American Express at Bernstein Conference: Strategic Focus on Young Consumers

On Thursday, 29 May 2025, American Express (NYSE:AXP) presented at the Bernstein 41st Annual Strategic Decisions Conference 2025. CEO Steve Squeri highlighted the company’s strategic initiatives, focusing on customer-centric innovation and targeting millennial and Gen Z demographics. While emphasizing strengths like their premium customer base and closed-loop network, Squeri also addressed challenges like macroeconomic factors and intense competition in the premium segment.

Key Takeaways

• American Express aims for a 10% revenue growth, driven by strong billing and card fee growth.
• The company is investing in technology to improve operational efficiency and customer experience.
• There is a strategic focus on expanding the value proposition to appeal to younger consumers.
• American Express plans to return 80% of its capital to shareholders.
• The competitive environment remains intense, particularly in the premium consumer segment.

Financial Results

• Revenue Growth Target: American Express reaffirmed its goal of 10% revenue growth, supported by high single-digit billing growth and increased card fees.
• US Consumer Business: Since 2019, the US consumer business has grown at a compound annual growth rate (CAGR) of 10.5%, outpacing the industry.
• Consumer Spending Trends: Spending on goods and services remains steady, with strong performance in restaurants, while airline and lodging spending face challenges.
• Lending Practices: Billings have grown 59% since 2019, with total loans and receivables up 47%. Retail deposits fund 65% of American Express’s lending stack.

Operational Updates

• Innovation and Technology: The company is replatforming backend systems for greater agility and scalability, focusing on customer-focused innovation.
• Targeting Younger Demographics: American Express is expanding its value proposition to attract millennials and Gen Z through refreshed products and unique membership benefits.
• Strategic Partnerships and Acquisitions: The company continues to invest in travel-related services, such as Centurion Lounges, and integrate acquisitions like Resy and Tock.

Future Outlook

• Growth Prospects: Squeri remains optimistic about continuing billing growth, especially in the consumer segment and internationally.
• International Expansion: American Express sees opportunities to increase market share in key international markets, with billings growing in the teens.
• Capital Return Strategy: The company expects to return 80% of its capital to shareholders, maintaining a disciplined approach to risk management and expense control.

Q&A Highlights

• Competitive Landscape: Squeri acknowledged the intense competition in the premium consumer segment and emphasized American Express’s readiness to compete.
• Macroeconomic Factors: Unemployment, particularly white-collar unemployment, is a key indicator for the company’s business outlook.
• Capital One/Discover Merger: Squeri commented on the merger, noting it provides Capital One with a debit network.

For more detailed insights, readers are invited to refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Rob Wildhack, Analyst, Autonomous: Alright. Good afternoon, everyone. Thanks for joining. My name is Rob Wildhack. I cover consumer finance and the cards here at Autonomous.

We are very excited to have Steve Squeri back with us today. Steve is the CEO and chairman of American Express, and those are roles he’s held since 2018. Steve’s also a forty year veteran of the company, so congratulations on that milestone, Steve. Just a quick note. Thank you.

Confused this. The, we have pigeonholed for the q and a, so you can submit your questions there directly. You can vote on questions that have already been submitted, and then we can get them up to Steve. But now we can get started. Steve, you highlighted in your annual letter this year that this is Amex’s hundred and seventy fifth anniversary, which is quite an achievement on its own.

Many high end brands, they come and they go, but American Express over almost two centuries has not wavered. Why is that? What what is it about the Amex brand that’s led to that staying power?

Steve Squeri, CEO and Chairman, American Express: Yeah. Well, thanks for having having Amex here today, and me in particular. Look. A hundred seventy five years, not a lot of companies around that long, and I think, you know, you have to go you go back in our history. We started as a freight forwarding company.

And, you know, we were FedEx before FedEx was FedEx, basically, except we did it on horses. And then, you know, we we moved through and got into financial services with money orders and traveler’s checks and then in travel and so forth. But if you look at the history, I think it’s always been about customer focused innovation. And I think that’s what’s really been important. If you look at American Express, American Express has always been focused on not only what the current customer needs are, but what the future customer needs could be.

And, you know, there was a lot of foresight over the history of the company in terms of, you know, getting into the travel business when the railroads nationalized because that really killed our delivery business. And you think about the decision that we made to get into the credit card business when we were, you know, basically dominating the traveler’s check business. And, you know, thank god that decision was made because not a lot of people are using traveler’s checks today. So, you know, the company was was very focused on not only, you know, dealing with the needs at that particular point in time, but also dealing with needs moving forward. And, you know, if you look at sort of the last, you know, seven, eight years, as we have, you know, really looked to reinvent the company, and I think we’ll talk about this a little bit later.

But, you know, as we’ve changed our focus, right, we’ve changed our focus to become much more of a revenue first company. We’ve changed our focus in terms of, you know, our our product strategy, how we refresh products, and also from a from what and we’ve expanded our TAM. Right? I mean, we’re we’re, you know, we’re really focused on millennials and Gen z. Not not that we’re not focused on the Gen Xers and the boomers, but we’ve we’ve we’ve we’ve done that as well.

And I think those are the things over time that have really been the hallmark of the company, it is willing to adapt, adjust, and be flexible, to meet customer needs.

Rob Wildhack, Analyst, Autonomous: You hit on the refresh cycle, but another recent theme has been a demographic shift where Amex is now incredibly relevant with and valued by younger consumers, millennial and Gen z, as well as the older cohort. How have you

Steve Squeri, CEO and Chairman, American Express: been able to be so successful with such a variety of customers? You know, I I think that, you know, as as we sat back and looked at it, and and I remember when I first took over, the the a lot of the questions was was was American Express going to be able to have its staying power? Because our customer our customer base was a little bit older, a little bit male dominated. And but the reality was if you looked at our products, our products spoke to many different people, but we just didn’t market them that way. And so when you think about the the products and the services that we had, they were just as relevant for millennials and gen and gen and Gen Zers as they were for Xers and and for boomers.

And, you know, if you go back to, you know, 2929 2019, we probably had about 18% of our volume with millennial and gen and gen and Gen Z And I think in the last quarter, was, like, 35% growing at a 15% clip. And the reality is is what we really did was just expand the aperture to value proposition. And when you think about it, we were focused on bringing people into the franchise with a a product, a cash back product that didn’t have any other value than cash back. But, you know, when you look at today’s today’s consumer, you know, when they’re 18 to to to 41, 40 two now, they’re as value conscious and as circumspect about the products and services that they use as anybody else. And they really know how to use the products and engage with the products, and that has that has really helped.

And and, you know, the reality is millennials and Gen Zs love to travel. Our product was travel focused, and yet we continue to add other services other services to that. And so when you look at the customers that we acquire now, you know, especially on a global basis, 60% are millennial and Gen z. When you look at when you look at the the gold and platinum card in The US, that’s a 75% is millennial and Gen z. So it’s not that we’re not interested in in in in Gen X, and we’re not that interested in in boomers, but the acquisition has has really spoke.

And the interesting thing is even as we have morphed the morphed the value proposition, to speak a lot more to younger people, and and I wouldn’t say it’s morphed as much as promoted it to younger people, our retention rates with our older core cohorts have increased. So it the product does speak to a a wider TAM at this particular point in time.

Rob Wildhack, Analyst, Autonomous: And a big part of all that and maybe the foundation, is the closed loop network that MX has. I mean, talk us talk to us about how the closed loop network underpins all of this, and what does it allow you to do that drives all these benefits and advantages that you’ve highlighted so far?

Steve Squeri, CEO and Chairman, American Express: Yeah. So, I mean, the closed loop network is is is really key. Right? And and and, fundamentally, what it means is we have the merchant relationship, we have the cardholder relationship, and we’re able to connect them. So what does that what does that do for you?

Well, what it does is it gives you it gives you more data. It gives you more information, not only from a credit and fraud perspective, which is why we’re the best best in the industry on that, but it also gives you more information from a marketing perspective. But what I don’t think people realize is that the way I like to think about the closed loop, the closed loop is like the Autobahn. Okay? You put a go kart on the Autobahn, it’s a go kart.

You put a Mercedes or BMW or Audi, it’ll open up and go. Our premium customer base is that Mercedes and that auto that Audi and that and that BMW, and that’s what really powers the closed loop network. What really powers the closed loop network is the premium customer base. And when you look at our customers, you know, 55% of our US card customers make over $200,000 a year. Those are customers that our merchants want to connect to.

That’s why they provide offers. So having the merchant and card member relationship is really nice. Having the merchant and card member relationship with premium customers at scale, that is the differentiator. So when you look at trying to replicate that, the way you have to replicate that is not by putting go karts on them. You gotta put Audi’s and you gotta put Mercedes and BMW’s on that.

And that’s what we’ve that’s what we tend to do, and that’s what our that’s what our merchants wanna see. And that’s why we’re able to get value from merchants who wanna connect with these premium customers who are gonna spend more money with them. The secret sauce is not just the closed loop network or the premium customer base, but the intersection of the two. It it absolutely is the intersection too. And and here’s another interesting point.

The other interesting point is we’ve tried to replicate that again with Resi. And so if you take Resi, Resi becomes a closed loop within the closed loop where we’re connecting diners and we’re connecting restaurateurs. And the interesting part about Resy is we’ve we’ve we’ve launched it and continue to promote it as an open platform with a closed component. So we have a a closed loop which is federated and open, but then within it, we have a closed loop within that closed loop for our cardholders. So what does that do?

What that does is it wants more restaurants to come in, and it helps us to acquire more card members who get special offers from that restaurant. And so if you think about that closed loop within a closed loop, we think about travel and our travel business within a closed loop like that, that helps power the overall earnings power of the company.

Rob Wildhack, Analyst, Autonomous: And you’ve put out, an aspirational target to grow revenue at 10%. The ingredients there being high single digit billings growth, continued card fee growth, and lending that I believe grows faster, slightly faster than billings. I mean, let’s start with billings. How much more space is there to grow billings at and above industry pace?

Steve Squeri, CEO and Chairman, American Express: Yeah. Look. I think there is there is a lot more room. I mean, the the great part about our business and the the people that are in this business, this is a this is a TAM that grows year after year in, you know, mid to high digits. Right?

Single digits. So so that’s really good. If you look at our consumer US consumer business, it’s grown on a CAGR of 10 and a half percent since 2019. And so we’ve outgrown the industry from that perspective. When you look at our penetration in that in that space, we only have about 5% of the accounts in The United States, and we have about 25% of the fee paying accounts in The United States.

So I think there’s room there. Internationally, you know, in our top five markets, we probably only have no more than 6% market share, and we’re continuing and that’s and we’re growing buildings at double digits. Right? And so and then you look at it, and, you know, we’re increasing coverage. And so coverage continues to increase.

So we’re really bullish that we can continue to grow to grow billings. Now we’ll probably talk about SME at some point. And the SME piece has been a little bit more flattish, and I think we’ll dive into that a little bit later. But, you know, there, it’s flattish at a, you know, a higher percentage of billings than our competitors would have.

Rob Wildhack, Analyst, Autonomous: I’ve gotta zoom in a little bit while we’re on the consumer. Any update you wanna give us on the state of spending as you see it now and recently?

Steve Squeri, CEO and Chairman, American Express: Yeah. I think I’ll give the same update that everybody else has been giving on the last I think I’m probably one of the last ones here, but, it’s it’s been consistent. Right? It’s really been consistent. What we’ve see what we’ve seen through through May is is what we saw through April and what we saw in March and in the first quarter.

And so, you know, goods and services, you know, consistent. You know, airline, you know, pretty consistent. We said that was down a little bit. I think lodging gets a little more challenged, but restaurants still very, very strong. And if you look at the individual segments, international, SME, and US consumer, pretty consistent to where they are.

So I you know, unless something crazy happens in June, I think when we start talking about this, you know, in July, we’re gonna say, you know, the the second quarter pretty much looked just like the first quarter did. You know, FX adjusted, you know, and all that other kind of stuff. Leafy adjusted too. Right.

Rob Wildhack, Analyst, Autonomous: Right. Right. Okay. On on card fees, you always emphasize pricing your products for value. And we talked a little bit about the different demographics, but the the different generations, you know, they like and value different things.

You have an Uber Eats reward on there. I use Uber Eats all the time. My dad certainly wouldn’t. So is that something that gets harder as the demographic base diversifies and the annual fee keeps increasing? How do you make sure that each different demographic who presumably likes a few different things gets enough value out of the card?

Steve Squeri, CEO and Chairman, American Express: Yeah. It it actually doesn’t get that much harder. I think, you know, as we think about refreshing products again, I’ll go back to that Autobahn example. We have a lot of people coming to us that wanna put value on the cards. And so it’s really about us picking and choosing of what we wanna do.

But, you know, just to pick on the the Uber benefit, which is does he does he take taxis? Or I know he just apparently doesn’t eat delivery, but you could use that. But but, you know, that is obviously millennial and Gen z’s use that. Ironically, Gen x’s use it just as much as they do, and boomers about half the time. Right?

So but that’s just one benefit. And, you know, if you look at our our product set, when you look at the platinum card, it’s pretty much targeted at people that travel, and you have value around that. You look at the gold card, and the gold card has really become the dining product, right, with the global dining collection, the Dunkin’ Donut benefit, which has been unbelievable as our Dunkin’ Donuts spending has gone up almost 55%. A lot of donuts. Although it’s hard to get a donut at Dunkin’ Donuts.

It’s more coffee now, right, than donuts. But, anyway, when when you look at that, what we really try and do is continue to add so that people can pick and choose what’s right for them. And so when you look at a product that’s, you know, $6.95 and 3 50, whatever it might be, you wanna make sure you’re adding more and more value. If you decide you’re gonna raise it, you add even a lot more value than you have than you’re gonna raise the fee. And you have to make sure that because not everybody’s gonna use every single benefit.

We know that going in. But by having an array of benefits for people, what happens is people can pick and choose. And, again, you pick you’re picking a platinum card because you travel. You’re gonna use fine hotels and resorts, and that stuff that does make a difference. I mean, you got, like, 1,500 fine hotels and resorts, you know, early check-in, late checkout, hundred dollar credit, breakfast, so forth and so on.

And that is a really good value. You you booked twice with us, and you’ve paid for your platinum card fee. And that’s, you know, that’s not even in sort of that implied value in terms of the credits and things like that.

Rob Wildhack, Analyst, Autonomous: Yep. Okay. And then the last ingredient to the 10% revenue growth is on the lending side. I mean, you’ve seen you’re seemed eager to lean into lending for some time, but a common point of pushback that we would hear from investors is that doing too much lending can get too risky or it could be multiple dilutive. I mean, to the people who say that, what what are they overlooking?

Don’t say that. You should None of them are in this room.

Steve Squeri, CEO and Chairman, American Express: Okay. None of them in this room. So here’s the way we look at it. We lend money to our cardholders because they wanna borrow. And our I’d rather have our cardholders borrow from us than from our competitors because once you start borrowing from our competitors, then why not just take the card from our competitors as well?

The other thing I’d say is most of our lending is done to existing customers, and our credit profile is, you know, pristine. Right? I mean, it’s beyond reproach at this particular point in time, and it’s been that way for for decades. But if you dig into the numbers, you’ve gotta look at a couple things. Look at our billings growth versus our total loans and receivables growth since 2019.

’50 ’9 percent billings growth, 47% loans and receivable growth. That means the ratio has gotten even better. And then if you dig into NII and look at it and you say, okay. Half of the NII growth is margin. So how do you get margin?

Well, if you look at our if you look at our funding stack, 20% number of years ago was funded through retail deposits. Now that’s 65%. If you look at our pricing capability, it’s even more sophisticated. So really when you look at that NII growth, only half of it is really volume related. The other half is margin related.

And when I look at the margin related piece of it, why wouldn’t I take that money? So I’m not gonna apologize for that piece of it. And I think the way to look at it is, you know, what has happened with delinquencies and so forth. And the other thing, you know, by putting pay over time and planet and things like that on it, that is driving a little bit more of our our loan growth and receivables. So we feel really good about it.

We don’t do balance transfers. We don’t get outside of our credit box. So and, you know, so I I think that’s you’ve really gotta ask the second and third order questions when you start to get into our the lending part of our business. But, you know, years ago, we were sort of allergic to it, and then you wonder why you don’t have these deeper relationships with your customers because they need to do it. And the reality is platinum cardholders re you know, will revolve and and and and need that working capital for themselves from time to time.

And so we’re there to give them that, and that’s a that’s a really good credit decision for us.

Rob Wildhack, Analyst, Autonomous: Your predecessor used to emphasize your best customer is your existing customer. Right?

Steve Squeri, CEO and Chairman, American Express: Yeah. I he he was right, and he had a pretty good run. So we’re gonna go with that. Stick with that. Okay.

We’ll go with that.

Rob Wildhack, Analyst, Autonomous: Okay. In your your initial remarks there, you talked about innovation, and a big part of the overall Amex value proposition is, the differentiated membership model and the customer base, which has created the customer base. So tell us about some of the innovations on the membership services side that you’ve made and that you’re excited about.

Steve Squeri, CEO and Chairman, American Express: Well, I I think look. What we’ve done is, you know, we as we look at you know, just you look at Resy, you look at you look at Tock, you look at those acquisitions, and I talked a little bit about that before in terms of creating this closed loop within a closed loop. That’s all a card member benefit. The constant the constant investment in our travel business in terms of providing more value to our cardholders there, investments, which, you know, we got the lounge wars now. Right?

But we continue to to do that. And, you know, look, we did we did Centurion Lounge over at 1 Vanderbilt, which has been, you know, a huge success as we we try and take that to another level. Experiences and, you know, when we do we do partnerships, we’ve done big Formula One partnership. You know, it’s it’s not about putting our names. I I was I was with Zach Brown from McLaren, and he’s trying to get me to sponsor the car.

And I said the only place you have left is the windshield. And I don’t think we really wanna put Amex across the windshield. You know? It may he’ll put a decal anywhere, that guy. He’s he’s he’s phenomenal.

But we don’t do that. What we’re doing is we’re involved with Formula One not only to provide to provide tickets, to provide special events, to provide special access, to provide driver access, to do the the Formula One academy, to do things like that that our card members can excited about and can get involved in. And so as you think about sponsorships, US Open, things like that, that’s how we do it. And then we work with our you know, we’re working with our merchant partners to provide more and more value in this membership model. What we’re doing is we’re creating that flywheel.

And the more card members we have, the more merchants we’re gonna get and the more merchants that wanna get to those those particular card members. So it’s it’s a lot more of the same. That playbook works for us. And I think the key thing is that the takeaway here is we’re gonna continue to invest in that model because if you don’t invest, then our competitors will continue to to catch up. And in a lot of cases, just replicate what we’re doing, and that’s why it’s really important for us to stay a couple steps ahead.

Rob Wildhack, Analyst, Autonomous: Yep. You mentioned the lounge wars and the competitors more broadly a little bit. It’s a good segue to an audience question. I mean, how would you talk or how would you rate the competitive environment today, the core US premium consumer segment? Yeah.

Steve Squeri, CEO and Chairman, American Express: I mean, it’s you know, look. It’s been it’s been a a war in that segment since Gordon Smith left American Express. Now he’s retired in Florida. But, you know, when he first launched Sapphire and and and I’ve said this, and I’ve said this multiple times. I think it it helped us up our game a little bit.

It put a it it put a great focus on that premium segment. And so it it’s intense. It’s intense, but there are a lot of people, you know, out there that want these premium cards, and we punch way above way above our weight. And, you know, at the the JPM investor conference, and and they’ve they’ve had a great run, but they’ve clearly said we’re not number one in premium. You know?

And and Citi is, I think, regrouping. And, you know, Capital One, I think, will be a little distracted at this point. But with Venturex, you know, they’ve they’ve come at us as well. And, you know, I’m sure Charlie will do some stuff at Wells Fargo. And and our perspective is, you know, we’re ready for all comers, and and that’s why the refresh is so important for us.

Right? Because you wanna stay on that that cycle of constantly refreshing your products because you have to have new things to introduce to your consumers on an ongoing basis, not only consumers, but small businesses as well. And that’s why we’ve really put a major focus on on refreshes, you know, since I took over.

Rob Wildhack, Analyst, Autonomous: And then on the earnings call in April, you know, you mentioned that the consumer base is not really affected by swings in the stock market or declines in consumer sentiment. Yeah. I can understand why that’s true historically, but does that relationship change at all with the growth with millennials and Gen z just because they haven’t they don’t have the home equity or the savings built up? Are they a little more sensitive there?

Steve Squeri, CEO and Chairman, American Express: Yeah. So I’ll get to the last part of that. The ironic part of that is we as we do our research is when you compare Gen Xers of yesteryear to the millennials of today, they have more the millennials of today have more savings than the Gen Xers did at that exact same time. Right? So I don’t think that holds.

I think that, you know, look, consumer sentiment, you know, is in the toilet, but yet they’re just complaining as they go spend. That that’s what we’re seeing. Watch what they do, not what they say. Exactly right. So they’re just complaining as they go spend, and that’s fine.

So they’re they’re just approaching a lot of disgruntled retailers and restaurateurs, but in a disgruntled way. But that I think that’s okay. And the reality is the stock market has never affected our customer base. What affects our customer base is unemployment, especially white collar unemployment. You know, we saw lots of unemployment during COVID, but that was more service unemployment.

You know, hotels, restaurants, things like that, and that really wasn’t our customer base by and large. So that’s what we do watch out for. And the other thing I’ll remind people is is that in stressed times, our card members act a lot differently than other cardholders. Right? And so what happens is when our cardholders get stressed, they spend a little bit less.

And if they get really stressed, and and a lot of them have multiple cards, and they will pay us first. And we put that fact up there when we did our investor conference back last last April. And so I think the thing that we really watch is we really watch unemployment for this because the stock market up and down I mean, just look at what’s happened with the stock market. As I said to somebody the other day, if you were Rip Van Winkle and went to sleep the day before the election and woke up now, you’d say, I guess nothing happened. Meanwhile, it’s been like mister Toad’s wild ride from a stock market perspective.

Right? So, you know, and I don’t I don’t think people are running their lives like that.

Rob Wildhack, Analyst, Autonomous: Got it. Okay. Let’s switch over to The US commercial business. What does it take to see an acceleration in spend growth there? And then second question would be given your share of small business spend today, I mean, how much more opportunity is there to gain share versus this being a business that just grows with the market from here?

Yeah.

Steve Squeri, CEO and Chairman, American Express: I I think, you know, look. The the when we look at small business, and we’ll ultimately probably provide a lot more color on this going forward, I think s m SMB is too large to look at. And I think you have to look at the small business, and we’ll define that by whatever revenue segment we want to, and the middle market segment. And I would say the small business segment is growing, it’s vibrant, and it is we’re acquiring new customers on an ongoing basis. I think when you start to get into the middle market segment, you have an organic issue.

You still have an organic growth issue. And part of that is rightsizing transactions for the right product. You know, coming out of during COVID, everything went on the credit card. Once people started spending again, everything went on the credit card. Coming out of COVID, that behavior didn’t change.

But as I said, I said this to my team, you know, the reality is at American Express, we don’t pay Google with the Amex card, but yet a lot of middle market companies were. And that’s probably not the right use of the card when you’re thinking about big advertising spend. I wouldn’t mind it being the right use of the card, but probably not probably not what the card was designed for. Right? And so we’re seeing a little bit a little bit of that.

And you’re also seeing a little bit of, you know, middle market companies acting a little bit more like large market companies in terms of really much more focused on expense management than on than on growth. The other big difference is the middle market companies tend not to put their goods for resale on the card where small businesses Having said all that, you’ve got about a 3% growth in the overall commercial business and almost 8% revenue growth, you know, seven and a half percent. Because what happens is we have so many small businesses, you got the fees and you got the lending. And the corporate business is relatively relatively flat at this point. There’s not you know, any of you that work for any company of any size, nobody is telling you, unfortunately, to go out and spend more money on your corporate card.

That’s not a memo I’m writing. Okay? And I’d probably not a memo that is coming out in your own businesses. And so I wish it was, but it’s not. And we’re we’re not leading like that.

And that’s what’s happening with corporate. So that’s why the corporate card business kinda stays a little bit flat, kinda moves with inflation.

Rob Wildhack, Analyst, Autonomous: Is there any specific catalyst that would reignite that sort of middle market organic growth, or is it just a matter of time and getting comfortable with sort

Steve Squeri, CEO and Chairman, American Express: and outlook? I think it has to I think it has to reset a little bit still. And and I think we have to do a better job, and I think we can do a better job in in making more b two b transactions viable on the product. And viability meaning from both the customer the the card member side and the merchant side. And because there is a there is a point there where maybe the right pricing decisions drive some more volume there.

And that’s something that we’ll ultimately look at to put more volume on. And then competitively in U. S. Commercial, you recently bought Center to build out the expense management capabilities. Tell us more about the strategy behind that acquisition and how you’re thinking about the offering on an overall basis and a holistic basis for for the commercial segment more broadly.

Yeah. I mean, we’ve been partnering with expense management providers for a long time, and it became it became clear that we probably needed our own own solution. And and maybe it should have been clearer a little bit earlier, but we are where we are. I think when you look at Ramp and you look at Brex, they’ve had this integrated product. And we tried to partner with with other providers, Concur and some others, and it just became apparent that we needed our own.

And so that’ll be targeted. It’ll become ultimately part of the Blueprint platform, which also will have on it Amex Pay. It’ll have it’s got our checking account. It’s got access to your card account. It’s got a cash flow analysis.

It’s got working capital. We’ll, you know, integrate travel into that. And so think about that as a platform going forward for small and mid sized businesses. I think, ultimately, center out of the gate, you know, as a stand alone product, we’ll be targeted much more at the middle market company, which is really focused a lot more on expense management, and we’ll integrate our corporate card into that. So that’s it.

I mean, and the reality is it’s a it’s it’s a it’s a decision for us to buy versus build. You know, it’s not our it’s not our bailiwick. It’s building expense management software. And and so we saw We thought Center was a we had a good tech stack, and so we bought it. That closed in April?

Right. That closed

Rob Wildhack, Analyst, Autonomous: in April. They’re in house. Okay. Let’s switch over to international. That’s an area where billings have been growing quite nicely, you know, in the teens.

What’s the driver behind that? And then how long do you think that’s sustainable?

Steve Squeri, CEO and Chairman, American Express: I I think that has a a long, long, long tail. You know, international was the fastest growing part of our business pre pandemic. During the pandemic, it was the one that was hit, and it took the longest to come back because it took a long time for a lot of countries to open. But when you start to look at international, you know, we’re we’re pretty much in 15 markets, which represent about 60% of the revenue of the of the card revenue that’s out there. And when you look at the top five markets that we’re in, we don’t have more than 6% market share.

When you look at Canada, you know, Mexico, The UK, Australia, Japan, there’s a lot of opportunity for growth, and premium products play really well internationally. As we continue to increase coverage where we now have over 80% coverage in 12 markets, we’ve taken a very specific city approach where we’ve identified, you know, approximately 50 cities where we wanna get to that 80% coverage number, and we’ve made a lot of progress against that. And so I think as coverage continues to increase and as we continue to, you know, push the product out in the marketplace, I think it’s a it’s a it’s a it’s a big, big growth opportunity for us. Not a lot of lending internationally for us, and you may see a little bit a little bit more of that. But right now, we’re focused on not only small business, which is growing at the same rate as as as our consumer businesses internationally.

That’s a real nascent business over there. There’s nobody that’s out there that’s dominating that business. And so I think there’s a lot of opportunity for growth in international.

Rob Wildhack, Analyst, Autonomous: Is less lending internationally? Is that a structural thing? International consumers don’t demand their

Steve Squeri, CEO and Chairman, American Express: I mean, if you you go market to market, it’s very, very different. You go to Germany. I mean, everything is debit. You go to different different markets. And in some markets, you just don’t have you have thin credit files, you just don’t wanna get involved in it.

But consumer debt is is a real US phenomenon. Right? It’s not necessarily an international phenomenon as much. We have, you know, we have some lending in the Canadian business, UK business, and so forth. But you go to Japan, you’re not it’s not a

Rob Wildhack, Analyst, Autonomous: big lending market. Right? Yep. Okay. And then let’s move over to VCE and marketing expenses too.

I’ll start with the first one. You know, VCE is a metric that as a percentage of revenue, it’s increased quite a bit since pre pandemic time. I know that as you add value to the card, VCE should increase too. But is there a limit to where that line makes sense as a percentage of revenue relative to sort of the low 40%? And then similar question, but, you know, why is 42, 40 three percent sort of the right level or the or the optimal level?

Steve Squeri, CEO and Chairman, American Express: Well, I think, you know, I think the first thing that’s really important is VCE is is not something we strive for as a as an output. Right? You know, it it it it’s a result of the actions that we take. We don’t set a goal and work our way and work our way back. And so, you know, sometimes it’s 42, sometimes it’s 41, sometimes it’s 43.

And it has to be taken into context of the entire expense base that we have. Right? Because when you have higher VCE, you sometimes don’t need to spend as much in marketing. You’ll get you’ll get more revenue out of your cardholders. You get better credit quality.

You get more efficiency in your acquisition. And so, you know, a lot of times when you when you relaunch a product and it has potentially more VCE and and and the the relative scale of how much VCE is in a product goes anywhere from 25% to 60% depending upon its cashback product or a cobrand product, and you got proprietary products in there as well. And so, you know, you have to look at that in the context of your entire expense base of how you wanna allocate allocate your money. Because, you know, the more value you put in a product, maybe the less the less rewards you need to offer from an incentive perspective to acquire a cardholder. Right?

Because it just makes makes a lot of sense, which is why you’ll see a lot of times when we launch a product, the v the the the VCE works a lot harder for us than it works on a normal basis. So I don’t know what the right level of of number is, but I think what you have to just focus on is, for us, is that, you know, our ultimate goal is to deliver mid teens EPS growth, and it’s all a combination of the marketing dollars, the OpEx, the tech spend, and so forth.

Rob Wildhack, Analyst, Autonomous: Okay. And then on the marketing side, you’ve often highlighted that as an area you can flex lower in the event of a downturn. I mean, I’d imagine there’s a certain level of marketing spend that you need to sustain this longer term growth algorithm. So how do you think about balancing those two? And then versus the 6,000,000,000 plus you’ve been calling for for marketing for this year, where’s the bottom line in terms of what’s necessary to sustain the, the growth trajectory?

Steve Squeri, CEO and Chairman, American Express: Yeah. And this gets a little bit back to the VCE question because it works in it works in concert. But here’s what I will say. I’m not gonna flex that marketing line to make an EPS number. This is not how I run the company.

Right? So when we talk about that flexibility, we talk about that flexibility in terms of if we need to potentially invest in other areas. So if we need to invest in technology or we need to invest a little bit more in OpEx, we can flex that, charge the, you know, charge the business with, you know, more efficiency. But the interesting thing is when times get a little uncertain or a little tougher, you don’t have as much line of sight into acquiring good cardholders or upgrading existing cardholders, so it becomes a self regulating line to a lot to a large extent. And so what happens is if you’re not meeting the ROI threshold, we’re not gonna spend not gonna spend the marketing dollars.

So I I wouldn’t think of it as a slush fund. That that’s not the way we want you to think about it. I would think about it as, you know, a a number that that we have out there that is driving that is driving that growth that we do have the opportunity to flex up or flex down depending upon the line of sight that we see into it. If you look at I guess it was last year, we flexed the thing all the way up. And, you know, we talked about at the beginning of the year that we were gonna add more to marketing.

And, you know, our plan at the beginning of the year was to take the Acerify gain, for example, put that into marketing. We wound up dropping that entire Acerify gain to the bottom line, shared that with our shareholders, did more share buybacks, and we were able to just, by the overall business, bring that up. And so that wasn’t the plan number necessarily at the beginning of the year, but we had line of sight into great cardholders, and and and that’s what we did. So, you know, that number is gonna vary. It could go a little bit up.

It could go a little bit down. You’re not gonna see it drop, you know, a couple billion dollars. It did during COVID because you didn’t have line of sight in there. But, you know, as you get bigger and bigger, you need to invest more to continue to bring those those cardholders in. But think of that investment in terms of VCE and marketing, not just one or the other.

Rob Wildhack, Analyst, Autonomous: And to your point on the ROI with respect to marketing, I’d imagine you have far more marketing opportunities that meet the ROI threshold today than you could fund with a reasonable marketing budget. Is that fair?

Steve Squeri, CEO and Chairman, American Express: Yeah. I mean, I I think that that is absolutely fair. I mean, we, you know, we have you know, look, we have a responsibility to our shareholders to deliver earnings and, you know, to delivering earnings growth. And so we set we set our ROIs at a level that we feel comfortable comfortable to do that. But the way I’ve described this is, you know, we have teams of people that look at initiatives, and they come, you know, they come to the marketing council with those initiatives.

It’s sort of like Shark Tank. Right? I mean, they come in. Here’s my initiative. And will you fund it?

Maybe yes. Maybe no. And it all depends on how the other ideas are. If the ROIs are really, really high for the other ideas, we’re gonna fund those. And so you may look at it and say, hey.

There’s some good ROIs on that we’re leaving on the table. On the other hand, we may make the decision and say that’s just completely idiotic to leave that. We’ll just communicate that to our shareholders. And, you know, you may miss again, you may miss from a short term perspective what the EPS is, but we don’t we’re not running this company from a short term perspective. And I think if you look over, you know, the last seven years, the returns that we’ve been able to deliver, the capital we’ve been able to return to our shareholders, the way that we have decided to run it is the right way.

Just going back to COVID, you know, I mean, look. We could have lost as we were going through COVID, it looked like we were gonna lose money. And, you know, my decision was to invest more because my view was if we lose $5 and we lose $6, who gives a shit? Doesn’t really matter. We’re losing money.

Right? And the reality was as long as your capital position, liquidity position is right, why not invest in your in your cardholders? We did that. We didn’t lose any money. Wound up making money.

Didn’t make as much as we had planned to make, but it kept the fuel in the tank. So when we came out of COVID, we came out like a rocket ship as opposed to limping out. And that and I think that was the right decision for us.

Rob Wildhack, Analyst, Autonomous: The turbo on the Mercedes on the Autobahn. Exactly. You’re getting the whole concept now. Right?

Steve Squeri, CEO and Chairman, American Express: If there’s any takeaway. At 03:00, you got it locked in.

Rob Wildhack, Analyst, Autonomous: Alright. And then on the, other operating expense lines, I mean, you’ve been able to generate healthy leverage there. But I guess the question would be, how do you ensure that you’re both driving operating leverage and making the necessary sort of back end technology investment? And then as a corollary to that, like, what are some of those maybe behind the scenes technology investments that you’re kind of excited about?

Steve Squeri, CEO and Chairman, American Express: Well, I think, you know, the the the key thing is, you know, over the last six, seven years, we’ve gone from, like, a $35,000,000,000 revenue company to almost a $70,000,000,000 revenue company. And when you do that, you know, your variable revenues that have come in don’t require the same amount of OpEx or technology and what have you. And so scale has its benefits. Having said that, probably we’ve invested 40% more in technology than we did just in 2021. Right?

So we’ve continued to invest. The reality is is that, you know, what what is exciting again, these are important investments for us. But one of the things that we’ve decided to do is, really, we’re replatforming all of our back end systems. Now that may not excite a lot of you in the room, but it really drives our technology people wild. They love this.

Right? So you’re replatforming systems that are thirty and forty and and sometimes thirty and forty years old or have gone through multiple iterations, and now you’ve decided three platforms. So we’ve made the the the decision to invest hundreds of millions of dollars to do that. Why do you do that? It makes it a lot more nimble.

It makes it more API ready. It makes it able able to to integrate in and invest in with with other fintechs and other providers and to really have to take advantage of our global scale. And, you know, look, you know, a lot of people talk about AI, and we’ve invested in AI. But the the the the key point is we have invested in AI since 2010. And when you look at our underwriting decisions, every time you swipe that card, that’s a it’s a machine learning decision that’s out there.

And so every credit fraud underwriting decision authorization that we do is all a is all AI. And it continues to learn, and that’s how we set the preset no preset spending limits and so forth. And so we’re excited about what we can do from a customer facing perspective going forward, and we’re excited about integrating in, you know, all of those acquisitions that we’ve made from a a a small business perspective into a platform that faces our SMEs. And then we got Takin. We’ve got we’ve got Takin.

We’ve got Resi, which we need to put together. And we got Rome, which is another acquisition that we did, which allows Takin Resi to connect to systems like Toast and Shift four to be able to bring information back so you get much more of a customer management system for the restaurant tour.

Rob Wildhack, Analyst, Autonomous: Awesome. Okay. Few minutes left. I’ll go to a couple audience questions. You you touched on Capital One Discover a little bit, but the question, specifically here is, do you think this combo helps overall industry economics and or will the potential extra margin be returned to card members for rewards, retention, those kinds of things?

Steve Squeri, CEO and Chairman, American Express: I I that would be a good question for Rich. Look. I think that I think it’s a really good acquisition for Capital One. I think, you know, it gives them a debit network, which I think is really important. I think that’s the crown jewel here.

I think it gives them more scale. I mean, they’ll become the the premium low FICO lender, if you could put those words together. And they’ll have tremendous tremendous scale, and they’ll do it better than anybody else because they do it better than anybody else. In terms of the Discover network itself, you know, we will see. I I would not consider the current Discover network the Autobahn.

So no disrespect, but it’s not known for premium customers. And I think the the tough part of that of that decision is do you take high interchange transactions off the Visa and Mastercard network and put them on the Discover network at a much lower discount rate? And that’s a tough that’s a real tough call because you’d have to believe that you’re gonna get more value out of that. And I just think you’re gonna see my view is you will see them keep a lot of the volume on Visa, Mastercard, and keep some of the volume on Discover. But I think the debit network will be a big big win for them in a consolidation of all that stuff.

Rob Wildhack, Analyst, Autonomous: Yep. Okay. Another audience question here. You know, you talked about deposit growth, but online banks broadly have not taken off in The US the way we might have expected several years ago. I mean, why do you think that is?

What’s the gating factor there? And then what do you think is unique and behind Amex Amex’s success there?

Steve Squeri, CEO and Chairman, American Express: Well, I I mean, you know, we’re not gonna scare anybody with our online deposits at this point. I don’t think Jamie or Jane or any what Brian is really worried about Amex at this point. But for us, it’s enough to to to help us fund our business. I mean, we’re not we’re really not a transaction. We’re not a transaction taking bank.

And I think, you know, online banks haven’t taken off because your regular bank can do everything you need to do online for you. Right? I mean, so you have a brick and mortar bank. I don’t know when’s the last time anybody was in a brick and mortar bank here.

Rob Wildhack, Analyst, Autonomous: I went this weekend. Did you? How was it? Not great. Not great.

Steve Squeri, CEO and Chairman, American Express: Okay. But you could do pretty much the exact same things you do in that brick and mortar bank other than maybe do a wire a big wire with your with your app that you have either from JPMorgan or Citi or so forth. And so I I think it’s really hard. I think the I think the banks have done a really good job of digitizing their existing value proposition. And I think, you know so that’s why I don’t think pure online banks have taken over.

For us, it’s really about we’re leaning in on our brand, our trust, and our security. And people for years have liked putting their money with American Express. It happened with traveler’s checks. Right? If you think about a traveler’s check, people gave us their money.

We gave them a piece of paper, and we’d say, we’ll get we’ll make we’ll make you good on that. Right? And so, you know, and that’s what we leaned into. And we did that right after the financial crisis, and it’s really high yield savings. Right?

And then what we decided to do is for small business and for consumer, if you wanna have a transaction bank with us, you got it. We’ll have that offering for you, but it’s not something that we’re necessarily leaning into for the future growth of the company.

Rob Wildhack, Analyst, Autonomous: Okay. We can wrap it up. I have one last question. Steve, as a a long time veteran of the company, you know, what are the main takeaways in the investment case that you want this audience to leave here with today?

Steve Squeri, CEO and Chairman, American Express: Hope we cleared up the NII stuff. That’s what I’m hoping. Loud and clear. Hope we cleared that up. No.

I think look. We’re in a great I I think anybody in the card business is in a great is in a great industry. Right? I mean, you wanna be in an industry where the TAM is growing. So I think that’s terrific.

For us, not only we’re a great industry where the TAM is growing, but we’re in those segments that have growth opportunities. Premium the premium segment is growing a lot faster than the rest of the industry, and we are punching above our weight. We talked about international and the huge opportunity that we have for growth in international. Look. I talked about the closed loop.

Our business model, which is part which is the closed loop with a premium a premium consumer and a premium small business customer, is really important, and it helps drive it helps drive our revenue. Look at our just look at our revenue mix, $75.25. You do not see that from a card from a card company. We have the best credit quality in in in the industry. We started out by talking about a hundred and seventy five years of innovation.

We continue to innovate, and we will continue to innovate. And, you know, our our key is continuing to stay above, to stay ahead of our competition, and to respond to the to those forces in in the marketplace. And if you like a 30% ROE and you like 80 you know, you like us to return 80% of our capital to shareholders, you may wanna think about us.

Rob Wildhack, Analyst, Autonomous: Awesome. This has been great, Steve. Thank you so much.

Steve Squeri, CEO and Chairman, American Express: My pleasure. Thank you very much. Thanks for coming.

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