american express Business Model – How does american express make money

Can you imagine how hard it would have been if we did not have credit cards or debit cards to pay the bills? While this is a normal thing now it was not heard of a few decades ago. People who are born in the age of credit cards and the latest banking services would never know how difficult it was for your elders to pay large amounts of money. Most of the people who are reading this article are in a time where banking transactions are way easier. Not only that but your people are also witnessing the time when transactions can also be made through your mobile phone. All you need is a mobile phone and an account in a neo bank application along with the internet to make transactions. However, you are still not witnessing the decline of issuing or usage of credit cards or debit cards anywhere.

Have you ever thought about that? Have you ever thought why do you still carry these cards when we can just make payments through your mobile phones? Well, there are a couple of reasons for this. The first reason is that not every place accepts mobile payments. And the second reason is that you cannot rely on mobile payments all the time. This is because the servers that are operated by these banks stop working suddenly for a temporary period of time.  During this time no transactions can happen so you will face a lot of problems when this happens and you don’t want that. You don’t want this especially when you are traveling. Traveling is also something that has become very easy for people these days. It’s not like you have to go to a travel agent to book your tickets or hotel room for you. You can do this on your phone using smartphones. Especially booking hotels has become very sophisticated.  A person can literally see how the hotel room looks, what are the services available along with its price. 

What if you have a company that provides both banking services and travel services? Many people don’t think that such a company does not exist but it does and it is also quite popular. The company that is being discussed is American Express. This is a company that is known to offer both banking and travel services. But not many people know about its business model or the way it makes. This article is completely about that. Before knowing about the business model of American Express, let’s know a little bit more about the company.

What is American Express?

As you already know American Express is a company that offers multinational financial and travel services. This is a very old company. It was founded in the year 1850. This is a combination of three companies that were founded prior to 1850. The company has seen tremendous growth in the following years. It had more than 900 offices across 10 states in the US. But it has faced fierce competition from another company called Merchants Union Express. Both of these companies merged to become a strong player. During this period of time, the company was known as American Merchants Union Express. It was renamed American Express in 1873. In 1881 James Cogdell Frago took over as the president of the company after the death of William Frago who was his younger brother. James was responsible for many innovative ideas of the company and made sure it got more success in the span of 33 years he served as a president.

After James, the position was taken by George Chadbourne who worked in the company for over 30 years. During the next few decades, American Express has played a significant role in the financial history of the United States. It was during this time the company thought of introducing a type of charge card. However, this idea was not taken seriously until a card was launched by Diners club in 1950. It took more than half a decade for the company to seriously think about entering the card business. It decided to launch its cards on October 1st but the public demand was so severe that it had to issue them before the launch date. American Express issued a staggering 250,000 cards before the launch date. In 1966 the company introduced Gold cards and after nearly two decades it released a Platinum card. American Express also partnered with Warner Communications to create a satellite entertainment company. This company is the reason for the creation of MTV and Nickelodeon. By the end of 2019, the company had more than 110 million users. Currently, the company is worth more than $24 billion.

Business model of American Express

Let’s look at the main aspects of its business model.

Giving great offers to its customers

You should not forget that while being a banking service, American Express also provides travel services to its customers. The cardholders get a lot of offers from the company. These offers are given to the customers only because they are using their cards. It gives ridiculous offers to people who own their cards. It can do this because of its affiliations with various institutions across the globe. This brings us to the next topic.


American Express is affiliated with a lot of businesses in America and around the world. This makes it easy for people to spend money using their cards. The businesses that are affiliated with American Express are happy to do this because of the huge customer base the company possesses. American Express can recommend its customers to avail services from those companies. Not only that but it provides offers on hotels. Apart from that it also provides offers on healthcare, groceries, and dining. It does this to boost the revenue of those companies. 

Various types of Cards

American Express provides different types of cards to people for different purposes. People can choose these cards according to their financial needs and their requirements. It has several types of cards for travel and financial purposes. You have cards like Platinum, Platinum reverse, and Gold cards which can be used for travel and financial purposes. The Platinum card has all the premium benefits. It also has a Smart earn and membership rewards card. These cards can be used to earn points on each spends. The last card is the Platinum travel card which is exclusive to people who want to enjoy travel rewards. 

Benefits of owning a card

Apart from the offers, there are a lot of benefits that you get from owning a card. People receive gift cards, travel vouchers, dining vouchers, shopping vouchers, as well as jewelry vouchers which can be redeemed for reward points. The company also provides online services to its customers. You can even get various types of insurance like health insurance, car insurance, life insurance, and personal accident insurance. If you ever lose your card then American Express makes sure that the payments made will cover your losses. Not only that but you will also receive a new card in two days. 

How does American Express money?

The company makes money from both sides of the market that is the end-users who make the payments and the businesses that accept card payments. There is more than one way in which American Express makes money. Let’s go through them one by one.

Commissions per transaction

This is probably the most obvious way in which a card issuing company makes money. You might have already thought about this. The company charges a fee every time a transaction is made. It charges a merchant fee whenever a customer uses the American Express card to make the transaction. The company used to charge a considerable percentage of money in the past. But in recent years it decided to decrease the amount so that more people get their cards and use them more often. This will make sure that their revenue increases even more over a period of time. 

Fee on cards

American Express charges a fee from customers who own their cards. Everyone who owns an American Express card has to pay an annual fee. This fee depends on the type of card you are owning. The more the benefits the more annual fee you have to pay. You have to pay thousands of dollars as an annual fee if you own a Platinum card.

Travel and Insurance

Apart from the above-mentioned ways, American Express makes money by providing insurance and travel-related services. Every time you use American Express to get travel services or get insurance from a company you the company makes money.


This is the business model of American Express. It is one of the largest card issuers in the world. The majority of its revenue comes from America even though it provides services all over the world. The company’s cards are great for people who want to travel and lifestyle benefits. You can know more about other interesting business models on Zeen. Click here to learn about the business model of eToro.

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