESG) risks, with an emphasis on climate-related risk, are currently identified as an “emerging risk” within our risk governance framework. We define climate-related risk as: (1) risks related to the transition to a low-carbon economy, which may include extensive changes pertaining to policy, legal, technology, market and reputational risks, and (2) risks related to the physical impacts of climate change, typically driven by acute physical risks such as increased severity of extreme weather events (e.g., cyclones, hurricanes, floods) and chronic physical risks which are longer-term shifts in climate patterns (e.g., sea level rise, chronic heat waves). Such transition and physical risk events driven by climate change can have broad impact on our customers, operations, suppliers and business.
Climate-related risk is interconnected and overarching across all risk types as it may manifest as credit risk, operational risk, market risk, liquidity risk or other risk types. We continue to enhance our focus on climate-related risk within our risk governance framework. We are currently performing a risk identification process for climate-related risk to determine the meaningfulness and measurability of the risk.
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CRITICAL ACCOUNTING ESTIMATES
Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain of our accounting policies requiring significant management assumptions and judgments are as follows:
RESERVES FOR CARD MEMBER CREDIT LOSSES
Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.
In estimating expected credit losses, we use a combination of statistically based models and analysis of the results produced by these models to determine the quantitative and qualitative components of our total balance sheet reserves for credit losses. These quantitative and qualitative components entail a significant amount of judgment. The primary areas of judgment used in measuring the quantitative components of our reserves relate to the determination of the appropriate R&S Period, the modeling of the probability of and exposure at default, and the methodology to incorporate current and future economic conditions. We use these models and assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses for the R&S Period. The qualitative component is intended to capture expected losses that may not have been fully captured in the quantitative component. Through an established governance structure, we consider certain external and internal factors, including emerging portfolio characteristics and trends, which consequentially may increase or decrease the reserves for Card Member credit losses.
The R&S Period, which is approximately three years, represents the maximum time-period beyond the balance sheet date over which we can reasonably estimate expected credit losses, using all available portfolio information, current economic conditions and forecasts of future economic conditions. Card Member loan products do not have a contractual term and balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S Period. To determine expected credit losses beyond the R&S Period, we immediately revert to long-term average loss rates. Card Member receivable products are contractually required to be paid in full; therefore, we have assumed the balances will be either paid or written-off no later than 180 days past due.
Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default. A significant area of judgment relates to how we apply future Card Member payments to the reporting period balances when determining the exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any future spend. Any remaining portion of the future payment is then allocated to the remaining reporting period balance.
CECL requires that the R&S Period include an assumption about current and future economic conditions. We incorporate multiple macroeconomic scenarios provided to us by an independent third party. The estimated credit losses calculated from each macroeconomic scenario are reviewed each period and weighted to reflect management’s judgment about uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real GDP, that are significant to our models.79Table of Contents
Macroeconomic SensitivityTo demonstrate the sensitivity of estimated credit losses to the macroeconomic scenarios, we compared our modeled estimates under a baseline scenario to that under a pessimistic downside scenario. As of December 31, 2023, for every 10 percentage points change in weighting from the baseline scenario to the pessimistic downside scenario, the estimated credit losses increased by approximately $160 million.The modeled estimates under these scenarios were influenced by the duration, severity and timing of changes in economic variables within each scenario and these macroeconomic scenarios, under different conditions or using different assumptions, could result in significantly different estimated credit losses. It is difficult to estimate how potential changes in specific factors might affect the estimated credit losses, and current results may not be indicative of the potential future impact of macroeconomic forecast changes.
In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on the downside scenario at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve component or the impact of management judgment for the qualitative reserve component, which may have a positive or negative effect on the results. Thus, the results of this sensitivity analysis are hypothetical and are not intended to estimate or reflect our expectations of any changes in the overall reserves for credit losses due to changes in the macroeconomic environment.
Refer to Note 3 to the “Consolidated Financial Statements” for further information on the range of macroeconomic scenario key variables used, in conjunction with other inputs described above, to calculate reserves for Card Member credit losses.
The process of estimating these reserves requires a high degree of judgment. To the extent our expected credit loss models are not indicative of future performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or lower future provisions for credit losses in any period.80Table of Contents
LIABILITY FOR MEMBERSHIP REWARDSThe Membership Rewards program is our largest card-based rewards program. Card Members can earn points for purchases charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members to earn bonus points for purchases at merchants in particular industry categories. Membership Rewards points are redeemable for a broad variety of rewards, including, but not limited to, travel, shopping, gift cards, and covering eligible charges. Points typically do not expire, and there is no limit on the number of points a Card Member may earn. Membership Rewards expense is driven by charge volume on enrolled cards, customer participation in the program and contractual arrangements with redemption partners.We record a Membership Rewards liability that represents our best estimate of the cost of points earned that are expected to be redeemed by Card Members in the future. The Membership Rewards liability is impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs. We estimate the Membership Rewards liability by determining the URR and the weighted average cost (WAC) per point, which are applied to the points of current enrollees. Refer to Note 9 to the “Consolidated Financial Statements” for additional information.
The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be redeemed in future periods. We use statistical and actuarial models to estimate the URR of points earned to date by current Card Members based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes. The WAC per point assumption is used to estimate future redemption costs and is primarily based on redemption choices made by Card Members, reward offerings by partners, and Membership Rewards program changes. The WAC per point assumption is derived from 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected developments in redemption patterns.
We periodically evaluate our liability estimation process and assumptions based on changes in cost per point redeemed, partner contract changes and developments in redemption patterns, which may be impacted by product refreshes, changes in redemption options and mix of proprietary cards-in-force.
The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership Rewards expense.Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the liability through the current period Membership Rewards expense by an amount estimated to cover the cost of all points previously earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31, 2023, an increase in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards liability and corresponding rewards expense by approximately $179 million. Similarly, an increase in the WAC per point of 1 basis point would increase the Membership Rewards liability and corresponding rewards expense by approximately $201 million.GOODWILL RECOVERABILITYGoodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment testing contains both a qualitative and quantitative assessment.We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using a more detailed quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit, bypassing the qualitative assessment.81Table of Contents
Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the measurement of fair value for our reporting units, which inherently entails the use of significant management judgment. For valuation, we use a combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair value of our reporting units.
When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of current and expected future economic conditions. To discount these cash flows we use our expected cost of equity, determined using a capital asset pricing model. When using the market method under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’ operating results. The judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could materially affect the fair value of our reporting units.
We could be exposed to an increased risk of goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions.
INCOME TAXES
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. In establishing a provision for income tax expense, we must make judgments about the application of inherently complex tax laws.
Unrecognized Tax Benefits
We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements.
In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the extent to which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized is the largest benefit that we believe is more likely than not to be realized on ultimate settlement. As new information becomes available, we evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate .
Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax.
Deferred Tax Asset Realization
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse.
Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies. These assessments are performed quarterly, taking into account any new information.
Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to uncertainties.82Table of Contents
OTHER MATTERS
RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS
Refer to the Recently Adopted and Issued Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”
GLOSSARY OF SELECTED TERMINOLOGY
Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and interest income not attributable to our Card Member loans.Airline spend — Represents spend at airlines as a merchant, which is included within T&E spend.Allocated service costs — Represents salaries and benefits associated with our technology and customer servicing groups, allocated based on activities directly attributable to our reportable operating segments, as well as overhead expenses, which are allocated to our reportable operating segments based on their relative levels of revenue and Card Member loans and receivables.
Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as asset-backed securities that are secured by the transferred loans and receivables. The trust uses the proceeds from the sale of such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets.
Billed business (Card Member spending) — Represents transaction volumes (including cash advances) on payment products issued by American Express.
Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine whether the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual estimates. Refer to “Consolidated Capital Resources and Liquidity — Capital Strategy” above for further related definitions under Basel III.
Card Member — The individual holder of an issued American Express-branded card.Card Member loans — Represents revolve-eligible transactions on our card products, as well as any interest charges and associated card-related fees.
Card Member receivables — Represents transactions on our card products and card related fees that need to be paid in full on or before the Card Member’s payment due date.Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary cards-in-force) and cards issued and outstanding under network partnership agreements with banks and other institutions, except for retail cobrand cards issued by network partners that had no out-of-store spending activity during the prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer accounts. Cards-in-force is useful in understanding the size of our Card Member base.Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method of payment and not as a means of financing purchases. Each transaction on a charge card with no pre-set spending limit is authorized based on its likely economics reflecting a Card Member’s most recent credit information and spend patterns. Charge Card Members must pay the full amount of balances billed each month, with the exception of balances that can be revolved under lending features offered on certain charge cards, such as Pay Over Time and Plan It, that allow Card Members to pay for eligible purchases with interest over time.
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Table of ContentsCobrand cards — Represents cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.Credit cards — Represents cards that have a range of revolving payment terms, structured payment features (e.g. Plan It), grace periods, and rate and fee structures.
Discount revenue — Represents the amount we earn and retain from the merchant payable for facilitating transactions between Card Members and merchants on payment products issued by American Express.Goods & Services (G&S) spend — Includes spend in merchant categories other than T&E-related merchant categories, which includes B2B spending by small and mid-sized enterprise customers in our CS and ICS segments.
Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds purchased, bank overdrafts and other short-term borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt.
Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest income on deposits with banks and other.
Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the applicable account agreement until the outstanding balance is paid or written off.
Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest income is recognized using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so a constant rate of return is recognized on the outstanding balance of the related investment security throughout its term. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be made as scheduled.
Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term funding requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts.
Loyalty coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally fund the consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the loyalty platform and by providing marketing support.
Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation and deferred acquisition costs.
Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net interest income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to uncollectible interest are recorded through provision for credit losses and are thus not included in the net interest yield calculation.
Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member loans or receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the average loan or receivable balance during the period.
Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.
Network volumes — Represents the total of billed business and processed volumes.
Operating expenses — Represents salaries and employee benefits, professional services, data processing and equipment, and other expenses.84Table of Contents
Processed revenue — Represents revenues related to network partnership agreements, comprising royalties, fees and amounts earned for facilitating transactions on cards issued by network partners. Processed revenue also includes fees earned on alternative payment solutions facilitated by American Express.
Processed volumes — Represents transaction volumes (including cash advances) on cards issued under network partnership agreements with banks and other institutions, including joint ventures, as well as alternative payment solutions facilitated by American Express.Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provision for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for credit losses.
T&E spend — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories.85Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address our current expectations regarding business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “potential,” “continue” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:• our ability to grow earnings per share in the future, which will depend in part on revenue growth, credit performance and the effective tax rate remaining consistent with current expectations and our ability to continue investing at high levels in areas that can drive sustainable growth (including our brand, value propositions, customers, colleagues, marketing, technology and coverage), controlling operating expenses, effectively managing risk and executing our share repurchase program, any of which could be impacted by, among other things, the factors identified in the subsequent paragraphs as well as the following: macroeconomic conditions, such as recession risks, changes in interest rates, effects of inflation, labor shortages and strikes or higher rates of unemployment, supply chain issues, energy costs and fiscal and monetary policies; geopolitical instability, including the ongoing Ukraine and Israel wars and tensions involving China and the United States; the impact of any future contingencies, including, but not limited to, legal costs and settlements, the imposition of fines or monetary penalties, increases in Card Member remediation, investment gains or losses, restructurings, impairments and changes in reserves; issues impacting brand perceptions and our reputation; impacts related to new or renegotiated cobrand and other partner agreements and joint ventures; and the impact of regulation and litigation, which could affect the profitability of our business activities, limit our ability to pursue business opportunities, require changes to business practices or alter our relationships with Card Members, partners and merchants;
• our ability to grow revenues net of interest expense and the sustainability of our future growth, which could be impacted by, among other things, the factors identified above and in the subsequent paragraphs, as well as the following: spending volumes and the spending environment not being consistent with expectations, including T&E spend growing slower than expected, further slowing in spend by U.S. small and mid-sized enterprise or U.S. large and global corporate customers, or a general slowdown or increase in volatility in consumer and business spending volumes; changes in foreign currency exchange rates; an inability to address competitive pressures, innovate and expand our products and services, leverage the advantages of our differentiated business model, attract customers across generations and age cohorts, including Millennial and Gen Z customers and implement strategies and business initiatives, including within the premium consumer space, commercial payments and the global merchant network; the effects of the end of the moratorium on student loan repayments; the impact of the decommissioning of one of our alternative payment solutions; and merchant discount rates changing by a greater or lesser amount than expected;
• net card fees not performing consistently with expectations, which could be impacted by, among other things, a deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees; higher Card Member attrition rates; the pace of Card Member acquisition activity and demand for our fee-based products; and our inability to address competitive pressures, develop attractive premium value propositions and implement our strategy of refreshing card products, enhancing benefits and services and continuing to innovate with respect to our products;
• net interest income, the effects of changes in interest rates and the growth of loans and Card Member receivables outstanding, and the portion of which that is interest bearing, being higher or lower than expectations, which could be impacted by, among other things, the behavior and financial strength of Card Members and their actual spending, borrowing and paydown patterns; our ability to effectively manage risk and enhance Card Member value propositions; changes in benchmark interest rates, including where such changes affect our assets or liabilities differently than expected; changes in capital and credit market conditions and the availability and cost of capital; credit actions, including line size and other adjustments to credit availability; the yield on Card Member loans not remaining consistent with current expectations; our deposit levels or the interest rates we offer on deposits changing from current expectations; and the effectiveness of our strategies to capture a greater share of existing Card Members’ spending and borrowings, and attract new, and retain existing, customers;
• future credit performance, the level of future delinquency, reserve and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; the ability and willingness of Card Members to pay amounts owed to us; changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates); the credit profiles of new customers acquired; the enrollment in, and effectiveness of, financial relief programs and the performance of accounts as they exit from such programs; collections capabilities and recoveries of previously written-off loans and receivables; and governmental actions providing forms of relief with respect to certain loans and fees and the termination of such actions;
• the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by continued changes in macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of spend in bonus categories), the redemption of rewards and offers (including travel redemptions) and usage of travel-related benefits; the costs
86Table of Contentsrelated to reward point redemptions; further enhancements to product benefits to make them attractive to Card Members and prospective customers, potentially in a manner that is not cost-effective; new and renegotiated contractual obligations with business partners; and the pace and cost of the expansion of our global lounge collection;
• the actual amount we spend on marketing in the future, which will be based in part on continued changes in the macroeconomic and competitive environment and business performance; management’s decisions regarding the timing of spending on marketing and the effectiveness of management’s investment optimization process; management’s identification and assessment of attractive investment opportunities; management’s ability to develop attractive premium value propositions and drive customer demand; the receptivity of Card Members and prospective customers to advertising and customer acquisition initiatives; our ability to realize marketing efficiencies and balance expense control and investments in the business;
• our ability to control operating expenses, including relative to future revenue growth, and the actual amount we spend on operating expenses in the future, which could be impacted by, among other things, salary and benefit expenses to attract and retain talent; a persistent inflationary environment; our ability to realize operational efficiencies, including through automation; management’s decision to increase or decrease spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities depending on overall business performance; our ability to innovate efficient channels of customer interactions and the willingness of Card Members to self-service and address issues through digital channels; restructuring activity; supply chain issues; fraud costs; compliance expenses and consulting, legal and other professional services fees, including as a result of litigation or internal and regulatory reviews; regulatory assessments; the level of M&A activity and related expenses, including the completion of our sale of Accertify Inc.; information or cybersecurity incidents; the payment of fines, penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; the performance of Amex Ventures and other of our investments; impairments of goodwill or other assets; and the impact of changes in foreign currency exchange rates on costs, such as due to the devaluation of foreign currencies;
• our tax rate not remaining consistent with expectations, which could be impacted by, among other things, further changes in tax laws and regulation (or related legislative or regulatory inaction), the timing and manner of the implementation of tax guidelines by jurisdictions, our geographic mix of income, unfavorable tax audits and other unanticipated tax items;
• changes affecting our plans regarding the return of capital to shareholders, including increasing the level of our dividend, which will depend on factors such as our capital levels and regulatory capital ratios; changes in the stress testing and capital planning process and new rulemakings and guidance from the Federal Reserve and other banking regulators, including changes to regulatory capital requirements, such as final rules resulting from the U.S. federal bank regulatory agencies’ capital rule proposal; our results of operations and financial condition; our credit ratings and rating agency considerations; required Company approvals; and the economic environment and market conditions in any given period;
• changes affecting the expected timing for closing the sale of Accertify Inc., the amount of the potential gain we recognize upon the closing and the portion of such gain management determines to reinvest back into our business, which will depend on regulatory and other approvals, consultation requirements, the execution of ancillary agreements, the cost and availability of financing for the purchaser to fund the transaction and the potential loss of key customers, vendors and other business partners and management’s decisions regarding future operations, strategies and business initiatives;
• changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may materially impact the prices charged to merchants that accept American Express cards, the desirability of our premium card products, competition for new and existing cobrand relationships, competition with respect to new products, services and technologies, competition from new and non-traditional competitors and the success of marketing, promotion and rewards programs;
• our ability to expand our leadership in the premium consumer space, which will be impacted in part by competition, brand perceptions (including perceptions related to merchant coverage) and reputation, and our ability to develop and market new benefits and value propositions that appeal to Card Members and new customers, offer attractive services and rewards programs and build greater customer loyalty, which will depend in part on identifying and funding investment opportunities, addressing changing customer behaviors, new product innovation and development, Card Member acquisition efforts and enrollment processes, including through digital channels, continuing to realize the benefits from strategic partnerships and evolving our infrastructure to support new products, services and benefits;
• our ability to build on our leadership in commercial payments, which will depend in part on competition, the willingness and ability of companies to use credit and charge cards for procurement and other business expenditures as well as use our other products and services for financing needs, perceived or actual difficulties and costs related to setting up card-based B2B payment platforms, our ability to offer attractive value propositions and new products to potential customers, our ability to enhance and expand our payment and lending solutions, and build out a multi-product digital ecosystem to integrate our broad product set, which is dependent on our continued investment in capabilities, features, functionalities, platforms and technologies;
• our ability to expand merchant coverage globally and our success, as well as the success of OptBlue merchant processors and network partners, in signing merchants to accept American Express, which will depend on, among other factors, the value propositions offered to merchants and merchant acquirers for card acceptance, the awareness and willingness of Card
87Table of ContentsMembers to use American Express cards at merchants, scaling marketing and expanding programs to increase card usage, identifying new-to-plastic industries and businesses as they form, working with commercial buyers and suppliers to establish B2B acceptance, increasing coverage in priority international cities and countries and key industry verticals, and executing on our plans in China and for continued technological developments, including capabilities that allow for greater digital integration and modernization of our authorization platform;
• our ability to successfully invest in and compete with respect to technological developments and digital payment and travel solutions, which will depend in part on our success in evolving our products and processes for the digital environment, developing new features in the Amex app and enhancing our digital channels, building partnerships and executing programs with other companies, effectively utilizing artificial intelligence and machine learning and increasing automation to address servicing and other customer needs, and supporting the use of our products as a means of payment through online and mobile channels, all of which will be impacted by investment levels, new product innovation and development and infrastructure to support new products, services, benefits and partner integrations;
• our ability to grow internationally, which could be impacted by regulation and business practices, such as those capping interchange or other fees, mandating network access or data localization, favoring local competitors or prohibiting or limiting foreign ownership of certain businesses; our inability to tailor products and services to make them attractive to local customers; competitors with more scale, local experience and established relationships with relevant customers, regulators and industry participants; the success of our network partners in acquiring Card Members and/or merchants; political or economic instability or regional hostilities, including as a result of the Ukraine and Israel wars;
• a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties, including as a result of cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of data, disrupt our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;• changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs and expectations regarding capital ratios; our access to capital and funding costs; the valuation of our assets; and our credit ratings or those of our subsidiaries;• our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various factors such as future business growth, the impact of global economic, political and other events on market capacity, demand for securities we offer, regulatory changes, our ability to securitize and sell loans and receivables and the performance of loans and receivables previously sold in securitization transactions;• our ability to implement our ESG strategies and initiatives, which depend in part on the amount and efficacy of our investments in product innovations, marketing campaigns, our supply chain and operations, and philanthropic, colleague and community programs; customer preferences and behaviors; and the cost and availability of solutions for a low carbon economy;
• legal and regulatory developments, which could affect the profitability of our business activities; limit our ability to pursue business opportunities or conduct business in certain jurisdictions; require changes to business practices or governance, or alter our relationships with Card Members, partners, merchants and other third parties, including our ability to continue certain cobrand relationships in the EU; exert further pressure on merchant discount rates and our network business; alter the competitive landscape; result in increased costs related to regulatory oversight and compliance, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or monetary penalties; materially affect capital or liquidity requirements, results of operations or ability to pay dividends; or result in harm to the American Express brand;• changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, including of cobrand partners, merchants that represent a significant portion of our business, network partners or financial institutions that we rely on for routine funding and liquidity, which could materially affect our financial condition or results of operations; and• factors beyond our control such as global economic and business conditions, consumer and business spending generally, unemployment rates, geopolitical conditions, including further escalations or widening of ongoing military conflicts, adverse developments affecting third parties, including other financial institutions, merchants or vendors, as well as severe weather conditions, natural disasters, power loss, disruptions in telecommunications, health pandemics, terrorism and other catastrophic events, any of which could significantly affect demand for and spending on American Express cards, delinquency rates, loan and receivable balances, deposit levels and other aspects of our business and results of operations or disrupt our global network systems and ability to process transactions.A further description of these uncertainties and other risks can be found in “Risk Factors” and our other reports filed with the SEC.88Table of Contents
FY 2024-12-31 (later)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
We are a globally integrated payments company with four reportable operating segments: U.S. Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS) and Global Merchant and Network Services (GMNS). Corporate functions and certain other businesses and operations are included in Corporate & Other.
Our range of products and services includes:
• Credit card, charge card, banking and other payment and financing products• Merchant acquisition and processing, servicing and settlement, fraud prevention, and point-of-sale marketing and information products and services for merchants• Network services• Travel and lifestyle services• Expense management products and services
• Other services, such as the design and operation of customer loyalty programsThe following types of revenue are generated from our various products and services:• Discount revenue, our largest revenue source, primarily represents the amount we earn and retain from the merchant payable for facilitating transactions between Card Members and merchants on payment products issued by American Express. The amount of fees charged for accepting our cards as payment, or merchant discount, varies with, among other factors, the industry in which the merchant conducts business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the card acceptance agreement between the merchant and us (e.g., local or global) and the transaction amount. In some instances, an additional flat transaction fee is assessed as part of the merchant discount, and additional fees may be charged such as a variable fee for card-not-present transactions or for transactions using cards issued outside the United States at merchants located in the United States;• Interest income, principally represents interest earned on outstanding loan balances;
• Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account;• Service fees and other revenue, primarily represent service fees earned from merchants and other customers, foreign currency-related fees charged to Card Members, Card Member delinquency fees, travel commissions and fees, and income (losses) from our investments in which we have significant influence; and• Processed revenue, primarily represents revenues related to network partnership agreements, comprising royalties, fees and amounts earned for facilitating transactions on cards issued by network partners.Refer to the “Glossary of Selected Terminology” below for the definitions of certain key terms and related information appearing within this Form 10-K and “Critical Accounting Estimates” below for a discussion of certain of our accounting policies requiring significant management assumptions and judgements.NON-GAAP MEASURES
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included within this report constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.43Table of Contents
TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE
Years Ended December 31, Change Change(Millions, except percentages, per share amounts and where indicated) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Selected Income Statement DataTotal revenues net of interest expense $ 65,949 $ 60,515 $ 52,862 $ 5,434 9 % $ 7,653 14 %
Total revenues net of interest expense (FX-adjusted) (a)
60,179 52,833 5,770 10 7,682 15Provisions for credit losses5,185 4,923 2,182 262 5 2,741 #Total expenses47,869 45,079 41,095 2,790 6 3,984 10
Pretax income 12,895 10,513 9,585 2,382 23 928 10
Income tax provision 2,766 2,139 2,071 627 29 68 3
Net income 10,129 8,374 7,514 1,755 21 860 11
Earnings per common share — diluted (b)
$ 14.01 $ 11.21 $ 9.85 $ 2.80 25 % $ 1.36 14 %Selected Balance Sheet DataCash and cash equivalents $ 40,640 $ 46,596 $ 33,914 $ (5,956) (13) % $ 12,682 37 %
Card Member receivables 59,411 60,411 57,613 (1,000) (2) 2,798 5
Card Member loans 139,674 125,995 107,964 13,679 11 18,031 17
Customer deposits 139,413 129,144 110,239 10,269 8 18,905 17
Long-term debt $ 49,715 $ 47,866 $ 42,573 $ 1,849 4 % $ 5,293 12 %
Common Share Statistics (c)
Cash dividends declared per common share $ 2.80 $ 2.40 $ 2.08 $ 0.40 17 % $ 0.32 15 %Average common shares outstanding:Basic 712 735 751 (23) (3) (16) (2)
Diluted 713 736 752 (23) (3) % (16) (2) %Selected Metrics and RatiosNetwork volumes (billions)
$ 1,764.8 $ 1,680.1 $ 1,552.8 $ 85 5 % $ 127 8 %
Billed business (billions)
1,550.9 1,459.6 1,338.3 91 6 121 9
Total loans and Card Member receivables (d)
208,317 193,492 170,993 14,825 8 22,499 13
Total loans and Card Member receivables (FX-adjusted) (a)(d)
$ 190,826 $ 171,594 $ 17,491 9 % $ 21,898 13 %Card Member loans and receivablesNet write-off rate — principal, interest and fees (e)
2.3 % 2.0 % 1.0 %
Net write-off rate — principal only — consumer and small business (e)(f)
2.0 % 1.8 % 0.9 %
30+ days past due as a % of total — consumer and small business (g)
1.3 % 1.3 % 1.1 %
Effective tax rate 21.5 % 20.3 % 21.6 %
Return on average equity (h)
34.6 % 31.5 % 32.3 %
Common Equity Tier 1 10.5 % 10.5 % 10.3 %# Denotes a variance of 100 percent or more(a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency conversion into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current period apply to the corresponding prior year period against which such results are being compared). FX-adjusted Total revenues net of interest expense and Total loans and Card Member receivables are non-GAAP measures. We believe the presentation of information on a foreign currency adjusted basis is helpful to investors by making it easier to compare our performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.
(b) Represents net income, less (i) earnings allocated to participating share awards of $76 million, $64 million and $57 million for the years ended December 31, 2024, 2023 and 2022, respectively, and (ii) dividends on preferred shares of $58 million, $58 million and $57 million for the years ended December 31, 2024, 2023 and 2022, respectively. Refer to Note 16 and Note 21 to the “Consolidated Financial Statements” for further details on preferred shares and earnings per common share (EPS), respectively.
(c) Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP.
(d) Total loans reflects Card Member loans and Other loans.
(e) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(f) A net write-off rate based on principal losses only is not available for corporate receivables due to system constraints.
(g) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. Refer to Table 12 for 90+ days past billing metrics for corporate receivables.
(h) Return on average equity (ROE) is calculated by dividing (i) net income for the period by (ii) average shareholders’ equity for the period.
44Table of ContentsBUSINESS PERFORMANCE
Our strong results for the year reflect the momentum and earnings power of our business model and our continued investments for growth. We saw record levels of annual Card Member spending, strong new card acquisitions, excellent credit performance and disciplined expense management. Net income for the year was $10.1 billion, or $14.01 per share, compared with net income of $8.4 billion, or $11.21 per share, a year ago. Our full year results reflect the sale of Accertify Inc. (Accertify), which resulted in a gain of $531 million ($479 million after tax or $0.66 per share).
Billed business grew by 6 percent, reflecting a stable spend environment for most of the year with an acceleration in the fourth quarter. This growth was broad-based across geographies and across both G&S and T&E categories. U.S. Consumer Services billed business grew by 7 percent year-over-year, with continued strength in spending by Millennial and Gen-Z Card Members as our products continue to resonate with these cohorts. Commercial Services billed business grew by 2 percent on a year-over-year basis, reflecting continued modest growth from U.S. small and mid-sized enterprise (SME) Card Members. Spending by existing U.S. SME Card Members declined slightly year-over-year, although we saw an improvement in small business sentiment in the fourth quarter and strong new card acquisitions for the year. International Card Services billed business grew by 11 percent year-over-year (14 percent on an FX-adjusted basis), driven by continued strong growth in spend across all regions and customer types outside the United States. 1 The continued global expansion of our merchant network contributed to our growth, as we added millions of new merchant locations globally in 2024 and continued to increase coverage across our top international countries.
Total revenues net of interest expense increased 9 percent year-over-year (10 percent on an FX-adjusted basis). 1 Growth in billed business drove a 5 percent increase in Discount revenue, our largest revenue line. Net card fees increased 16 percent year-over-year, reflecting high levels of new card acquisitions and Card Member retention, as well as the ongoing execution of our product refresh strategy. Net interest income increased 18 percent versus the prior year, outpacing growth in Total loans and Card Member receivables of 8 percent year-over-year, primarily due to higher growth in our revolving loan balances. The growth in Total loans and Card Member receivables and revolving loan balances both moderated over the course of the year. During the fourth quarter, we reclassified $758 million of Card Member loans related to the Lowe’s small business cobrand portfolio from held for investment to held for sale (HFS).
Provisions for credit losses increased, primarily driven by higher net write-offs, partially offset by a lower reserve build compared to last year. Net write-off and delinquency rates were relatively stable throughout the year and remain best-in-class supported by our premium global customer base, our strong focus on risk management and disciplined growth strategy.
Card Member rewards, Card Member services and Business development expenses, which are generally correlated to volumes or are variable based on usage, collectively grew slightly faster than revenues as we continue to enhance our value propositions, drive Card Member engagement and acquire more Card Members on premium products. Marketing expense increased 16 percent year-over-year, as we invested at an elevated level in growth initiatives, including acquiring high spending, high credit-quality customers. During the year we acquired a record 13 million proprietary new cards. Operating expenses decreased 2 percent, primarily reflecting the gain recognized on the sale of Accertify and our continued operating expense discipline. We remain focused on driving marketing and operating expense efficiencies over time.
During the year, we maintained our capital ratios within our current target range of 10 to 11 percent and returned $7.9 billion of capital to our shareholders in the form of share repurchases and common stock dividends. We plan to continue to return to shareholders the excess capital we generate while managing our CET1 capital ratio within our target range and supporting balance sheet growth. We also expect to increase the regular quarterly dividend on common shares outstanding by approximately 17 percent beginning with the first quarter 2025 dividend declaration. Our robust capital, funding and liquidity positions provide us with significant flexibility to maintain a strong balance sheet.
Our performance continues to give us confidence in our business model and while we recognize the uncertainty of the geopolitical and macroeconomic environment and the evolving regulatory and competitive landscape, we remain committed to executing on our strategy to deliver sustainable and profitable long-term growth.See “Supervision and Regulation” under “Business” for information on legislative and regulatory changes that could have a material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for information on potential impacts of macroeconomic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business.1 The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency conversion into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current period apply to the corresponding prior year period against which such results are being compared). FX-adjusted revenues is a non-GAAP measure. We believe the presentation of information on a foreign currency adjusted basis is helpful to investors by making it easier to compare our performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.
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CONSOLIDATED RESULTS OF OPERATIONSThe discussions in both “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the year ended December 31, 2024 compared to the year ended December 31, 2023, as presented in the accompanying tables. For a discussion of the financial condition and results of operations for 2023 compared to 2022, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 9, 2024.TABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY
Years Ended December 31, Change Change(Millions, except percentages) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022
Discount revenue $ 35,192 $ 33,416 $ 30,739 $ 1,776 5 % $ 2,677 9 %
Net card fees 8,449 7,255 6,070 1,194 16 1,185 20
Service fees and other revenue 5,129 5,005 4,521 124 2 484 11
Processed revenue 1,636 1,705 1,637 (69) (4) 68 4
Total non-interest revenues 50,406 47,381 42,967 3,025 6 4,414 10
Total interest income 23,795 19,983 12,658 3,812 19 7,325 58
Total interest expense 8,252 6,849 2,763 1,403 20 4,086 #
Net interest income 15,543 13,134 9,895 2,409 18 3,239 33
Total revenues net of interest expense $ 65,949 $ 60,515 $ 52,862 $ 5,434 9 % $ 7,653 14 %# Denotes a variance of 100 percent or more
TOTAL REVENUES NET OF INTEREST EXPENSEDiscount revenue increased, primarily driven by an increase in billed business of 6 percent. See Tables 5 and 6 for more details on billed business performance.
Net card fees increased, primarily driven by growth in our premium card portfolios. See Table 5 for more details on proprietary new card acquisitions, proprietary cards-in-force and average fee per card.
Service fees and other revenue increased, primarily driven by increases in foreign exchange related revenues associated with Card Member cross-currency spending, loyalty coalition-related fees and merchant service fees, partially offset by Accertify revenues included in the prior year.
Processed revenue decreased, and was relatively flat on an FX-adjusted basis. 2 See Tables 5 and 6 for more details on processed volume performance.
Interest income increased, primarily driven by growth in revolving loan balances and higher interest rates.
Interest expense increased, primarily driven by higher interest rates paid on, and growth in, customer deposits and long-term debt.
2 Refer to footnote 1 on page 45 for details regarding foreign currency adjusted information.
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TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY
Years Ended December 31, Change Change(Millions, except percentages) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Card Member loansNet write-offs $ 3,515 $ 2,486 $ 1,066 $ 1,029 41 % $ 1,420 # %Reserve build (release) (a)594 1,353 448 (759) (56) 905 #
Total 4,109 3,839 1,514 270 7 2,325 #Card Member receivablesNet write-offs 773 937 462 (164) (18) 475 #
Reserve build (release) (a)
1 (57) 165 58 # (222) #
Total 774 880 627 (106) (12) 253 40OtherNet write-offs — Other loans
187 107 22 80 75 85 #
Net write-offs — Other receivables
44 25 15 19 76 10 67
Reserve build (release) — Other loans (a)
69 67 7 2 3 60 #
Reserve build (release) — Other receivables (a)
2 5 (3) (3) (60) 8 #
Total 302 204 41 98 48 163 #Total provisions for credit losses$ 5,185 $ 4,923 $ 2,182 $ 262 5 % $ 2,741 # %# Denotes a variance of 100 percent or more
(a) Refer to the “Glossary of Selected Terminology” below for a definition of reserve build (release).PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs driven by growth in loans outstanding, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding. The reserve build in the prior year was primarily driven by an increase in loans outstanding and higher delinquencies.
Card Member receivables provision for credit losses decreased, primarily due to lower net write-offs, partially offset by a reserve release in the prior year. The reserve release in the prior year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding.
Other provision for credit losses increased, primarily due to higher net write-offs.
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TABLE 4: EXPENSES SUMMARY
Years Ended December 31, Change Change(Millions, except percentages) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Card Member rewards$ 16,599 $ 15,367 $ 14,002 $ 1,232 8 % $ 1,365 10 %
Business development 5,886 5,657 4,943 229 4 714 14
Card Member services 4,782 3,968 2,959 814 21 1,009 34
Marketing 6,040 5,213 5,458 827 16 (245) (4)
Salaries and employee benefits 8,198 8,067 7,252 131 2 815 11Other, net6,364 6,807 6,481 (443) (7) 326 5
Total expenses $ 47,869 $ 45,079 $ 41,095 $ 2,790 6 % $ 3,984 10 %EXPENSESCard Member rewards expense increased, driven by increases in Membership Rewards and cash back rewards expenses, collectively, of $705 million, and cobrand rewards expense of $527 million, all of which were primarily driven by higher billed business. In the second half of the year, the increase in Membership Rewards expense was also driven by an increase in the Ultimate Redemption Rate (URR) and slightly higher redemption costs reflecting a shift in the mix of Card Member redemptions.
The Membership Rewards URR for current program participants was 96 percent (rounded down) at both December 31, 2024 and 2023.
Business development expense increased, primarily due to increased partner payments driven by higher network volumes, partially offset by lower client incentives and a prior-year charge related to revenue allocated to a joint venture partner.
Card Member services expense increased, primarily due to growth in premium card accounts, contributing to a higher usage of travel-related benefits.
Marketing expense increased, reflecting higher levels of spending on customer acquisition and other growth initiatives.
Salaries and employee benefits expense increased, primarily driven by higher incentive and compensation costs, partially offset by lower restructuring costs.
Other expenses decreased, primarily driven by the gain recognized on the sale of Accertify, foreign exchange-related gains and net gains on Amex Ventures investments, partially offset by an increase in legal reserves, higher professional service costs and a charge associated with an increase in international non-income tax reserves.
48Table of ContentsINCOME TAXES
The effective tax rate was 21.5 percent and 20.3 percent for 2024 and 2023, respectively. The increase in the effective tax rate primarily reflected discrete tax benefits in the prior year.TABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION
Change ChangeYears Ended December 31, 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Network volumes (billions)$ 1,764.8 $ 1,680.1 $ 1,552.8 5 % 8 %
Billed business $ 1,550.9 $ 1,459.6 $ 1,338.3 6 9
Processed volumes $ 213.9 $ 220.5 $ 214.5 (3) 3Cards-in-force (millions)146.5 141.2 133.3 4 6
Proprietary cards-in-force 83.6 80.2 76.7 4 5Basic cards-in-force (millions)123.3 118.7 111.5 4 6
Proprietary basic cards-in-force 64.3 61.7 59.1 4 4Average proprietary basic Card Member spending (dollars)$ 24,608 $ 24,059 $ 23,496 2 2Average fee per card (dollars) (a)$ 103 $ 92 $ 82 12 % 12 %
Proprietary new cards acquired (millions)
13.0 12.2 12.5Discount revenue as a % of Billed business2.27% 2.29% 2.30%(a) Average fee per card is computed on an annualized basis based on proprietary Net card fees divided by average proprietary total cards-in-force.
TABLE 6: NETWORK VOLUMES-RELATED STATISTICAL INFORMATION2024 2023Year over Year Percentage Increase (Decrease) Percentage Increase (Decrease) Assuming No Changes in FX Rates (a)
Year over Year Percentage Increase (Decrease) Percentage Increase (Decrease)
Assuming No Changes in FX Rates (a)Network volumes 5 % 6 % 8 % 9 %
Total billed business 6 7 9 9
U.S. Consumer Services 7 10
Commercial Services 2 2 3 3
International Card Services 11 14 17 18
Processed volumes (3) — 3 6Merchant industry billed business metricsG&S spend (73% and 72% of billed business for 2024 and 2023, respectively)
7 6 6 6
T&E spend (27% and 28% of billed business for 2024 and 2023, respectively)
5 % 8 % 19 % 19 %(a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of conversion into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply to the corresponding prior-year period against which such results are being compared).49Table of Contents
TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages)
2024 2023 2022 2024 vs. 2023
2023 vs. 2022Card Member loans and receivables:
Net write-off rate — principal, interest and fees (a)2.3 % 2.0 % 1.0 %
Net write-off rate — principal only — consumer and small business (a)(b)
2.0 % 1.8 % 0.9 %
30+ days past due as a % of total — consumer and small business (c)
1.3 % 1.3 % 1.1 %Card Member loans:Card Member loans
$ 139,674 $ 125,995 $ 107,964 11 % 17 %Credit loss reserves:Beginning balance $ 5,118 $ 3,747 $ 3,305 37 13
Provisions — principal, interest and fees 4,109 3,839 1,514 7 #
Net write-offs — principal less recoveries (2,894) (2,043) (837) 42 #
Net write-offs — interest and fees less recoveries (621) (443) (229) 40 93Other (d)(33) 18 (6) # #
Ending balance $ 5,679 $ 5,118 $ 3,747 11 37
% of loans 4.1 % 4.1 % 3.5 %
% of past due 288 % 297 % 348 %
Average loans
$ 130,758 $ 114,816 $ 95,369 14 20Net write-off rate — principal, interest and fees (a)2.7 % 2.2 % 1.1 %Net write-off rate — principal only (a)2.2 % 1.8 % 0.9 %30+ days past due as a % of total1.4 % 1.4 % 1.0 %Card Member receivables:Card Member receivables
$ 59,411 $ 60,411 $ 57,613 (2) 5Credit loss reserves:Beginning balance $ 174 $ 229 $ 64 (24) #Provisions — principal and fees774 880 627 (12) 40
Net write-offs — principal and fees less recoveries
(773) (937) (462) (18) #Other (d)(4) 2 — # —
Ending balance $ 171 $ 174 $ 229 (2) % (24) %
% of receivables 0.3 % 0.3 % 0.4 %
Net write-off rate — principal and fees (a)
1.3 % 1.6 % 0.8 %
Net write-off rate — principal only — consumer and small business (a)(b)
1.5 % 1.8 % 0.9 %
30+ days past due as a % of total — consumer and small business (c)
0.9 % 1.1 % 1.3 %# Denotes a variance of 100 percent or more
(a) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.
(b) A net write-off rate based on principal losses only is not available for corporate receivables due to system constraints.
(c) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. Refer to Table 12 for 90+ days past billing metrics for corporate receivables.
(d) Other includes foreign currency translation adjustments.50Table of Contents
TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS
Years Ended December 31,(Millions, except percentages)
2024 2023 2022
Net interest income $ 15,543 $ 13,134 $ 9,895Exclude:
Interest expense not attributable to our Card Member loan portfolio (a)3,599 2,943 1,268Interest income not attributable to our Card Member loan portfolio (b)(3,599) (2,896) (1,023)Adjusted net interest income (c)$ 15,543 $ 13,181 $ 10,140
Average Card Member loans including loans held for sale (d)
$ 130,817 $ 114,816 $ 95,369Net interest income divided by average Card Member loans (c)11.9 % 11.4 % 10.4 %Net interest yield on average Card Member loans (c)11.9 % 11.5 % 10.6 %(a) Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables.
(b) Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment portfolios.
(c) Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to the “Glossary of Selected Terminology” below for the definitions of these terms. We believe adjusted net interest income is useful to investors because it represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net interest yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a GAAP measure, includes elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not representative of net interest yield on average Card Member loans.(d) For purposes of the calculation of net interest yield on Card Member loans, average loans includes loans held for sale (HFS) as we continue to recognize interest income on these loans until they are sold. Refer to Note 1 to the Consolidated Financial Statements for further information on loans HFS.
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BUSINESS SEGMENT RESULTS OF OPERATIONS
We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and “Business” for additional discussion of products and services that comprise each segment.Results of the reportable operating segments generally treat each segment as a stand-alone business. The management reporting process that derives these results allocates revenue and expense using various methodologies as described below.
TOTAL REVENUES NET OF INTEREST EXPENSE
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the USCS, CS and ICS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue being allocated.
Net card fees, processed revenue and certain other revenues are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.
PROVISIONS FOR CREDIT LOSSES
The provisions for credit losses are directly attributable to the segment in which they are reported.
EXPENSES
Card Member rewards and Card Member services expenses are included in each segment based on the actual expenses incurred. Business development and Marketing expenses are included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue.
Salaries and employee benefits and other expenses reflect both costs incurred directly within each segment, as well as allocated expenses. The allocated expenses include service costs, which primarily reflect salaries and benefits associated with our technology and customer servicing groups, and overhead expenses. Service costs are allocated based on activities directly attributable to the segment, and overhead expenses are allocated based on the relative levels of revenue and Card Member loans and receivables. As a proportion of Salaries and employee benefits and other expenses, allocated costs remain relatively consistent from period to period. Increases in expenses year-over-year driven by allocated costs primarily reflect the changes in salaries and employee benefit costs and other costs related to our technology or servicing organizations and the growth in business volume within our operating segments.52Table of Contents
U.S. CONSUMER SERVICES
TABLE 9: USCS SELECTED INCOME STATEMENT DATA
Years Ended December 31, Change Change(Millions, except percentages) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022RevenuesNon-interest revenues $ 20,137 $ 18,464 $ 16,440 $ 1,673 9 % $ 2,024 12 %
Interest income 14,430 12,336 8,457 2,094 17 3,879 46
Interest expense 3,140 2,684 983 456 17 1,701 #
Net interest income 11,290 9,652 7,474 1,638 17 2,178 29
Total revenues net of interest expense 31,427 28,116 23,914 3,311 12 4,202 18
Provisions for credit losses 3,029 2,855 1,021 174 6 1,834 #
Total revenues net of interest expense after provisions for credit losses 28,398 25,261 22,893 3,137 12 2,368 10ExpensesCard Member rewards, business development and Card Member services
14,329 12,808 10,791 1,521 12 2,017 19
Marketing
3,051 2,585 2,744 466 18 (159) (6)Salaries and employee benefits and other operating expenses4,641 4,435 3,958 206 5 477 12
Total expenses 22,021 19,828 17,493 2,193 11 2,335 13
Pretax segment income $ 6,377 $ 5,433 $ 5,400 $ 944 17 % $ 33 1 %# Denotes a variance of 100 percent or moreUSCS issues a wide range of proprietary consumer cards and provides services to U.S. consumers, including travel and lifestyle services as well as banking and non-card financing products. USCS also manages our dining platform that provides digital tools for restaurants and reservation bookings for diners.TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees.Discount revenue increased 7 percent, primarily driven by an increase in U.S. consumer billed business. See Tables 5, 6 and 10 for more details on billed business performance.
Net card fees increased 18 percent, primarily driven by growth in our premium card portfolios.
Service fees and other revenue increased 5 percent, primarily driven by revenue from the sale of reward points and higher delinquency fees, partially offset by lower travel commissions and fees from our Amex Travel business.
Interest income increased, primarily driven by growth in revolving loan balances and higher interest rates.
Interest expense increased, primarily driven by a higher cost of funds due to segment net asset growth and higher interest rates.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding. The reserve build in the prior year was primarily driven by an increase in loans outstanding and higher delinquencies.
Card Member receivables provision for credit losses decreased, primarily due to a higher reserve release and lower net write-offs in the current year. The reserve releases in both the current and prior years were primarily driven by lower delinquencies and a decrease in receivables outstanding.
Other provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve builds in both the current and prior years were primarily driven by increases in Other loans outstanding.
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EXPENSESTotal expenses increased, primarily driven by higher Card Member rewards, Card Member services and Marketing expenses.
Card Member rewards expense increased, primarily driven by higher billed business. In the second half of the year, the increase in Membership Rewards expense was also driven by an increase in the URR and slightly higher redemption costs reflecting a shift in the mix of Card Member redemptions.
Business development expense increased, primarily due to increased partner payments driven by higher billed business.
Card Member services expense increased, primarily due to growth in premium card accounts, contributing to a higher usage of travel-related benefits.
Marketing expense increased, reflecting higher levels of spending on customer acquisition and other growth initiatives.
Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs.
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TABLE 10: USCS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Billed business (billions)$ 654.8 $ 610.8 $ 553.0 7 % 10 %
Proprietary cards-in-force 46.3 43.8 41.7 6 5
Proprietary basic cards-in-force 32.5 30.7 29.2 6 5Average proprietary basic Card Member spending (dollars)$ 20,707 $ 20,303 $ 19,514 2 4
Total segment assets
$ 114,228 $ 107,158 $ 94,444 7 13Card Member loans:Total loans
$ 92,632 $ 83,207 $ 72,660 11 15
Average loans
$ 85,264 $ 75,975 $ 63,720 12 19Net write-off rate — principal, interest and fees (a)2.7 % 2.2 % 1.1 %Net write-off rate — principal only (a)2.2 % 1.7 % 0.9 %
30+ days past due as a % of total 1.4 % 1.4 % 1.0 %Calculation of Net Interest Yield on Average Card Member Loans:
Net interest income$ 11,290 $ 9,652 $ 7,474Exclude:
Interest expense not attributable to our Card Member loan portfolio (b)198 192 139Interest income not attributable to our Card Member loan portfolio (c)(557) (386) (228)Adjusted net interest income (d)$ 10,931 $ 9,458 $ 7,385
Average Card Member loans
$ 85,264 $ 75,975 $ 63,720Net interest income divided by average Card Member loans (d)13.2 % 12.7 % 11.7 %Net interest yield on average Card Member loans (d)12.8 % 12.4 % 11.6 %Card Member receivables:Total receivables
$ 14,419 $ 14,789 $ 14,263 (3) % 4 %Net write-off rate — principal and fees (a)1.2 % 1.3 % 0.6 %Net write-off rate — principal only (a)1.1 % 1.2 % 0.6 %
30+ days past due as a % of total 0.6 % 0.8 % 0.9 %(a) Refer to Table 7 footnote (a).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).55Table of Contents
COMMERCIAL SERVICES
TABLE 11: CS SELECTED INCOME STATEMENT DATA
Years Ended December 31, Change Change(Millions, except percentages) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022RevenuesNon-interest revenues $ 13,219 $ 12,931 $ 12,196 $ 288 2 % $ 735 6 %
Interest income 4,374 3,328 2,070 1,046 31 1,258 61
Interest expense 1,734 1,483 697 251 17 786 #
Net interest income 2,640 1,845 1,373 795 43 472 34
Total revenues net of interest expense 15,859 14,776 13,569 1,083 7 1,207 9
Provisions for credit losses 1,389 1,313 565 76 6 748 #
Total revenues net of interest expense after provisions for credit losses 14,470 13,463 13,004 1,007 7 459 4ExpensesCard Member rewards, business development and Card Member services
6,504 6,332 6,116 172 3 216 4
Marketing
1,319 1,090 1,122 229 21 (32) (3)Salaries and employee benefits and other operating expenses3,142 3,180 2,886 (38) (1) 294 10
Total expenses 10,965 10,602 10,124 363 3 478 5
Pretax segment income $ 3,505 $ 2,861 $ 2,880 $ 644 23 % $ (19) (1) %# Denotes a variance of 100 percent or more
CS issues a wide range of proprietary corporate and small business cards and provides services to U.S. businesses, including payment and expense management, banking and non-card financing products. CS also issues proprietary corporate cards and provides services to select global corporate clients.
TOTAL REVENUES NET OF INTEREST EXPENSENon-interest revenues increased, primarily driven by higher Discount revenue and Net card fees.
Discount revenue increased 2 percent, primarily driven by an increase in commercial billed business. See Tables 5, 6 and 12 for more details on billed business performance.
Net card fees increased 12 percent, primarily driven by growth in our premium card portfolios.
Service fees and other revenue decreased 7 percent, primarily driven by lower travel commissions and fees from our Amex Travel business.
Interest income increased, primarily driven by growth in revolving loan balances and higher interest rates.
Interest expense increased, primarily driven by a higher cost of funds due to segment net asset growth and higher interest rates.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding. The reserve build in the prior year was primarily driven by an increase in loans outstanding and higher delinquencies.
Card Member receivables provision for credit losses decreased, primarily due to lower net write-offs, partially offset by a reserve release in the prior year. The reserve release in the prior year was primarily driven by lower delinquencies and a decrease in receivables outstanding.
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EXPENSESTotal expenses increased, primarily driven by higher Marketing and Card Member rewards expenses, partially offset by a decrease in Operating expenses and Business development expense.
Card Member rewards expense increased, primarily driven by higher billed business and slightly higher redemption costs in the second half of the year, partially offset by a decrease in the Membership Rewards URR.
Business development expense decreased, primarily due to lower client incentives, partially offset by increased partner payments due to higher billed business.
Card Member services expense increased, primarily due to growth in premium card accounts, contributing to a higher usage of travel-related benefits.
Marketing expense increased, reflecting higher levels of spending on customer acquisition and other growth initiatives.
Salaries and employee benefits and other expenses decreased, primarily driven by a decrease in allocated service costs and lower restructuring costs, partially offset by higher compensation.
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TABLE 12: CS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Billed business (billions)$ 526.5 $ 516.0 $ 499.5 2 % 3 %
Proprietary cards-in-force 15.4 15.4 14.9 — 3Average Card Member spending (dollars)$ 34,130 $ 33,745 $ 35,202 1 (4)
Total segment assets
$ 58,969 $ 55,361 $ 51,411 7 8Card Member loans:Total loans
$ 29,647 $ 25,838 $ 21,406 15 21
Average loans
$ 28,518 $ 23,877 $ 19,271 19 24Net write-off rate — principal, interest and fees (a)2.7 % 2.0 % 0.8 %Net write-off rate — principal only (a)2.3 % 1.7 % 0.7 %
30+ days past due as a % of total 1.5 % 1.4 % 0.9 %Calculation of Net Interest Yield on Average Card Member Loans:Net interest income $ 2,640 $ 1,845 $ 1,373Exclude:
Interest expense not attributable to our Card Member loan portfolio (b)765 711 430Interest income not attributable to our Card Member loan portfolio (c)(325) (204) (89)Adjusted net interest income (d)$ 3,080 $ 2,352 $ 1,714
Average Card Member loans including loans held for sale (e)
$ 28,576 $ 23,877 $ 19,271Net interest income divided by average Card Member loans (d)9.2 % 7.7 % 7.1 %Net interest yield on average Card Member loans (d)10.8 % 9.9 % 8.9 %Card Member receivables:Total receivables
$ 24,945 $ 26,222 $ 26,876 (5) % (2) %
Net write-off rate — principal and fees (f)
1.3 % 1.5 % 0.7 %
Net write-off rate — principal only (a) — small business
1.9 % 2.1 % 0.9 %
30+ days past due as a % of total — small business
1.3 % 1.5 % 1.6 %
90+ days past billing as a % of total (f) — corporate
0.4 % 0.4 % 0.6 %(a) Refer to Table 7 footnote (a).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).(e) Refer to Table 8 footnote (d).
(f) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.
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INTERNATIONAL CARD SERVICES
TABLE 13: ICS SELECTED INCOME STATEMENT DATA
Years Ended December 31, Change Change(Millions, except percentages) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022RevenuesNon-interest revenues $ 10,369 $ 9,472 $ 8,262 $ 897 9 % $ 1,210 15 %
Interest income 2,331 2,076 1,453 255 12 623 43
Interest expense 1,239 1,118 654 121 11 464 71
Net interest income 1,092 958 799 134 14 159 20
Total revenues net of interest expense 11,461 10,430 9,061 1,031 10 1,369 15
Provisions for credit losses 726 727 584 (1) — 143 24
Total revenues net of interest expense after provisions for credit losses 10,735 9,703 8,477 1,032 11 1,226 14ExpensesCard Member rewards, business development and Card Member services
5,243 4,588 3,816 655 14 772 20
Marketing
1,235 1,081 1,146 154 14 (65) (6)Salaries and employee benefits and other operating expenses3,226 3,061 2,937 165 5 124 4
Total expenses 9,704 8,730 7,899 974 11 831 11
Pretax segment income $ 1,031 $ 973 $ 578 $ 58 6 % $ 395 68 %
ICS issues a wide range of proprietary consumer, small business and corporate cards outside the United States. ICS also provides services to our international customers, including travel and lifestyle services, and manages certain international joint ventures and our loyalty coalition business.TOTAL REVENUES NET OF INTEREST EXPENSENon-interest revenues increased, primarily driven by higher Discount revenue and Net card fees.
Discount revenue increased 10 percent (13 percent on an FX-adjusted basis), primarily reflecting an increase in billed business. 3 See Tables 5, 6 and 14 for more details on billed business performance.
Net card fees increased 16 percent (20 percent on an FX-adjusted basis), primarily driven by growth in our premium card portfolios. 3
Service fees and other revenue increased 2 percent, primarily driven by higher foreign exchange related revenues associated with Card Member cross-currency spending and loyalty coalition-related fees, partially offset by a benefit in the prior year related to a portion of the revenue allocated to a joint venture partner as described in Business development expense below, as well as lower delinquency fees.
Interest income increased, primarily driven by growth in revolving loan balances, partially offset by lower interest rates.
Interest expense increased, primarily driven by a higher cost of funds due to segment net asset growth.PROVISIONS FOR CREDIT LOSSESCard Member loans provision for credit losses increased, primarily due to higher net write-offs, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding, partially offset by lower delinquencies. The reserve build in the prior year was primarily driven by an increase in loans outstanding, partially offset by the performance of portfolios in certain international markets.
Card Member receivables provision for credit losses decreased, primarily due to lower net write-offs, partially offset by a reserve build in the current year versus a reserve release in the prior year. The reserve build in the current year was primarily driven by an increase in receivables outstanding. The reserve release in the prior year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding.
3 Refer to footnote 1 on page 45 for details regarding foreign currency adjusted information.
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EXPENSESTotal expenses increased, primarily driven by higher Card Member rewards, Card Member services and Operating expenses.
Card Member rewards expense increased, primarily driven by higher billed business and an increase in the Membership Rewards URR, partially offset by lower redemption costs.
Business development expense increased, primarily due to increased partner payments driven by higher billed business, partially offset by a prior-year charge related to revenue allocated to a joint venture partner.
Card Member services expense increased, primarily due to growth in premium card accounts, contributing to a higher usage of travel-related benefits.
Marketing expense increased, reflecting higher levels of spending on customer acquisition and other growth initiatives.
Salaries and employee benefits and other expenses increased, primarily due to a charge associated with an increase in international non-income tax reserves and higher allocated service costs, partially offset by a one-time fee from a partner.
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TABLE 14: ICS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022Billed business (billions)$ 366.9 $ 329.5 $ 281.6 11 % 17 %
Proprietary cards-in-force 21.9 21.0 20.1 4 4
Proprietary basic cards-in-force 16.4 15.6 14.9 5 5Average proprietary basic Card Member spending (dollars)$ 22,965 $ 21,550 $ 19,519 7 10
Total segment assets
$ 42,879 $ 42,234 $ 36,891 2 14Card Member loans - consumer and small business:Total loans
$ 17,395 $ 16,950 $ 13,844 3 22
Average loans
$ 16,976 $ 14,964 $ 12,314 13 22Net write-off rate — principal, interest and fees (a)2.5 % 2.5 % 1.4 %Net write-off rate — principal only (a)2.1 % 2.1 % 1.2 %
30+ days past due as a % of total 1.2 % 1.3 % 1.2 %Calculation of Net Interest Yield on Average Card Member Loans:Net interest income $ 1,092 $ 958 $ 799Exclude:
Interest expense not attributable to our Card Member loan portfolio (b)496 475 270Interest income not attributable to our Card Member loan portfolio (c)(56) (62) (28)Adjusted net interest income (d)$ 1,532 $ 1,371 $ 1,041
Average Card Member loans
$ 16,976 $ 14,964 $ 12,378Net interest income divided by average Card Member loans (d)6.4 % 6.4 % 6.5 %Net interest yield on average Card Member loans (d)9.0 % 9.2 % 8.4 %Card Member receivables:Total receivables
$ 20,047 $ 19,400 $ 16,474 3 % 18 %
Net write-off rate — principal and fees (e)
1.4 % 2.1 % 1.3 %
Net write-off rate — principal only (a) — consumer and small business
1.5 % 2.2 % 1.4 %
30+ days past due as a % of total — consumer and small business
0.8 % 1.0 % 1.3 %
90+ days past billing as a % of total (e) — corporate
0.4 % 0.5 % 0.5 %(a) Refer to Table 7 footnote (a).
(b) Refer to Table 8 footnote (a).
(c) Refer to Table 8 footnote (b).
(d) Refer to Table 8 footnote (c).
(e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.61Table of Contents
GLOBAL MERCHANT AND NETWORK SERVICES
TABLE 15: GMNS SELECTED INCOME STATEMENT AND OTHER DATA
Years Ended December 31, Change Change(Millions, except percentages and where indicated) 2024 2023 2022 2024 vs. 2023
2023 vs. 2022RevenuesNon-interest revenues $ 6,729 $ 6,620 $ 6,123 $ 109 2 % $ 497 8 %
Interest income 52 57 23 (5) (9) 34 #
Interest expense (703) (719) (329) 16 2 (390) #
Net interest income 755 776 352 (21) (3) 424 #
Total revenues net of interest expense 7,484 7,396 6,475 88 1 921 14
Provisions for credit losses 42 27 7 15 56 20 #
Total revenues net of interest expense after provisions for credit losses 7,442 7,369 6,468 73 1 901 14ExpensesBusiness development and Card Member services
1,148 1,218 1,192 (70) (6) 26 2
Marketing
411 437 419 (26) (6) 18 4Salaries and employee benefits and other operating expenses1,485 2,058 1,903 (573) (28) 155 8
Total expenses 3,044 3,713 3,514 (669) (18) 199 6
Pretax segment income 4,398 3,656 2,954 742 20 702 24Network volumes (billions)1,764.8 1,680.1 1,552.8 $ 85 5 $ 127 8
Total segment assets
$ 17,712 $ 23,714 $ 20,005 (25) % 19 %# Denotes a variance of 100 percent or moreGMNS operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network. GMNS manages our partnership relationships with third-party card issuers, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network.TOTAL REVENUES NET OF INTEREST EXPENSENon-interest revenues increased, primarily driven by higher Discount revenue, partially offset by lower Processed revenue.
Discount revenue increased 3 percent, primarily driven by an increase in billed business, partially offset by lower average merchant discount rates. See Tables 5 and 6 for more details on billed business performance.
Service fees and other revenue increased 1 percent, primarily driven by higher merchant service fees and foreign exchange-related revenues associated with Card Member cross-currency spending, largely offset by Accertify revenues included in the prior year.
Processed revenue decreased 2 percent and increased 4 percent on an FX-adjusted basis. 4
GMNS receives an interest expense credit relating to internal transfer pricing due to its merchant payables. Net interest income decreased, primarily due to a lower interest expense credit, largely driven by a decrease in interest rates in international markets, partially offset by higher average merchant payables.
4 Refer to footnote 1 on page 45 for details regarding foreign currency adjusted information.
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Table of ContentsEXPENSESTotal expenses decreased, primarily driven by lower Operating expenses.
Business development expense decreased, primarily due to decreased partner payments driven by lower volumes from certain network issuing partners.
Marketing expense decreased, reflecting lower levels of spending on merchant engagement and other growth initiatives.
Salaries and employee benefits and other expenses decreased, primarily driven by the gain recognized on the sale of Accertify included in the Other, net component of operating expenses, partially offset by an increase in allocated service costs.
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CORPORATE & OTHER
Corporate functions and certain other businesses are included in Corporate & Other.Corporate & Other pretax loss was $2.4 billion in both 2024 and 2023. Increases in foreign exchange gains and net gains on Amex Ventures investments year-over-year were offset largely by an increase in legal reserves.CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
• A solid and flexible equity capital profile;
• A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
• Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period under a variety of adverse circumstances.
We continue to see volatility in the capital markets due to a variety of factors and manage our balance sheet to reflect evolving circumstances.
CAPITAL STRATEGYWe believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value. Our objective is to retain sufficient levels of capital generated through net income and other sources, such as the issuance of subordinated debt and preferred shares, as well as the exercise of stock options by colleagues, to maintain a strong balance sheet, provide flexibility to support future business growth and distribute excess capital to shareholders through dividends and share repurchases. See “Dividends and Share Repurchases” below.The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy Assessment Process, which takes into account our business activities, as well as marketplace conditions and requirements or expectations of credit rating agencies, regulators and shareholders, among others. As a bank holding company, we are subject to regulatory requirements administered by the U.S. federal bank regulatory agencies. The Federal Reserve has established specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure to maintain minimum regulatory capital levels at American Express or our U.S. bank subsidiary, American Express National Bank (AENB), could affect our status as a financial holding company and cause the banking regulators with oversight of American Express or AENB to take actions that could limit our business operations.
We seek to maintain capital levels and ratios in excess of our minimum regulatory requirements, specifically within a 10 to 11 percent target range for American Express Company’s Common Equity Tier 1 (CET1) risk-based capital ratio.We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory requirements. These infused amounts can affect the capital and liquidity positions at American Express Company or at our subsidiaries.We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating risk-weighted assets.As discussed above, we became a Category III firm in the third quarter of 2024 and thus are subject to a CET1 countercyclical capital buffer requirement (if enacted by the Federal Reserve) and a minimum supplementary leverage ratio. See “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for more information.
64Table of ContentsThe following table presents our regulatory risk-based capital and leverage ratios and those of AENB, as of December 31, 2024:TABLE 16: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS
Effective Minimum (a)Ratios as of December 31, 2024Risk-Based Capital
Common Equity Tier 1 7.0 %
American Express Company 10.5 %
American Express National Bank 11.6
Tier 1 8.5American Express Company 11.2American Express National Bank 11.6
Total 10.5American Express Company 13.2
American Express National Bank 13.2
Tier 1 Leverage 4.0
American Express Company 9.8
American Express National Bank 9.6
Supplementary Leverage Ratio
3.0 %
American Express Company
8.3
American Express National Bank
8.0 %(a) Represents Basel III minimum requirements and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer (SCB) for American Express Company and the capital conservation buffer for AENB. Refer to “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” and Note 22 to the “Consolidated Financial Statements” for additional information.The following table presents American Express Company’s regulatory risk-based capital and risk-weighted assets as of December 31, 2024:TABLE 17: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS
American Express Company
($ in Billions)December 31, 2024Risk-Based CapitalCommon Equity Tier 1 $ 24.9
Tier 1 Capital 26.4Tier 2 Capital4.7
Total Capital 31.1
Risk-Weighted Assets 235.8
Average Total Assets to calculate the Tier 1 Leverage Ratio 268.8
Total Leverage Exposure to calculate the Supplementary Leverage Ratio
$ 317.0
The following are definitions for our regulatory risk-based capital and leverage ratios, which are calculated as per standard regulatory guidance:
Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital adequacy guidelines. On- and off-balance sheet items are risk weighted, with off-balance sheet items converted to balance sheet equivalents, using risk conversion factors, before being assigned a risk weight. Off-balance sheet exposures comprise a minimal part of the total risk-weighted assets.
Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as CET1 capital, divided by risk-weighted assets. CET1 capital is common shareholders’ equity, adjusted for ineligible goodwill and intangible assets and certain deferred tax assets. CET1 capital is also adjusted for the CECL final rules, as described below.
65Table of ContentsTier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets. Tier 1 capital is the sum of CET1 capital, preferred shares and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held by insurance subsidiaries. We have $1.6 billion of preferred shares outstanding to help address a portion of the Tier 1 capital requirements in excess of common equity requirements. See Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.
Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital divided by risk-weighted assets. Tier 2 capital is the sum of the allowable allowance for credit losses adjusted for the CECL final rules, and $1,750 million of eligible subordinated notes, adjusted for capital held by insurance subsidiaries. The $1,750 million of eligible subordinated notes includes the $500 million subordinated debt issued in April 2024, the $500 million subordinated debt issued in July 2023 and the $750 million subordinated debt issued in May 2022.
Tier 1 Leverage Ratio — Calculated as Tier 1 capital divided by average total consolidated assets for the most recent quarter.
Supplementary Leverage Ratio — Calculated as Tier 1 capital divided by total leverage exposure. Total leverage exposure includes total average on-balance sheet assets and certain off-balance sheet exposures, less amounts permitted to be deducted from Tier 1 capital.
We elected to delay the recognition of $0.7 billion of reduction in regulatory capital from the adoption of the CECL methodology for two years, followed by a three-year phase-in period at 25 percent once per year beginning January 1, 2022, pursuant to rules issued by federal banking regulators (the CECL final rules). As of January 1, 2025, we have phased in 100 percent of such amount.We continue to include accumulated other comprehensive income (loss) in regulatory capital.We participated in the Federal Reserve’s supervisory stress tests in 2024. We submitted our annual capital plan to the Federal Reserve in April 2024. On August 28, 2024, the Federal Reserve confirmed our SCB of 2.5 percent, which resulted in a minimum CET1 ratio of 7 percent, effective October 1, 2024 to September 30, 2025.DIVIDENDS AND SHARE REPURCHASES
We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans.During the year ended December 31, 2024, we returned $7.9 billion to our shareholders in the form of share repurchases of $5.9 billion and common stock dividends of $2.0 billion. We repurchased 23.9 million common shares at an average price of $242.65 in 2024. These dividend and share repurchase amounts collectively represent approximately 76 percent of total capital generated during the year.
We plan to increase the regular quarterly dividend on our common shares outstanding by 17 percent, from 70 cents to 82 cents per share, beginning with the first quarter 2025 dividend declaration.
In addition, during the year ended December 31, 2024, we paid $58 million in dividends on non-cumulative perpetual preferred shares outstanding. Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.Our decisions on capital distributions depend on various factors, including: our capital levels and regulatory capital requirements; regulatory guidance or restrictions; actual and forecasted business results; economic and market conditions; revisions to, or revocation of, the Federal Reserve’s authorization of our capital plan; and the supervisory stress test process. We may conduct share repurchases through a variety of methods, including open market purchases, plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, privately negotiated transactions or other purchases, including block trades, accelerated share repurchase programs or any combination of such methods as market conditions warrant and at prices we deem appropriate.66Table of Contents
FUNDING STRATEGY
Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to finance our global businesses and to maintain a strong liquidity profile. Our funding strategy and activities are integrated into our asset-liability management activities. We have in place a funding policy covering American Express Company and all of our subsidiaries.
Our financing needs are in large part a consequence of our proprietary card-issuing businesses, where we generally pay merchants for card transactions prior to reimbursement by Card Members and therefore fund the merchant payments during the period Card Member loans and receivables are outstanding. In addition, we maintain a liquidity position to meet regulatory requirements and support our business activities.We aim to satisfy these financing needs with a diverse set of funding sources. The diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, mitigates the impact of disruptions in any one type of instrument, tenor or investor. We seek to achieve diversity and cost efficiency in our funding sources by maintaining scale and market relevance in deposits, unsecured debt and asset securitizations and access to secured borrowing facilities and a committed bank credit facility. In particular, we are focused on continuing to grow our direct deposit program as a funding source.
Our funding plan is primarily driven by the size and mix of business asset growth, our liquidity position and choice of funding sources, as well as cash requirements generated by withdrawals of deposits by our customers, the maturities of debt outstanding and related interest payments. In executing our funding plan, we aim to maintain a balanced debt maturity profile with an appropriate mix of short-term and long-term refinancing requirements.FUNDING PROGRAMS AND ACTIVITIES
We had the following customer deposits and consolidated debt outstanding as of December 31:
TABLE 18: SUMMARY OF CUSTOMER DEPOSITS AND CONSOLIDATED DEBT(Billions) 2024 2023
Customer deposits $ 139.4 $ 129.1
Short-term borrowings 1.4 1.3
Long-term debt 49.7 47.9
Total customer deposits and debt $ 190.5 $ 178.3We may redeem from time to time certain debt securities prior to the original contractual maturity dates in accordance with the optional redemption provisions of those debt securities.Our funding plan for the full year 2025 includes, among other sources, approximately $9.0 billion to $13.0 billion of unsecured term debt issuance and approximately $6.0 billion to $10.0 billion of secured term debt issuance. Actual funding activities can vary from our plans due to various factors, such as future business growth, the impact of global economic, political and other events on market capacity and funding needs, demand for securities offered by us, regulatory changes, ability to securitize and sell loans and receivables, and the performance of loans and receivables previously sold in securitization transactions. Many of these factors are beyond our control.Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding strategy. Our asset securitization activities are rated separately.67Table of Contents
TABLE 19: UNSECURED DEBT RATINGS
American Express Entity Moody’s
S&P Fitch
American Express Company Long Term A2A-A
Short Term N/R
A-2
F1
Outlook Stable
Stable
Stable
American Express Travel Related Services Company, Inc. Long Term A2AAShort Term P-1A-1F1
Outlook Stable
Stable
Stable
American Express National Bank Long Term A3AAShort Term P-1A-1F1
Outlook Stable
Stable
Stable
American Express Credit Corporation Long Term A2AAShort Term N/R
N/R
N/R
Outlook Stable
Stable
Stable
These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at the sole discretion of the rating organization.Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding costs, as well as higher fees related to borrowings under our unused credit facilities. Declines in credit ratings could also reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding mix, including the proportion of U.S. direct deposits insured by the FDIC to total funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs.
In August, 2023, the U.S. federal bank regulatory agencies issued a notice of proposed rulemaking that would require covered bank holding companies such as American Express Company to issue and maintain minimum amounts of eligible external long-term debt and certain insured depository institutions such as AENB to issue and maintain minimum amounts of eligible internal long-term debt. See “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for more information.DEPOSIT PROGRAMSWe offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to an amount that is at least $250,000 per depositor, per ownership category through the FDIC; as of December 31, 2024, approximately 92 percent of these deposits were insured. Our ability to obtain deposit funding and offer competitive interest rates is dependent on, among other factors, the capital level of AENB. The direct deposit program offered by AENB is our primary deposit product channel, which makes FDIC-insured high-yield savings account, certificates of deposit (CDs), business checking and consumer rewards checking account products available directly to customers. As of December 31, 2024, our direct deposit program had approximately 3.3 million accounts. AENB also sources deposits through third-party distribution channels as needed to meet our overall funding objectives. CDs carry stated maturities while high-yield savings account, checking account and third-party sweep deposit products do not. We manage the duration of our maturing obligations, including CDs, to reduce concentration and refinancing risk.
As of December 31, 2024, we had $139.4 billion in deposits. Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits and scheduled maturities of certificates of deposits.
The following table sets forth the average interest rates we paid on different types of deposits during the years ended December 31, 2024, 2023 and 2022. Changes in the average interest rate we paid on our deposits were primarily due to the impact of higher market interest rates offered for retail deposits.TABLE 20: AVERAGE INTEREST RATES PAID ON DEPOSITS
Year ended December 31,2024 2023 2022(Millions, except percentages)
Average Balance Interest Expense Average Interest Rate Average Balance Interest Expense Average Interest Rate Average Balance Interest Expense Average Interest RateSavings accounts
$ 101,705 $ 4,210 4.1 % $ 84,913 $ 3,320 3.9 % $ 70,990 $ 961 1.4 %
Checking accounts
1,677 29 1.7 1,189 37 3.1 468 6 1.3Certificates of deposit:Direct 4,978 211 4.2 4,407 159 3.6 1,708 33 1.9
Third-party (brokered) 9,718 397 4.1 13,945 518 3.7 7,649 221 2.9
Sweep accounts — Third-party (brokered) 15,419 845 5.5 15,676 824 5.3 15,039 301 2.0
Total U.S. interest-bearing deposits
$ 133,497 $ 5,692 4.3 % $ 120,130 $ 4,858 4.0 % $ 95,854 $ 1,522 1.6 %
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SHORT-TERM FUNDING PROGRAMSShort-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less, as well as interest-bearing overdrafts with banks. Our short-term funding programs are used primarily to fund working capital needs, such as managing seasonal variations in receivables balances. The amount of short-term borrowings issued in the future will depend on our funding strategy, our needs and market conditions. We had no commercial paper outstanding at any point during 2024. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMSAs of December 31, 2024, we had $49.7 billion in long-term debt outstanding, including unsecured debt and asset-backed securities. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings and scheduled maturities of long-term debt obligations.We periodically securitize Card Member loans and receivables arising from our U.S. card business, as the securitization market provides us with cost-effective funding. Securitization of Card Member loans and receivables is accomplished through the transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to third-party investors. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset securitizations.
TABLE 21: DEBT ISSUANCES(Billions) 2024American Express Company:Floating Rate Senior Notes (compounded SOFR (a) plus weighted-average spread of 90 basis points)
$ 1.1
Fixed-to-Floating Rate Senior Notes (weighted-average coupon of 5.31% during the fixed rate period and compounded SOFR (a) plus weighted-average spread of 106 basis points during the floating rate period)
7.3
Fixed-to-Floating Rate Subordinated Notes (coupon of 5.92% during the fixed rate period and compounded SOFR (a) plus spread of 163 basis points during the floating rate period)0.5
American Express Credit Account Master Trust:
Fixed Rate Class A Certificates (weighted-average coupon of 5.02%)3.2
Total $ 12.1(a) Secured overnight financing rate (SOFR).69Table of Contents
LIQUIDITY MANAGEMENT
Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to maintain liquidity sources in amounts sufficient to meet our expected future financial obligations and business requirements for liquidity for a period of at least twelve months under a variety of adverse circumstances. These include, but are not limited to, an event where we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions.
Our liquidity management strategy includes a number of elements, including, but not limited to:
• Maintaining diversified funding sources (refer to “Funding Strategy” above for more details);
• Maintaining unencumbered liquid assets and off-balance sheet liquidity sources;
• Projecting cash inflows and outflows under a variety of economic and market scenarios; and
• Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements.We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash and other liquid assets, secured borrowing facilities and a committed bank credit facility. Through our U.S. bank subsidiary, AENB, we have also pledged collateral eligible for use at the Federal Reserve’s discount window.
The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy include market-wide, firm-specific and combined liquidity stresses. Additionally, as discussed above, we became a Category III firm in the third quarter of 2024 and thus are subject to the regulatory requirements under LCR and NSFR rules, subject to applicable transition periods. See “Supervision and Regulation — Enhanced Prudential Standards” under “Business” for more information. We consider other factors in determining the amount and type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations, growth in our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources and credit rating agency guidelines and requirements. We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements.
As of December 31, 2024 and 2023, we had $40.6 billion and $46.6 billion in Cash and cash equivalents, respectively. The year-over-year decline was primarily due to the deployment of cash to fund the growth of our business. Refer to “Cash Flows” below for a discussion of the major drivers impacting cash flows for the year ended December 31, 2024. Depending on the interest rate environment, our funding composition and the amount of liquidity resources we maintain, the level of future net interest income or expense associated with our liquidity resources will vary. During 2024, interest income exceeded the interest expense associated with the liquidity portfolio.
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Securitized Borrowing CapacityAs of December 31, 2024, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2026, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the American Express Issuance Trust II (the Charge Trust). We also maintained our committed, revolving, secured borrowing facility, with a maturity date of September 15, 2026, which gives us the right to sell up to $3.0 billion face amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust). These facilities enhance our contingent funding resources and are also used in the ordinary course of business to fund working capital needs. As of December 31, 2024, no amounts were drawn on the Charge Trust facility or the Lending Trust facility.Committed Bank Credit FacilityAs of December 31, 2024, we maintained a committed syndicated bank credit facility of $4.0 billion with a maturity date of October 30, 2026. The availability of the credit facility is subject to our maintenance of a minimum CET1 risk-based capital ratio of 4.5 percent, with certain restrictions in relation to either accessing the facility or distributing capital to common shareholders in the event our CET1 risk-based capital ratio falls between 4.5 percent and 6.5 percent. It does not contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on our credit rating. As of December 31, 2024, we were in compliance with the covenants contained in the credit facility and no amounts were drawn on this facility. This facility enhances our contingent funding resources and is also used in the ordinary course of business to fund working capital needs. Any undrawn portion of this facility could serve as a backstop for the amount of commercial paper outstanding.Other Sources of Liquidity
In addition to cash and other liquid assets and the secured borrowing facilities and committed bank credit facility described above, as an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco through the discount window against the U.S. credit card loans and charge card receivables that it pledged.As of December 31, 2024, AENB had available borrowing capacity of $76.9 billion based on the amount and collateral valuation of receivables that were pledged to the Federal Reserve Bank of San Francisco. Whether specific assets will be considered qualifying collateral and the amount that may be borrowed against the collateral remain at the discretion of the Federal Reserve and can change from time to time. Due to regulatory restrictions, liquidity generated by AENB can generally be used only to fund obligations within AENB, and transfers to the parent company or non-bank affiliates may be subject to prior regulatory approval.Off-balance Sheet Arrangements
We have certain off-balance sheet obligations that include guarantees, indemnifications and certain Card Member and partner arrangements that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, or liquidity and capital resources. For more information on these obligations, refer to Note 12, Note 15 and Note 23 to the “Consolidated Financial Statements.”71Table of Contents
CASH FLOWSThe following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating, investing and financing cash flows for the year ended December 31, 2024 compared to the year ended December 31, 2023:TABLE 22: CASH FLOWS(Billions) 2024 2023 2022Total cash provided by (used in):Operating activities $ 14.0 $ 18.5 $ 21.1
Investing activities (24.4) (24.4) (33.7)
Financing activities 4.4 18.4 24.5
Effect of foreign currency exchange rates on cash and cash equivalents — 0.2 —
Net (decrease) increase in cash and cash equivalents
$ (6.0) $ 12.7 $ 11.9Cash Flows from Operating Activities
Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.In 2024, the net cash provided by operating activities was driven by cash generated from net income for the period, partially offset by lower net operating liabilities, primarily driven by lower book overdrafts due to timing differences arising in the ordinary course of business.
In 2023, the net cash provided by operating activities was primarily driven by cash generated from net income for the period and higher net operating liabilities, primarily driven by higher book overdrafts due to timing differences arising in the ordinary course of business and higher accounts payable to merchants.Cash Flows from Investing ActivitiesOur cash flows from investing activities primarily include changes in loans and Card Member receivables, as well as changes in our available-for-sale investment securities portfolio.
In both 2024 and 2023, the net cash used in investing activities was primarily driven by higher Loans and Card Member receivables outstanding, partially offset by net maturities of investment securities.Cash Flows from Financing Activities
Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term borrowings, as well as dividend payments and share repurchases.In both 2024 and 2023, the net cash provided by financing activities was primarily driven by growth in customer deposits and net proceeds from long-term debt, partially offset by share repurchases and dividend payments.
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RISK MANAGEMENT
GOVERNANCE
Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit and Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of independent directors and provides regular reports to the full Board regarding matters reviewed at their committee. The committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance Officer, the Chief Audit Executive and other senior management with regard to our risk management processes, risk profile and performance, controls, talent and capabilities. The Board monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks.
We use our comprehensive Enterprise Risk Management (ERM) program to identify, aggregate, monitor, measure, report and manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer. The Risk Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Risk Officer and receives regular updates from the Chief Risk Officer on key risks and exposures.The Risk Committee of our Board of Directors provides oversight of our ERM framework, processes and methodologies. The Risk Committee approves our ERM and select other risk policies. The ERM policy defines and governs risk governance, risk oversight and risk appetite, including credit risk (at both the individual and institutional levels), operational risk (e.g., operations and process, legal, conduct, third-party, information technology, information security, data management, privacy and people risks), compliance risk, reputational risk, market risk, funding and liquidity risk, model risk, strategic and business risk and country risk. The ERM policy also guides the monitoring of emerging risks, as appropriate. Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios. In addition, it establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for monitoring performance (including limits and escalation triggers) and assessing control programs. On an ongoing basis, the Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including significant risk exposures, risk trends in our portfolios and major risk concentrations.The Risk Committee also provides oversight of our compliance with Regulatory capital and liquidity standards, and our Internal Capital Adequacy Assessment Process, including the CCAR submissions.
The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include our Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of our Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of our internal audit services function, and the integrity of our systems of internal controls.
The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Audit Executive, who reports to the Audit and Compliance Committee, and approves Internal Audit’s annual audit plan, charter, policies, budget and staffing levels, and overall risk assessment methodology. The Audit and Compliance Committee also receives regular updates on the audit plan’s status and results, including significant reports issued by Internal Audit and the status of our corrective actions.The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our overall compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with business incentives and that business performance is achieved without taking imprudent or excessive risk. Our Chief Risk Officer is actively involved in setting risk goals for the Company. Our Chief Risk Officer also reviews the risk profiles of each business unit and, in conjunction with the Chief Audit Executive, provides input into performance evaluation through the Risk Performance Program. The Chief Risk Officer meets with the Compensation and Benefits Committee and attests whether performance goals and results have been achieved without taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to decide on our bonus pools and the compensation of senior executives.
73Table of ContentsThere are several internal management committees, including the Enterprise Risk Management Committee (ERMC), chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and is responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies Company-wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, and provides guidance on the steps to monitor, control and report major risks. In addition, the Asset Liability Committee, chaired by our Chief Financial Officer, is responsible for managing our capital, funding and liquidity, investment, market risk and asset/liability activities in accordance with our policies and in compliance with applicable regulatory requirements.As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk taking. The Chief Executive Officer, business unit presidents and the Chief Financial Officer are part of the first line of defense. The second line comprises independent functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief Compliance Officer, the Chief Operational Risk Officer and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The global risk oversight team oversees the policies, strategies, frameworks, models, processes and capabilities deployed by the first line teams and provides challenges and independent assessments on how the first line of defense is managing risks. Our Internal Audit Group constitutes the third line of defense and provides independent assessments and effective challenge of the first and second lines of defense.
CREDIT RISK MANAGEMENT PROCESSWe define credit risk as loss due to default or changes in the credit quality of a customer, obligor or security. Our credit risks are divided into two broad categories: individual and institutional. Each has distinct risk management profiles, capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures of significant importance are supported by dedicated risk management teams, each led by a Chief Credit Officer.Individual Credit Risk
Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These portfolios consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk management capabilities, which span underwriting, customer management and collections. The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and gross domestic product (GDP) growth.
The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief Credit Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and enforcement of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and procedures and escalates to the ERMC as appropriate.
Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-date information on prospects and customers, such as spending and payment history and data feeds from credit bureaus. We have developed data-driven economic decision logic for customer interactions to better serve our customers.
Institutional Credit Risk
Institutional credit risk arises principally within our CS, ICS and GMNS businesses, as well as investment and liquidity management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large losses in any given year or over several years is not necessarily representative of the level of risk of institutional portfolios, given the infrequency of loss events in such portfolios.74Table of Contents
Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers. These officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for implementation and enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the credit officers of each business unit with substantial institutional credit risk exposures. The committee, along with the business unit Chief Credit Officers, makes investment decisions in core risk capabilities, ensures proper implementation of the underwriting standards and contractual rights for risk mitigation, monitors risk exposures, and determines risk mitigation actions. The IRMC formally reviews large institutional risk exposures to ensure compliance with ERMC guidelines and procedures and escalates them to the ERMC as appropriate. At the same time, the IRMC provides guidance to the business unit risk management teams to optimize risk-adjusted returns on capital. A centralized risk rating unit provides risk assessment of our institutional obligors.OPERATIONAL RISK MANAGEMENT PROCESS
We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment, including failures to comply with laws and regulations as well as impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory penalties.To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the ERMC. The Operational Risk Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups on effective risk assessments and controls. It also oversees the preventive, responsive and mitigation efforts by control management teams in the business units and staff groups.
We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks. The framework includes programs established for risk management activities related to processes and the launch of new products and services. The framework also defines guidelines and risk management requirements for the (a) identification of issues and operational risk events, (b) related control enhancements and (c) reporting of key trends and escalation of risks. Outcomes from the operational risk framework are discussed and escalated to various risk management committees and incorporated within our accountability framework for executive compensation.Information Security and Cybersecurity
We define information security and cybersecurity risk as the risk that the confidentiality, integrity or availability of American Express information and information systems are impacted by unauthorized or unintended access, use, disclosure, modification or destruction.
Our Technology Risk and Information Security (TRIS) program, which is our enterprise information security and cybersecurity program, is designed to (i) ensure the security, confidentiality, integrity and availability of our information and information systems; (ii) protect against any anticipated threats or hazards to the security, confidentiality, integrity or availability of such information; and (iii) protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to us, our colleagues or our customers. The program is built upon a foundation of advanced security technology, employs a highly trained team of experts, and is designed to operate in alignment with global regulatory requirements. The TRIS program includes controls designed to identify, protect, detect, respond to and recover from information security and cybersecurity incidents. We continue to assess the risks and changes in the cyber environment, invest in enhancements to our cybersecurity capabilities and engage in industry and government forums to promote advancements in our cybersecurity capabilities as well as the broader financial services cybersecurity ecosystem.
See “Cybersecurity” and “ A major information or cybersecurity incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our products and services ” under “Risk Factors” for additional information.75
Table of ContentsInformation Technology
We define information technology risk as the risk that events or circumstances could compromise the processing, stability, capacity, performance, or resilience of information technology and cause financial, reputational, and/or regulatory impacts.
We manage information technology risk through our policies, procedures, governance structure, and control framework to preserve the confidentiality, integrity, and availability of systems and processes across our Company.
See “ The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations ” under “Risk Factors” for additional information.
Privacy
We define privacy risk as the risk of financial loss, reputational damage, or regulatory or legal action resulting from decisions related to the violation of applicable laws, rules, regulations, contractual obligations, or the non-adherence to privacy policies, disclosures, or standards that apply to the processing of personal data.
The Global Privacy Policy, which establishes the privacy framework and defines the American Express Data Protection & Privacy Principles, governs the way we collect, use, store, share, transmit, delete or otherwise process our customer and colleague personal data globally. Chaired by the Chief Privacy Officer, the Privacy Risk Management Committee, a sub-committee of the ORMC, provides oversight and governance for our privacy program.
Data Management and Governance
We define data management and governance risk as the risk of financial, reputational, and/or regulatory impacts due to inadequate data governance and/or data management practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data throughout its lifecycle.
Our Enterprise Data Governance Policy establishes the framework for defining in-scope critical data and the requirements for managing such data effectively throughout its lifecycle as a critical corporate asset. This policy is approved by the ERMC.
Chaired by the Chief Data Officer, our Enterprise Data Committee, a sub-committee of the ERMC, provides governance and oversight for our enterprise-wide data governance and management activities.Third Party Risk
We define third party risk as the risk that relationships with third parties (including their significant subcontractors) create unexpected outcomes and deviations from expectations or stated obligations. The Third Party Management Policy is approved by the Risk Committee of our Board and the ERMC. It sets forth the procurement, risk management, and contracting framework for managing third-party relationships commensurate with their risk and complexity. Our Third Party Lifecycle Management program sets guidelines for identifying, measuring, monitoring, and reporting the risk associated with third parties through the life cycle of the relationships, which includes planning, due diligence and third-party selection, contracting, ongoing monitoring and termination.
Conduct Risk
We define conduct risk as the risk that colleagues, intentionally or unintentionally, fail to fulfill their responsibilities to American Express, our customers, colleagues or stakeholders in a manner consistent with our Code of Conduct, policies and values as well as applicable laws and regulations. Conduct issues also have the potential to increase several other risk types, including reputational risk, which may undermine the integrity and trust upon which our brand is built.
The Conduct Risk Management Policy is approved by the ERMC. It establishes the governance framework for conduct risk across the Company. The policy requires annual risk assessments, implementation of detective and preventive controls, colleague training and timely escalations of conduct issues. It also provides guidance on consequence management for any substantiated cases of misconduct. The Conduct Risk Committee oversees conduct risk related topics and escalates such matters to the ERMC, as appropriate.76
Table of ContentsCOMPLIANCE RISK MANAGEMENT PROCESS
We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or other forms of sanction as a result of non-compliance with applicable laws and/or regulations, internal policies and procedures and related practices, or ethical standards.We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance Risk Management Committee (CRMC), chaired by the Chief Compliance Officer, is responsible for identifying, evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship to both the Risk Committee (through the ERMC) and the Audit and Compliance Committee.
Additionally, we have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the appropriate government authorities. The program includes an independent risk assessment of the rules used by the Anti-Money Laundering team.REPUTATIONAL RISK MANAGEMENT PROCESS
We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner relationships, business activities and policies, management and workplace culture, or our response to unexpected events, could cause sustained critical media coverage, a decline in revenue or investment, talent attrition, litigation, or government or regulatory scrutiny.
We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of providing the world’s best customer experience and fundamental to our long-term success.
Our business leaders are responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring reputational risk considerations are included in the scope of appropriate subordinate risk policies and committees and properly reflected in all decisions escalated to the ERMC.MARKET RISK MANAGEMENT PROCESS
We define market risk as the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include (i) interest rate risk due to changes in the relationship between the interest rates on our assets (such as loans, receivables and investment securities) and the interest rates on our liabilities (such as debt and deposits) and (ii) foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S. dollar.
Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and escalation triggers. These policies are approved by the ERMC, Asset Liability Committee or Market Risk Management Committee.Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an independent risk assessment and oversight over the policies and exposure management for market risk and Asset Liability Management activities.Interest Rate Risk
We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on earnings and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over time as a result of, among other things, the proportion of our total funding provided by variable and fixed-rate debt and deposits compared to our Card Member loans and receivables. Interest rate swaps are used from time to time to effectively convert debt issuances to variable-rate from fixed-rate, or vice versa. Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative financial instruments.77
Table of ContentsTo measure the sensitivity of net interest income to interest rate changes, we first project net interest income over the following twelve-month time horizon considering forecasted business growth and anticipated future market interest rates. The impact from rate changes is then measured by instantaneously increasing or decreasing the anticipated future interest rates by the amounts set forth in Table 23 below. Our current net interest income sensitivity analysis shows higher interest rates would have a detrimental impact on our net interest income. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities that reprice within the twelve-month horizon generally reprice by the same magnitude, subject to applicable interest rate caps or floors, as benchmark rates change. It is further assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate movements, and the magnitude of this repricing in turn could depend on, among other factors, the direction of rate movements. These assumptions are consistent with historical deposit repricing experience in the industry and within our own portfolio. Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to changes in market interest rates.TABLE 23: SENSITIVITY ANALYSIS OF INTEREST RATE CHANGES ON ANNUAL NET INTEREST INCOME AS OF DECEMBER 31, 2024(Millions) Instantaneous Parallel Rate Shocks (a)
+200bps +100bps -100bps -200bps$ (560) $ (224) $ 225 $ 457(a) Negative values represent a reduction in net interest income.
We use economic value of equity to inform us of the potential impacts from interest rate changes on the net present value of our assets and liabilities under a variety of interest rate scenarios. Economic value of equity is calculated based on our existing assets, liabilities and derivatives, and does not incorporate projected changes in our balance sheet. Key assumptions used in this calculation include the term structure of interest rates, as well as deposit repricing and liquidation profiles used to inform duration and cash flow schedules. The economic value of equity is calculated under multiple interest rate scenarios, including baseline and immediate upward and immediate downward interest rate shocks, to assess its sensitivity to changes in interest rates. Our current sensitivity profile demonstrates that our economic value of equity generally decreases in a declining interest rate scenario and increases in an increasing interest rate scenario. The level of this sensitivity is managed within board-approved policy limits.
Foreign Exchange Risk
Foreign exchange exposures arise in four principal ways: (1) Card Member spending in currencies that are not the billing currency, (2) cross-currency transactions and balances from our funding activities, (3) cross-currency investing activities, such as in the equity of foreign subsidiaries, and (4) revenues generated and expenses incurred in foreign currencies, which impact earnings.These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2024, foreign currency derivative instruments with total notional amounts of approximately $43 billion were outstanding.
With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward contracts outstanding, the impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been immaterial to projected earnings as of December 31, 2024. With respect to translation exposure of foreign subsidiary equity balances, including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2024. With respect to anticipated earnings denominated in foreign currencies for the next twelve months, the adverse impact on pretax income of a hypothetical 10 percent strengthening of the U.S. dollar, net of hedges, would be approximately $136 million as of December 31, 2024.The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses.78
Table of ContentsFUNDING & LIQUIDITY RISK MANAGEMENT PROCESS
We define funding and liquidity risk as our inability to meet our ongoing financial and business obligations at a reasonable cost as they become due.
Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.
Funding and liquidity risk is managed by the Funding and Liquidity Committee. To manage this risk, we seek to maintain access to a diverse set of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business requirements and expected future financing obligations for at least a twelve-month period under a variety of adverse circumstances. These include, but are not limited to, an event where we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions. We consider the trade-offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having inadequate liquidity, which may result in financial distress during a liquidity event.
Funding and liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure that sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy those requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity resources required and monitors positions and determines any actions to be taken.Our liquidity risk management processes are designed in alignment with regulatory guidelines. As a Category III firm under U.S. federal bank regulatory agencies’ rules, we are subject to heightened capital, liquidity and prudential requirements, including more stringent liquidity risk management requirements. See “Supervision and Regulation – Capital and Liquidity Regulation” under “Business” for more information.MODEL RISK MANAGEMENT PROCESS
We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making, damage to our reputation or customer harm, from decisions based on incorrect or misused model outputs and outcomes.The Enterprise-Wide Model Risk Policy establishes the comprehensive framework for governing model risk. This policy is approved by the ERMC. The comprehensive risk management and governance framework includes procedures for model development, independent model validation, model risk reporting and change management capabilities that seek to minimize erroneous model methodology, outputs, and misuse. We also assess model performance and model- related issues on an ongoing basis and seek to address deficiencies in a timely manner. In addition, we utilize artificial intelligence and machine learning (AI/ML) models, including Generative AI tools, for a variety of business use cases. We perform extensive reviews and testing to reduce the risk that these AI/ML techniques result in adverse consequences.STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESSWe define strategic and business risk as the risk related to our inability to achieve our business objectives due to poor strategic decisions, including decisions related to the launch or modification of products, mergers, acquisitions, and divestitures, poor implementation of strategic decisions or declining demand for our products and services.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as well as overall risk management oversight over business goals. Launch of key new products as well as existing product performance is reviewed periodically by committees and business leaders to inform business decisions as appropriate. Mergers, acquisitions and divestitures can only be approved following Executive Committee due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the Chief Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new and material changes to products and services are reviewed and approved by the New Products Committee and appropriate credit or risk committees.
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Table of ContentsCOUNTRY RISK MANAGEMENT PROCESS
We define country risk as the risk that economic, social, and/or political conditions and events in a country present. They might adversely impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate capital.
We manage country risk as part of the normal course of business. Policies and procedures establish country risk escalation thresholds to control and limit exposure, driven by processes that enable the monitoring of conditions in countries where we have exposure.EMERGING RISKS
We also identify, monitor and report on emerging risks through our risk governance framework. Emerging risks arise due to changes in the external environment or internal initiatives and may manifest across multiple risk types. For example, climate-related risk is currently identified as an emerging risk and may manifest as credit risk, operational risk, market risk, liquidity risk or other risk types. Emerging risks are monitored and reported periodically to members of management, as well as to the ERMC and the Risk Committee of our Board of Directors.
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CRITICAL ACCOUNTING ESTIMATES
Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain of our accounting policies requiring significant management assumptions and judgments are as follows:
RESERVES FOR CARD MEMBER CREDIT LOSSES
Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.
In estimating expected credit losses, we use a combination of statistically based models and analysis of the results produced by these models to determine the quantitative and qualitative components of our total balance sheet reserves for credit losses. These quantitative and qualitative components entail a significant amount of judgment. The primary areas of judgment used in measuring the quantitative components of our reserves relate to the determination of the appropriate R&S Period, the modeling of the probability of and exposure at default, and the methodology to incorporate current and future economic conditions. We use these models and assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses for the R&S Period. The qualitative component is intended to capture expected losses that may not have been fully captured in the quantitative component. Through an established governance structure, we consider certain external and internal factors, including emerging portfolio characteristics and trends, which consequentially may increase or decrease the reserves for Card Member credit losses.
The R&S Period, which is approximately three years, represents the maximum time-period beyond the balance sheet date over which we can reasonably estimate expected credit losses, using all available portfolio information, current economic conditions and forecasts of future economic conditions. Card Member loan products do not have a contractual term and balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S Period. To determine expected credit losses beyond the R&S Period, we immediately revert to long-term average loss rates. Card Member receivable products are contractually required to be paid in full; therefore, we have assumed the balances will be either paid or written-off no later than 180 days past due.
Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default. A significant area of judgment relates to how we apply future Card Member payments to the reporting period balances when determining the exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any future spend. Any remaining portion of the future payment is then allocated to the remaining reporting period balance.
CECL requires that the R&S Period include an assumption about current and future economic conditions. We incorporate multiple macroeconomic scenarios provided to us by an independent third party. The estimated credit losses calculated from each macroeconomic scenario are reviewed each period and weighted to reflect management’s judgment about uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real GDP, that are significant to our models.81Table of Contents
Macroeconomic SensitivityTo demonstrate the sensitivity of estimated credit losses to the macroeconomic scenarios, we compared our modeled estimates under a baseline scenario to that under a pessimistic downside scenario. As of December 31, 2024, for every 10 percentage points change in weighting from the baseline scenario to the pessimistic downside scenario, the estimated credit losses increased by approximately $230 million.The modeled estimates under these scenarios were influenced by the duration, severity and timing of changes in economic variables within each scenario and these macroeconomic scenarios, under different conditions or using different assumptions, could result in significantly different estimated credit losses. It is difficult to estimate how potential changes in specific factors might affect the estimated credit losses, and current results may not be indicative of the potential future impact of macroeconomic forecast changes.
In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on the downside scenario at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve component or the impact of management judgment for the qualitative reserve component, which may have a positive or negative effect on the results. Thus, the results of this sensitivity analysis are hypothetical and are not intended to estimate or reflect our expectations of any changes in the overall reserves for credit losses due to changes in the macroeconomic environment.
Refer to Note 3 to the “Consolidated Financial Statements” for further information on the range of macroeconomic scenario key variables used, in conjunction with other inputs described above, to calculate reserves for Card Member credit losses.
The process of estimating these reserves requires a high degree of judgment. To the extent our expected credit loss models are not indicative of future performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or lower future provisions for credit losses in any period.82Table of Contents
LIABILITY FOR MEMBERSHIP REWARDSThe Membership Rewards program is our largest card-based rewards program. Card Members can earn points for purchases charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members to earn bonus points for purchases at merchants in particular industry categories. Membership Rewards points are redeemable for a broad variety of rewards, including, but not limited to, travel, shopping, gift cards, and statement credits. Points typically do not expire, and there is no limit on the number of points a Card Member may earn. Membership Rewards expense is driven by charge volume on enrolled cards, customer participation in the program and contractual arrangements with redemption partners.We record a Membership Rewards liability that represents our best estimate of the cost of points earned that are expected to be redeemed by Card Members in the future. The Membership Rewards liability is impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs. We estimate the Membership Rewards liability by determining the URR and the weighted average cost (WAC) per point, which are applied to the points of current enrollees. Refer to Note 9 to the “Consolidated Financial Statements” for additional information.
The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be redeemed in future periods. We use statistical and actuarial models to estimate the URR of points earned to date by current Card Members based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes. The WAC per point assumption is used to estimate future redemption costs and is primarily based on redemption choices made by Card Members, reward offerings by partners, and Membership Rewards program changes. The WAC per point assumption is derived from 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected developments in redemption patterns.
We periodically evaluate our liability estimation process and assumptions based on changes in cost per point redeemed, partner contract changes and developments in redemption patterns, which may be impacted by product refreshes, changes in redemption options and mix of proprietary cards-in-force.
The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership Rewards expense.Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the liability through the current period Membership Rewards expense by an amount estimated to cover the cost of all points previously earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31, 2024, an increase in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards liability and corresponding rewards expense by approximately $197 million. Similarly, an increase in the WAC per point of 1 basis point would increase the Membership Rewards liability and corresponding rewards expense by approximately $220 million.GOODWILL RECOVERABILITYGoodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when events or circumstances arise, such as adverse changes in the business environment, that would more likely than not reduce the fair value of the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment testing contains both a qualitative and quantitative assessment.We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using a more detailed quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit, bypassing the qualitative assessment.83Table of Contents
Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the measurement of fair value for our reporting units, which inherently entails the use of significant management judgment. For valuation, we use a combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair value of our reporting units.
When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of current and expected future economic conditions. To discount these cash flows we use our expected cost of equity, determined using a capital asset pricing model. When using the market method under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’ operating results. The judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could materially affect the fair value of our reporting units.
We could be exposed to an increased risk of goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions.
INCOME TAXES
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. In establishing a provision for income tax expense, we must make judgments about the application of inherently complex tax laws.
Unrecognized Tax Benefits
We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements.
In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the extent to which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized is the largest benefit that we believe is more likely than not to be realized on ultimate settlement. As new information becomes available, we evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate .
Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax.
Deferred Tax Asset Realization
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse.
Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies. These assessments are performed quarterly, taking into account any new information.
Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to uncertainties.84Table of Contents
OTHER MATTERS
RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS
Refer to the Recently Adopted and Issued Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”
GLOSSARY OF SELECTED TERMINOLOGY
Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and interest income not attributable to our Card Member loans.Allocated service costs — Represents salaries and benefits associated with our technology and customer servicing groups, allocated based on activities directly attributable to our reportable operating segments, as well as overhead expenses, which are allocated to our reportable operating segments based on their relative levels of revenue and Card Member loans and receivables.
Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as asset-backed securities that are secured by the transferred loans and receivables. The trust uses the proceeds from the sale of such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets.
Billed business (Card Member spending) — Represents transaction volumes (including cash advances) on payment products issued by American Express.
Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine whether the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual estimates. Refer to “Consolidated Capital Resources and Liquidity — Capital Strategy” above for further related definitions under Basel III.
Card Member — The individual holder of an issued American Express-branded card.Card Member loans — Represents balances on our credit card products and revolve-eligible balances on our charge card products.
Card Member receivables — Represents balances on our charge card products that need to be paid in full on or before the Card Member’s payment due date.Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary cards-in-force) and cards issued and outstanding under network partnership agreements with banks and other institutions, except for retail cobrand cards issued by network partners that had no out-of-store spending activity during the prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer accounts. Cards-in-force is useful in understanding the size of our Card Member base.Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method of payment and not as a means of financing purchases. Each transaction on a charge card with no pre-set spending limit is authorized based on its likely economics reflecting a Card Member’s most recent credit information and spend patterns. Charge Card Members must pay the full amount of balances billed each month, with the exception of balances that can be revolved under lending features offered on certain charge cards, such as Pay Over Time and Plan It ® , that allow Card Members to pay for eligible purchases with interest over time.Cobrand cards — Represents cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.85
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Credit cards — Represents cards that have a range of revolving payment terms, structured payment features (e.g., Plan It, Expanded Buying Power), grace periods, and rate and fee structures.
Discount revenue — Primarily represents the amount we earn and retain from the merchant payable for facilitating transactions between Card Members and merchants on payment products issued by American Express.Goods & Services (G&S) spend — Includes spend in merchant categories other than T&E-related merchant categories, which includes B2B spending by small and mid-sized enterprise customers in our CS and ICS segments.
Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds purchased, bank overdrafts and other short-term borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt.
Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest income on deposits with banks and other.
Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the applicable account agreement until the outstanding balance is paid or written off.
Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest income is recognized using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so a constant rate of return is recognized on the outstanding balance of the related investment security throughout its term. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be made as scheduled.
Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term funding requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts.
Loyalty coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally fund the consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the loyalty platform and by providing marketing support.
Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation and deferred acquisition costs.
Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net interest income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to uncollectible interest are recorded through provision for credit losses and are thus not included in the net interest yield calculation.
Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member loans or receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the average loan or receivable balance during the period.
Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.
Network volumes — Represents the total of billed business and processed volumes.
Operating expenses — Represents salaries and employee benefits, professional services, data processing and equipment, and other expenses.Other loan s — Represents balances on non-card payment and financing products that are not associated with a Card Member agreement, and instead are governed by a separate borrowing relationship. Other loans consist primarily of consumer installment loans and lines of credit offered to small business customers.
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Processed revenue — Represents revenues related to network partnership agreements, comprising royalties, fees and amounts earned for facilitating transactions on cards issued by network partners. Processed revenue also includes fees earned on alternative payment solutions facilitated by American Express.
Processed volumes — Represents transaction volumes (including cash advances) on cards issued under network partnership agreements with banks and other institutions, including joint ventures, as well as alternative payment solutions facilitated by American Express.Proprietary new cards acquired — Represents the number of new cards issued by American Express during the referenced period, net of replacement cards. Proprietary new cards acquired is useful as a measure of the effectiveness of our customer acquisition strategy.Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provision for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for credit losses.
T&E spend — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories.87Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address our current expectations regarding business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “potential,” “continue” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:• our ability to grow earnings per share in the future, which will depend in part on revenue growth, credit performance and the effective tax rate remaining consistent with current expectations and our ability to continue investing at high levels in areas that can drive sustainable growth (including our brand, value propositions, coverage, marketing, technology and talent), controlling operating expenses, effectively managing risk and executing our share repurchase program, any of which could be impacted by, among other things, the factors identified in the subsequent paragraphs as well as the following: macroeconomic conditions, higher rates of unemployment, changes in interest rates, effects of inflation, tariffs, supply chain issues, energy costs and fiscal and monetary policies; geopolitical instability, hostilities and tensions, such as involving China and the United States; the impact of any future contingencies, including, but not limited to, legal costs and settlements, the imposition of fines or monetary penalties, increases in Card Member remediation, investment gains or losses, restructurings, impairments and changes in reserves; issues impacting brand perceptions and our reputation; impacts related to acquisitions, cobrand and other partner agreements, portfolio sales and joint ventures; and the impact of regulation and litigation, which may be heightened due to the uncertain regulatory environment and could affect the profitability of our business activities, limit our ability to pursue business opportunities, require changes to business practices or alter our relationships with Card Members, partners and merchants;
• our ability to grow revenues net of interest expense and the sustainability of our future growth, which could be impacted by, among other things, the factors identified above and in the subsequent paragraphs, as well as the following: spending volumes and the spending environment not being consistent with expectations, including a decline in spending by U.S. small and mid-sized enterprise Card Members or slowdowns in U.S. consumer or international spending volumes; an inability to address competitive pressures, attract and retain customers, invest in and enhance our Membership Model of premium products, differentiated services and partnerships, successfully refresh our card products, grow spending and lending with customers across age cohorts, including Millennial and Gen Z customers, and implement strategies and business initiatives, including within the premium consumer space, commercial payments and the global network; the effects of regulatory initiatives, including pricing and network regulation; merchant coverage growing less than expected or the reduction of merchant acceptance or the perception of coverage; increased surcharging, steering, suppression or differential acceptance of our products; merchant discount rates changing from our expectations; and changes in foreign currency exchange rates;
• net card fees not performing consistently with expectations, which could be impacted by, among other things, a decrease in the ability and desire of Card Members to pay card fees, such as due to a deterioration in macroeconomic conditions; higher Card Member attrition rates; the pace of Card Member acquisition activity and demand for our fee-based products; and our inability to address competitive pressures, develop attractive premium value propositions and implement our strategy of refreshing card products and realize our anticipated growth from those refreshes, enhancing and delivering benefits and services and continuing to innovate with respect to our products;
• net interest income, the effects of changes in interest rates and the growth of loans and Card Member receivables outstanding and revolving balances, being higher or lower than expectations, which could be impacted by, among other things, the behavior and financial strength of Card Members and their actual spending, borrowing and paydown patterns; the effectiveness of our strategies to enhance Card Member value propositions, capture a greater share of Card Members’ spending and borrowings and attract new, and retain existing, customers; our ability to effectively manage underwriting risk; changes in benchmark interest rates, including where such changes affect our assets or liabilities differently than expected; changes in capital and credit market conditions and the availability and cost of capital; credit actions, including line size and other adjustments to credit availability; the yield on Card Member loans not remaining consistent with current expectations; and our deposit levels or the interest rates we offer on deposits changing from current expectations; loss or impacts to cobrand relationships; and governmental actions to cap interest rates;
88Table of Contents• future credit performance, the level of future delinquency, reserve and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; the ability and willingness of Card Members to pay amounts owed to us; changes in loans and receivables outstanding, such as from the implementation of our strategy to capture spending and borrowings, or from changes in consumer behavior that affect loan and receivable balances (e.g., paydown and revolve rates); changes in the levels of customer acquisitions and the credit profiles of new customers acquired; the enrollment in, and effectiveness of, financial relief programs and the performance of accounts as they exit from such programs; the impact of the usage of debt settlement companies; and collections capabilities and recoveries of previously written-off loans and receivables;
• the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by continued changes in macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of spend in bonus categories), the redemption of rewards and offers (including travel redemptions) and usage of travel-related benefits; the costs related to reward point redemptions; further enhancements to our rewards programs and product benefits, including to make them attractive to Card Members and prospective customers, potentially in a manner that is not cost-effective; new and renegotiated contractual obligations with business partners, which may be affected by business partners with greater scale and leverage; our ability to identify and negotiate partner-funded value for Card Members; and the pace and cost of the expansion of our global lounge collection;
• the actual amount we spend on marketing in the future and the effectiveness and efficiency of our marketing spend, which will be based in part on continued changes in the macroeconomic and competitive environment and business performance, including the levels of demand for our products; management’s decisions regarding the timing of spending on marketing and the effectiveness of management’s investment optimization process, management’s identification and assessment of attractive investment opportunities; management’s ability to develop premium value propositions and drive customer demand, including continued customer spend growth and retention; the receptivity of Card Members and prospective customers to advertising and customer acquisition initiatives; and our ability to realize marketing efficiencies and balance expense control and investments in the business;
• our ability to control operating expenses, including relative to revenue growth, and the actual amount we spend on operating expenses in the future, which could be impacted by, among other things, salary and benefit expenses to attract and retain talent; our ability to realize operational efficiencies, including through increased scale and automation and continued adoption of artificial intelligence technologies; management’s decisions regarding spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities; our ability to innovate efficient channels of customer interactions and the willingness of Card Members to self-service and address issues through digital channels; restructuring activity; fraud costs; inflation; supply chain issues; expenses related to control management and compliance and consulting, legal and other professional services fees, including as a result of litigation or internal and regulatory reviews; regulatory assessments; the level of M&A activity and related expenses; information security or cybersecurity incidents; the payment of fines, penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; the performance of Amex Ventures and other of our investments; impairments of goodwill or other assets; and the impact of changes in foreign currency exchange rates on costs;
• our tax rate not remaining consistent with expectations, which could be impacted by, among other things, further changes in tax laws and regulation (or the expiration of provisions of tax laws or regulations), the implementation of the OECD’s global minimum tax guidelines by jurisdictions, our geographic mix of income, unfavorable tax audits, assessments and tax litigation outcomes;
• changes affecting our plans regarding the return of capital to shareholders, including increasing the level of the dividend, which will depend on factors such as our capital levels and regulatory capital ratios; the results of our stress testing and capital planning process and new rulemakings and guidance from the Federal Reserve and other banking regulators, including changes to regulatory capital requirements, such as from the U.S. federal bank regulatory agencies’ Basel III rulemaking; our results of operations and financial condition; our credit ratings and rating agency considerations; required company approvals; and the economic environment and market conditions in any given period;
• changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure and competitor settlements and mergers that may materially impact the prices charged to merchants that accept American Express cards; surcharging, steering and suppression by merchants and merchant acceptance; the desirability of our premium card products; competition for new and existing cobrand relationships; competition from new and non-traditional competitors, and with respect to new products, services and technologies, such as the emergence or increase in popularity of alternative payment mechanisms; and the success of marketing, promotion and rewards programs;
89Table of Contents• our ability to expand our leadership in the premium consumer space, including with Millennial and Gen-Z consumers, which will be impacted in part by competition, brand perceptions (including perceptions related to merchant coverage) and reputation, and our ability to develop and market new benefits and value propositions that appeal to Card Members and new customers, grow spending with new and younger age cohort Card Members, offer attractive services and rewards programs and build greater customer loyalty, which will depend in part on identifying and funding investment opportunities, addressing changing customer behaviors, new product innovation and development, Card Member acquisition efforts and enrollment processes, including through digital channels, continuing to realize the benefits from strategic partnerships, successfully implementing our dining strategy and evolving our infrastructure to support new products, services and benefits;
• our ability to build on our leadership in commercial payments, which will depend in part on competition; the willingness and ability of companies to use credit and charge cards for procurement and other business expenditures as well as use our other products and services for financing needs; perceived or actual difficulties and costs related to setting up B2B payment platforms; our ability to offer attractive value propositions and new products to current and potential customers; our ability to enhance and expand our payment, lending and cash flow management solutions, increase customer engagement, and build out a multi-product digital ecosystem to integrate our broad product set, which is dependent on our continued investment in capabilities, features, functionalities, platforms and technologies; and the success of our initiatives to support businesses, such as Small Business Saturday and other Shop Small campaigns;
• our ability to expand merchant coverage globally and our success, as well as the success of third-party merchant acquirers, aggregators and processors, in signing merchants to accept American Express, which will depend on, among other factors, the value propositions offered to merchants and merchant acquirers for card acceptance, the awareness and willingness of Card Members to use American Express cards at merchants, scaling marketing and expanding programs to increase card usage, identifying and growing acceptance in low- and new-to-plastic industries and businesses as they form, working with commercial buyers and suppliers to establish B2B acceptance, executing on our plans to increase coverage in priority international cities, destinations, countries and industry verticals, and continued network investments, including in capabilities that allow for greater digital integration and modernization of our authorization platform;
• our ability to successfully invest in, benefit from and expand the use of technological developments, digital payments, servicing and travel solutions and other technological capabilities, which will depend in part on our success in evolving our products and processes for the digital environment, developing new features in the Amex ® app and enhancing our digital channels, effectively utilizing data and data platforms, building partnerships and executing programs with other companies, effectively utilizing artificial intelligence and machine learning and increasing automation, including to address servicing and other business and customer needs, and supporting the use of our products as a means of payment through online and mobile channels, all of which will be impacted by investment levels, customer and colleague receptiveness and ability to adopt new technologies, new product innovation and development and the platforms and infrastructure to support new products, services, benefits and partner integrations;
• our ability to grow internationally, which could be impacted by regulation and business practices, such as those capping interchange or other fees, mandating network access or data localization, favoring local competitors or prohibiting or limiting foreign ownership of certain businesses; our inability to successfully replicate aspects of our business model internationally and tailor products and services to make them attractive to local customers; competitors with more scale, local experience and established relationships with relevant customers, regulators and industry participants; the success of us and our network partners in acquiring Card Members and/or merchants; and political or economic instability or regional hostilities;
• our ability to successfully implement our dining strategy and grow our dining platform, which will depend in part on our ability to grow the number of diners, restaurants and other bookable venues using the platform and transactions on the platform; expand and innovate in the tools and capabilities offered through the platform, including integrating the Tock and Rooam acquisitions and benefiting from their added capabilities, users and/or bookable venues; successfully compete with other dining platforms and means of booking venues; and effectively utilize our dining platform to provide value to Card Members and merchants and sell our products and services;
• a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties, including as a result of cyberattacks or outages, which could compromise the confidentiality, integrity, privacy and/or security of data, disrupt our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;• changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs and expectations regarding capital ratios; our access to capital and funding costs; the valuation of our assets; and our credit ratings or those of our subsidiaries;90
Table of Contents• our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various factors such as future business growth, the impact of global economic, political and other events on market capacity, demand for securities we offer, regulatory changes, our ability to securitize and sell loans and receivables and the performance of loans and receivables previously sold in securitization transactions;• our ability to achieve our climate-related goals, which depend in part on the amount and efficacy of our investments in emissions reduction projects, the ability of our partners to set and achieve sustainability targets, the success of our supply chain and sustainability initiatives, and colleague programs; customer preferences and behaviors; the cost and availability of renewable energy, carbon removal and carbon offset projects and energy attribute certificates; changes in our real estate, technology and colleague strategies or an inability to execute those strategies; and brand perceptions and reputation;
• legal and regulatory developments, which could affect the profitability of our business activities; limit our ability to pursue business opportunities or conduct business in certain jurisdictions; require changes to business practices or governance, or alter our relationships with Card Members, partners, merchants and other third parties, including affecting our network operations and practices governing merchant acceptance, as well as our ability to continue certain cobrand relationships in the EU; impact card fees and rewards programs; exert further pressure on merchant discount rates and our network business, as well as result in an increase in surcharging, steering or other differential acceptance practices; alter the competitive landscape; subject us to heightened regulatory scrutiny and result in increased costs related to regulatory oversight and compliance, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or monetary penalties; materially affect capital or liquidity requirements, results of operations or ability to pay dividends; or result in harm to the American Express brand;• changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, including of cobrand partners, merchants that represent a significant portion of our business, network partners or financial institutions that we rely on for routine funding and liquidity, which could materially affect our financial condition or results of operations; and• factors beyond our control such as global economic and business conditions, consumer and business spending generally, unemployment rates, geopolitical conditions, including resulting from recent political developments or further escalations or widening of ongoing military conflicts and regional hostilities, adverse developments affecting third parties, including other financial institutions, merchants or vendors, as well as severe weather conditions and natural disasters (e.g., hurricanes and wildfires), power loss, disruptions in telecommunications, pandemics, terrorism and other catastrophic events, any of which could significantly affect demand for and spending on American Express cards, delinquency rates, loan and receivable balances, deposit levels, foreign exchange rates and other aspects of our business and results of operations or disrupt our global network systems and ability to process transactions.A further description of these uncertainties and other risks can be found in “Risk Factors” and our other reports filed with the SEC.91Table of Contents