How Does American Express Make its Money?
American Express is a globally integrated payments company that operates as both a card issuer and a card network — a unique “closed-loop” model. Unlike Visa and Mastercard (which only operate payment networks), Amex issues its own cards directly to consumers and businesses, sets its own terms, owns the customer relationships, and processes transactions on its own network.
This integrated model gives Amex richer customer data, higher merchant fees (typically 2.3-3.5% vs. ~1.5-2% for Visa/Mastercard), and the ability to offer premium rewards and experiences. The trade-off is greater credit risk and higher operating costs. Amex cards are positioned as premium products, targeting high-spending consumers and businesses.
Revenue Breakdown
| Revenue Source | 2024 | 2023 | YoY Growth |
|---|---|---|---|
| Discount Revenue (merchant fees) | $36.3B | $33.0B | +10.0% |
| Net Card Fees | $8.4B | $7.3B | +15.1% |
| Net Interest Income | $14.2B | $13.4B | +6.0% |
| Other Revenue | $6.6B | $6.1B | +8.2% |
| Total Revenue | $65.9B | $60.5B | +8.9% |
Discount Revenue — 55% of Revenue
The largest revenue source. Every time a cardholder makes a purchase at a merchant, Amex collects a “discount rate” (merchant fee) of approximately 2.3-3.5%. This is higher than what merchants pay for Visa/Mastercard transactions, justified by the higher average spending of Amex cardholders. Discount revenue is directly tied to billed business (total spending on Amex cards), which reached $1.55 trillion in 2024.
Net Card Fees — 13% of Revenue
Annual fees paid by cardholders. Amex’s premium cards command significant fees: the Platinum Card ($695/year), Gold Card ($325/year), Delta SkyMiles cards, and Hilton cards. Fee revenue grew 15% as Amex continued to attract Millennial and Gen Z customers willing to pay annual fees for travel, dining, and lifestyle benefits.
Net Interest Income — 22% of Revenue
Interest earned on outstanding card balances (loans). While Amex positions itself as a “spend-centric” model (encouraging full payment), a growing portion of the portfolio now carries revolving balances, generating net interest income. This segment benefits from higher interest rates.
Other Revenue — 10% of Revenue
Travel commissions (Amex Travel), insurance premiums, foreign exchange revenue, and other fees.
Income Statement Overview
| Metric | 2024 | 2023 |
|---|---|---|
| Total Revenue | $65.9B | $60.5B |
| Provision for Credit Losses | $5.4B | $5.1B |
| Total Expenses | $47.3B | $43.4B |
| Pre-Tax Income | $13.2B | $12.0B |
| Net Income | $10.1B | $8.4B |
Key Financial Metrics
- Net Income Margin: 15.3% — Strong for a financial services company. Amex’s premium customer base has lower default rates than mass-market credit card issuers.
- Revenue Growth: +8.9% — Consistent high-single-digit growth driven by strong spending trends, new card acquisitions, and annual fee increases.
- Billed Business: $1.55T — Total spending on Amex cards grew 6%. Amex cardholders spend on average 3-4x more per card than Visa/Mastercard holders.
- Return on Equity: ~33% — Exceptional. Amex generates outstanding returns on shareholder equity, reflecting its capital-light closed-loop model.
What to Watch
- Millennial and Gen Z acquisition — Amex has been aggressively targeting younger demographics. Over 60% of new Platinum Card members are Millennials or Gen Z. Retaining these customers as they age and increase spending is critical for long-term growth.
- Merchant acceptance — Amex’s higher fees mean some merchants don’t accept it. Expanding the acceptance network (now at ~99% coverage in the U.S.) is essential for cardholder value.
- Credit quality — As the economy evolves, monitoring write-off rates is important. Amex’s premium customer base historically weathers downturns better than mass-market competitors.
- Travel recovery — Travel and entertainment spending is a core Amex strength. Continued growth in travel spending benefits both discount revenue and the travel services business.
- Competition from premium Visa/Mastercard products — Chase Sapphire Reserve and Capital One Venture X compete directly with Amex Platinum. Sustaining differentiation through exclusive experiences and services is key.