Welcome to the Deep Dive, the place where we
take massive amounts of information, distill
it down to its most crucial and fascinating nuggets,
and make sure you walk away truly informed. Today,
we aren't talking about a trendy new fintech
startup, nor are we focusing on a centuries -old
commercial bank. We're diving into an entity
that is a successful fusion of both. An institution
that has, I mean, fundamentally shaped global
commerce, travel, and even personal status for
over 175 years. American Express. Okay, let's
unpack this. When most people hear Amex, they
immediately think of, you know, platinum card,
airport lounges, maybe that distinctive green
card design. Right. But the sheer scale of this
institution is staggering. making it far more
than just a card company. We were talking about
a Dow Jones component with total reported assets
clocking in at, what, U .S. $271 .5 billion as
of 2024. Yeah, I mean, this isn't just big. It's
a financial citadel. Exactly. And the numbers,
they really speak to its immense reach. As of
the end of 2023, there were 141 .2 million Amex
cards in force worldwide. And collectively, those
cards handled a colossal purchase volume of over
$1 .7 trillion that year. While Amex is sometimes
overshadowed by its larger rivals, it's still
the fourth largest card network globally by purchase
volume. So it's sitting right behind giants like
China UnionPay, Visa and MasterCard. That's right.
So our mission today is to figure out how this
institution achieved this level of dominance
and built this financial citadel. We're going
to trace the journey of American Express from
its surprising origins as a freight forwarder
in Buffalo, New York. Which is a story in itself.
Right. Through a necessary forced reinvention
during the chaos of World War I. Then we'll examine
the high stakes corporate maneuvers, the huge
legal battles over fees and market share, and
the deliberate strategic brand choices that gave
its cards that distinct sort of untouchable premium
image. And the foundation for this deep dive
is a comprehensive institutional history and
financial profile, which gives us all these granular
details of its numerous corporate transformations.
It's really a study in corporate survival. A
history of radical reinvention. Exactly. And
that's really central to MX's longevity in the
world of finance and travel. Reinvention isn't
just a buzzword here, is it? It's a matter of
survival. The history of Amex is genuinely an
exciting journey of transformation. It's not
just a timeline of financial acquisitions, but
a story of how they literally invented new tools
of trust and payment. Tools that reshaped how
people travel and transact business globally.
It's incredible. It is. We are looking at a company
that successfully navigated the extinction of
its initial core business freight delivery and
then pivoted repeatedly by mastering brand loyalty,
leveraging celebrity endorsements, and... And
most importantly, managing a proprietary network
model that gives them unique control over the
entire transaction. Let's start at the very beginning,
1850. This is the ultimate wait, they did what
moment in corporate history. When Amex was founded
in Buffalo, New York on March 18th, 1850, it
wasn't founded as a bank or a credit institution.
No, not at all. It was an express company. An
express company. So like packages. Essentially,
yeah. It was a joint stock corporation dedicated
to freight forwarding, specializing in the high
-value movement of cash -in -transit securities
and precious goods. The creation itself was a
significant corporate event involving the merger
of three existing competing cash -in -transit
companies. And those founders have quite the
pedigree of names that still echo in American
financial history. Absolutely. The three companies
that merged were Henry Wells' Wells & Company,
William G. Fargo's Livingston Fargo and Company,
and John Warren Butterfield's Wells Butterfield
and Company. They pooled their resources, routes
and expertise to form a dominant force in northern
transportation. And that brings up the most fascinating
historical footnote. The connection to Wells
Fargo. It sounds like they just split off the
American Express business, but why? It's a direct
split, and it really illustrates the geographical
ambitions of the different founders. Wells and
Fargo, two of the Amex founders, went on to start
Wells Fargo & Co. just two years later in 1852.
Two years, wow. And the reason was geographical
resistance from within the newly merged American
Express. Geographical resistance to what, exactly?
Well, Wells and Fargo proposed extending American
Express's express operation. all the way to California.
To cash in on the gold rush. Exactly, to capitalize
on the gold rush and the rapid expansion of the
West. But Butterfield and other Amex directors
objected. They saw it as too risky, too far from
their established New York State network. So
they couldn't sway the board? Nope. So Wells
and Fargo just went westward on their own. So
Amex decided to stay focused on the East, at
least for a while. And what did they focus on?
Logistics monopolies. And they were spectacularly
successful at it. In those early decades, American
Express quickly developed what the sources describe
as a near virtual monopoly on the movement of
express shipments. So everything. Goods, legal
securities, and crucially, physical currency.
All of it. Throughout the entire state of New
York. This dominance was built on reliability
and trust, which was, you know, a requirement
for transporting large sums of money. You can
almost track the company's ambition just by following
its physical headquarters in Manhattan. This
was a company whose business relied on horses,
wagons, and railways, so its first locations
really reflect that logistical need. That's right.
Their initial headquarters were at the intersection
of J Street and Hudson Street, which is now part
of Tribeca. And this location was vital because
the building had a busy freight depot on the
ground floor with a spur line that ran directly
to the Hudson River Railroad. This made it super
easy to transfer goods and cash from the train
lines to their city delivery system. But as Amex
started dealing more in securities and financial
transfers rather than just, you know, boxes,
they recognized they needed to move closer to
the burgeoning financial heart of the city. Precisely.
In 1874, Amix moved its headquarters downtown
to 65 Broadway. By 1903, they purchased the entire
site, solidifying their presence in the budding
financial district. And this move coincided with
their rising financial stature, right? Yeah.
It did. By that time, their assets were some
$28 million, a figure second only to the National
City Bank of New York among financial institutions
in the city. They were positioning themselves
as a financial player, not just a logistics firm.
And the ultimate physical statement of their
power, signaling their transformation from a
freight company to a financial power broker,
that came in the years leading up to World War
I. Under the new president, George Shadbourne
Taylor, they decided to tear down the older buildings
and erect a massive, imposing new headquarters.
And despite massive construction delays caused
by the war, the 21 -story neoclassical American
Express Co. building was completed in 1916 -17
at 65 Broadway. That building became a defining
structure in what was known as Express Row on
Lower Broadway. The source notes that this continuous
masonry wall have transformed Broadway into the
canyon of office towers that still define that
area today. And Amex kept that building until
1975, but their presence there absolutely defined
a section of the financial district for decades.
It linked their brand identity to solidity and
permanence. And this physical dominance mirrored
their strategic expansion into financial services,
which they were doing even while still operating
the express business. It was a slow. careful
pivot. The very first step into pure finance
was the money order business in 1857. This was
a direct shot at the U .S. post office. So they
were willing to take on government entities to
secure market share. Oh, absolutely. That move
proved they understood the business of transmitting
value reliably, not just physical goods. But
the real aha moment, the invention that cemented
their global trustworthy reputation, was the
creation of the traveler's check. And this invention
literally redefined international travel finance.
It did. And the story behind it is pure corporate
legend. It involves J .C. Fargo, who was president
for over 30 years. He took a pivotal trip to
Europe around, what, the late 1880s? experience
that sounds incredibly frustrating. It was more
than frustrating. It was infuriating, especially
for a powerful businessman. Even as the head
of American Express, he was carrying traditional
letters of credit issued by his own company.
Right. And other major banks. And he found that
when he went outside the major capitals, Paris,
London, Berlin, it was nearly impossible to get
cash easily. Local bankers were suspicious or
they demanded complex, time consuming verification.
So he comes back to New York completely annoyed
by the backwardness of it all. He came back with
a mission. Create a piece of paper that could
be instantly recognized, instantly verifiable
and instantly cashable anywhere in the world.
backed by the name American Express. So he commissioned
one of his employees, Marcellus Fleming Berry,
to devise a better solution. And Berry delivered
the American Express traveler's check, launching
it in 1891. And it worked because it solved the
security problem, right? Exactly. The check required
the purchaser to sign it twice, once when you
bought it and again when you cashed it in front
of the clerk. This simple two signature system
eliminated the risk of fraud that plagued currency
and letters of credit. It was basically a portable,
universally accepted form of private branded
money. And the ultimate stress test for this
new instrument came in 1914 at the start of World
War One. The war didn't just test the check.
It solidified Amex's reputation for global reliability.
When the war broke out, many European financial
institutions just stopped honoring traditional
letters of credit. They were worried about a
systemic collapse. Right. So you had all these
stranded American tourists and businessmen. Amex
was one of the few companies in Europe that continued
to honor the letters of credit and cash the traveler's
checks. That's a massive public relations and
trust victory that money couldn't buy. And their
operational involvement in the war went even
further. The British government recognized Amex's
incredible logistical and financial network.
They appointed American Express as their official
agent for managing relief. MX was tasked with
delivering letters, money, and relief parcels
to British prisoners of war. That's incredible.
A freight company turned financial company is
now handling humanitarian logistics for a major
power. It was operational chaos managed with
military precision. By the end of the war, MX
employees were delivering 150 tons of parcels
per day to prisoners held across six different
countries. This level of operational reliability
combined with the humanitarian aspect, built
an incredibly powerful brand foundation. It connected
the Amex name directly to stability, international
reach, and solving complex problems for people
in distress. They banked on trust. So Amex is
flying high in the early 20th century, having
successfully pivoted into financial instruments
that dominate global travel. But at the same
time, their original core business freight forwarding
via railroads was drawing highly unwelcome attention
from Washington. It had achieved too much success.
President Theodore Roosevelt's administration,
specifically from 1901 to 1909, tasked the Interstate
Commerce Commission, the ICC, with investigating
American Express for monopolizing the railroad
express business. A classic antitrust challenge
of the progressive era. Exactly. You could imagine
the corporate lawyers getting ready for a long
battle. But the resolution to this monopoly didn't
come from a direct ruling. It came from a massive,
completely unrelated national crisis. World War
I. It was a forced strategic intervention. The
source calls it a dramatic coincidence. The U
.S. entered the war, and during the severe coal
shortage in the winter of 1917, President Wilson's
administration decided it needed total control
over infrastructure. So the government effectively
commandeered all U .S. railroads. To manage troop.
supply and coal movement. And to do that efficiently,
the government decided that all the competing
express companies were just too inefficient.
So they needed to consolidate. The Treasury Secretary,
William Gibbs McAdoo, was given that task. And
this single governmental action designed for
the war effort was the end of American Express's
original core business. All individual contracts
were nullified. So Mikado forced them all to
consolidate into a single entity. A single, unified,
quasi -governmental entity, the American Railway
Express Agency, in July 1918. That must have
been a devastating blow, even with compensation.
They were forced to give up their entire infrastructure.
They gave up the largest share of equipment and
property to this new entity. 30 % of the pooled
assets. This single wartime act fundamentally
ended MX's freight forwarding routes overnight.
But the good news for them, I guess, was that
this transition conveniently removed them from
the ICC's regulatory crosshairs. Exactly. They
were forced out of one business and instantly
released from its accompanying regulatory scrutiny.
A truly forced pivot. But the company wasn't
left adrift. They had already been subtly building
their next life raft, leveraging that traveler's
check infrastructure and reputation. That's right.
In 1915, they had wisely established the Travel
Division, which quickly led to the opening of
their first travel agency. The systems they perfected
for assisting global travelers were now formalized
into a dedicated business line. They were transitioning
from moving packages to moving people. That's
a great way to put it. Okay, let's jump forward
a few decades past the Depression and WWII. The
1950s brought about the next massive permanent
reinvention, the modern payment card. Amex executives
have been discussing the concept of a travel
charge card as early as 1946. But discussions
aren't market launches. What truly spurred them
into action was the competitive threat posed
by the launch of Diners Club in March 1950. Diners
Club proved that a charge card concept initially
for restaurants and travel was viable. So Amex,
which hates being second. had to move quickly
and decisively. They did. By the time they entered
the business in late 1957, preparing for their
official launch on October 1st, 1958, the Pentep
public interest was astonishing. They had already
issued 250 ,000 cards before the official launch.
So they instantly secured a significant market
presence. Instantly. What's truly fascinating
to me is how they immediately established their
premium positioning through strategic pricing.
Oh, that's textbook brand building. The annual
fee for the new American Express card was set
at $6. Okay. And crucially, this was $1 higher
than the annual fee charged by Diners Club. This
small price difference wasn't accidental. It
was intentional. Just to position it as a premium
product from day one. Exactly. They were selling
status, not just convenience. And they also innovated
quickly on the technology side to maintain that
premium image. The very first cards issued in
1958 were actually paper, with the account number
and name typed on them. Just paper? That seems
so flimsy. It was. And just one year later, in
1959, American Express made a physical change
that revolutionized the entire industry. They
became the first company to issue embossed plastic
cards. That plastic innovation became the physical
standard for the entire global payment industry.
And the card ecosystem continued to grow and
diversify in the 1960s, allowing them to segment
their new affluent market. Right. In 1966, Amex
introduced the gold card specifically for what
they termed big spending members. This created
the first recognizable tier in their product
structure and further cemented the idea that
not all Amex members were the same. an emphasis
on the affluent market that has remained central
to their strategy ever since. Right. And then
the one we all recognize, the classic green card,
followed a few years later. Introduced in 1969.
But it was still a charge card, requiring the
balance to be paid in full monthly. That's right.
The 1970s saw the card division solidify its
foundation, which really set the stage for the
highly ambitious, volatile, and ultimately transformative
era of acquisitions under a new CEO. Here's where
this story gets really complex. Amex moves from
payments and travel into the highly aggressive
and frankly cutthroat world of Wall Street investment
banking. And the driving force was James D. Robinson
III, who became CEO in 1977. And under his leadership,
Amex decided it wanted to be more than just a
charge card company. It aimed to become a sprawling
financial services holding company, a one stop
financial supermarket. This decision launched
them into a massive decade long investment banking
foray that proved to be wildly volatile. The
initial and most significant move was in 1981
when Amex purchased Sanford -Distotle, Wells,
Shearson, Loeb, Rhodes. Weill's firm was already
a beast in its own right, the second largest
securities firm in the U .S. at the time. But
the fit felt strange, didn't it? A staid premium
travel company merging with a high octane brokerage
house. It was a huge culture clash. Shearson
was already a complicated entity, the result
of a flurry of aggressive mergers in the 70s.
When Amex bought it, the new Shearson American
Express had capital of $250 million, placing
it right behind Merrill Lynch. So the ambition
was palpable. Connect the Amex cardholder, base
wealthy, high spending. With Shearson's brokers
and financial products. That was the idea. And
the expansion continued rapidly. In 1984, they
acquired the legendary investment bank Lehman
Brothers. They incorporated Lehman into the Shearson
family, creating Shearson Lehman American Express.
They also acquired Investors Diversified Services,
or IDS, that same year. Right, bringing a huge
network of financial advisors and investment
products under the Amex umbrella. This was an
all -in bet on becoming a diversified financial
behemoth. And it climaxed in 1980. with the acquisition
of EF Hutton & Co., creating Shearson Lehman
Hutton, Inc. This was the pinnacle, the absolute
largest expression of their brokerage experiment.
But these experiments rarely succeed when the
corporate cultures are so disparate. And this
one failed spectacularly. The brokerage business
proved challenging for Amex for several key reasons.
Management difficulty, huge trading losses, and
the fundamental volatility of the investment
world just contracted so sharply with the steady,
predictable, high margin revenue of the card
business. Robinson III realized the strategic
mismatch was too great. So the exit process began
in 1993. That's right. Amex negotiated the sale
of Shearson's retail brokerage business to Primerica,
which then merged it with Smith Barney to create
Smith Barney Shearson. But even after that sale,
Amex was left with the institutional investment
banking arm. Which they finally spun off as Lehman
Brothers. Yes. In June 1994, American Express
completed the spinoff of the remaining institutional
and investment banking businesses as the independent
firm Lehman Brothers. This marked the definitive
end of Amex's 13 year, highly ambitious. and
ultimately costly experiment with the high -risk
brokerage business. And that allowed them to
finally focus back on their core strength, payments
and trust. Yes, but while they were navigating
Wall Street, MX was simultaneously dealing with
one of the worst external ethical crises in its
history, the Safra scandal. This is a remarkable
cautionary tale about corporate warfare. Amex
had acquired the Trade Development Bank of Geneva
from the famed international financier Edmund
Safra in 1983. Right. The goal was to expand
international private banking services for ultra
-wealthy clients. Safra even joined the Amex
board. But the arrangement didn't last. He left
and opened a competing private bank. And that's
when the relationship soured dramatically. Amex,
threatened by the competition, launched what
can only be described as a full -scale international
smear campaign. What did they do? They provided
deliberate, highly inaccurate reports to media
outlets suggesting Safra was under investigation
by the FBI for heinous crimes, drug trafficking,
connection to the mafia, even involvement in
the Iran -Contra affair. All of which were complete
fabrications. This corporate espionage tactic,
designed to destroy a competitor's reputation,
backfired spectacularly when the truth emerged.
It was a massive public humiliation. Amex's public
relations chief resigned. In July 1989, American
Express had to issue a very public, very painful
apology to Edmund Safra, stating that all accusations
were false. And as restitution, they donated
$8 million to a charity of his choice. It remains
a classic example of corporate overreach and
the damage caused when competition turns malicious
and unchecked. Yet, despite this public humiliation
and the chaos of the brokerage business, this
era also saw the company double down on the very
thing that made it powerful, premium status and
exclusivity. That's the strategic bedrock. In
1984, they launched the Platinum Card. It was
marketed as ultra -exclusive, carried a substantial
$250 annual fee, and was strictly invitation
only. So you couldn't just apply for it? No.
To even be considered, customers needed at least
two years of tenure, significant spending habits,
and an excellent payment history. They were actively
curating membership, not selling a commodity.
They also expanded their product structure to
compete directly with revolving credit products,
which had become ubiquitous. In 1987, Amex introduced
the Optima card. This is a critical distinction
in Amex history. The Optima card was their first
true credit card product. Before this, all their
cards were charge cards. Let's pause and clarify
that for the listener, because that difference
is central to Amex's entire business model. What
is the functional difference between a charge
card and a credit card? In simple terms, a charge
card legally requires the card member to pay
the balance in full every single month. If you
spend $5 ,000, you must pay $5 ,000 when the
bill arrives. This virtually eliminates credit
risk for Amex. Because they aren't carrying debt.
Exactly. A credit card, however, allows the customer
to carry a revolving balance over multiple months,
paying interest on the unpaid amount. So when
Amex introduced Optima, they were finally entering
the world of consumer lending. where they could
earn money on interest, not just transaction
fees. Precisely. It showed they recognized the
massive market potential of revolving credit,
but they kept it separate from their core charge
card business, maintaining the high -status image
of the latter. And then, capitalizing on all
this built -up status, the ultimate status symbol
emerged in 1999, the legendary black card. The
Centurion card. And what's remarkable is that
Amix actually created the card in direct response
to an urban legend. An urban legend, really.
Yeah. Rumors had circulated throughout the 1980s
that the company secretly produced an ultra exclusive
black card for an elite hidden customer base
who could supposedly purchase anything with it.
So Amex essentially manufactured the legend.
They capitalized on it perfectly. They launched
the Centurion card as a high fee invitation only
product initially available only to select high
spending platinum card users. It cemented their
position as the aspirational brand for the ultra
accolade segment. But while they were building
this powerful exclusive image, they were simultaneously
frustrating the life out of the merchants who
accepted their cards due to one major issue.
Fees. The fees. And this frustration boiled over
in a very colorful incident, the Boston Fee Party
in 1991. This was a pivotal moment. Amex was
known for charging significantly higher interchange
fees, the percentage they take from a merchant
on every transaction. Sources suggest Amex was
often charging around 4 % per transaction. And
how did that compare to Visa and MasterCard at
the time? Visa and MasterCard were charging merchants
significantly less, often in the range of 1 .2
% to 1 .5%. So Amex was demanding nearly three
times the rate. Right. And adding insult to injury,
Amex often cut those fees only if the merchant
agreed to accept Amex exclusively. That sounds
like an untenable position for a business operating
on thin margins like a restaurant. It was. A
group of Boston restaurateurs, tired of subsidizing
Amex's expensive network, staged a high -profile,
highly effective protest. They stopped accepting
Amex cards altogether. And they displayed signs
encouraging customers to use Visa or MasterCard
instead. Exactly. And the revolt spread, quickly.
The movement spread to over 250 restaurants nationwide,
New York, Chicago, Los Angeles. This wasn't just
a local issue, it was a national PR crisis. The
resistance forced a major strategic reassessment
from the top. Kenneth Chennaught, then head of
travel -related services and future CEO, had
to respond quickly. He was forced to cut fees
to bring these crucial merchants back into the
network. This incident marked a pivot in strategy.
Amex shifted its focus away from mandatory exclusivity
and focused on broadening acceptance. So adding
mainstream merchants like Walmart to the network.
Right. The exclusivity practice, aside from a
few high -end strategic holdouts like Neiman
Marcus, was largely ended around 1991. This forced
transition paved the way for the 21st century's
focus on regulatory battles and massive digital
expansion. As we enter the 21st century, Amex
faces a paradox. defending its premium, high
-fee business model in court, while simultaneously
fighting to break into new markets that had previously
been barred to them by their rivals. The first
major obstacle was a decades -long antitrust
blockade. For years, the operating rules of Visa
and MasterCard explicitly barred U .S. banks
from issuing American Express cards. So if you
were a major bank like Bank of America or Chase,
you could only issue Visa or MasterCard? Precisely.
This significantly limited Amex's ability to
grow market share because they had to bear the
financial risk and capital outlay for every single
card they issued themselves. But the U .S. Department
of Justice antitrust litigation finally struck
down those anti -competitive rules in 2004. A
colossal win for Amex. It opened up entirely
new avenues of growth and risk mitigation. The
immediate consequence was a flurry of third -party
issuing deals. Immediately. AMAC struck key deals
with third -party issuers, starting notably with
MB &A in 2004. This partnership led to co -branded
products like the Bank of America Rewards American
Express card in 2006. Which was strategically
brilliant. It allowed Amex to expand its card
base dramatically without having to use its own
capital to finance every single cardholder loan.
Exactly. Meanwhile, Amex continued to systematically
shed the complex conglomerate elements they had
acquired during the ill -fated 80s expansion.
They were cleaning house. Right. Focusing back
on payments and travel. In 2005, they spun off
their financial advisors unit as Ameriprise Financial
and sold the tax and business services unit.
They also sold their international banking subsidiary
to Standard Chartered Bank in 2008. These divestments
focused the company back on its core competencies.
Then came the 2008 financial crisis. which forced
another massive institutional shift regarding
their regulatory status. This is a critical point
that goes beyond just receiving a bailout. On
November 10, 2008, in the depths of the financial
meltdown, Amex received Federal Reserve approval
to convert to a bank holding company. Why was
that conversion so crucial strategically? Before
2008, Amex was essentially an industrial loan
company and a network processor, not fully regulated
as a primary bank. Converting to a bank holding
company was a dramatic permanent shift. It made
them eligible for government assistance under
TARP. Which they needed for survival. But more
importantly, it placed them directly under the
supervision of the Federal Reserve. So they were
trading independence for stability? That's a
good way to see it. They took $3 .39 billion
in TARP funds, which they repaid completely by
July 2009. But the conversion itself was the
real story. It ensured survival and stability
by placing them within the Fed's regulatory protective
structure. They survived the systemic crisis,
but were quickly hit by a market disruption that
truly showcased Amex's vulnerability to reliance
on single massive retail partnerships. Yeah.
The Costco breakup. Oh, the Costco partnership.
That was a relic of the old exclusivity era dating
back to 1999. And the U .S. Costco was Amex's
last major U .S. merchant that accepted Amex
cards exclusively. And this wasn't just a partner.
It was a cornerstone of Amex's entire domestic
volume. Just how big was this piece of business?
It represented a staggering 8 % of American Express's
entire build business globally. That translated
to $80 billion in purchase volume annually. $80
billion. Wow. And furthermore, the partnership
accounted for approximately 20 % of Amex's entire
interest -bearing credit portfolio. So when that
contract came up for renewal, the negotiations
broke down. And the breakup was swift. Two stages.
Canada switched to Capital One and MasterCard
in 2015, and the U .S. followed in 2016, switching
to a new partnership with Citigroup and Visa.
The financial consequences for Amex were immediate
and painful. How painful? In the very first quarter,
without the Costco accounts, Amex's profit dropped
a dramatic 10 % and revenue dropped 5%. They
were forced to sell all the existing card accounts
and balances to Citigroup. So it served as a
sharp reminder that relying on one major exclusive
retailer was too fragile a strategy. It was.
They shifted even further toward direct customer
relationships. And even as they recovered, Amex
has continually faced regulatory scrutiny. regarding
its sales and operational practices. The fines
and settlements are consistent. In October 2012,
the Consumer Financial Protection Bureau, the
CFPB, required three Amex subsidiaries to refund
an estimated $85 million to 250 ,000 customers.
For what? The core allegations involved illegal
practices like misleading consumers about sign
-up bonuses, charging unlawful late fees, and
even age discrimination against card applicants.
And recently, these issues have centered on their
small business practices. Yes. In 2023, MX agreed
to pay $15 million to the U .S. Treasury to settle
an investigation. And in January 2025, they agreed
to pay about $230 million to settle probes by
the DOJ into alleged deceptive practices when
selling products to small business customers.
It highlights that the regulatory challenges
are a permanent fix of their operation. Absolutely.
So on one hand, they're paying massive fines.
On the other hand, in 2018, they scored a massive
market -defining legal victory. It upholds the
very structure of their business. We're talking
about the Ohio v. American Express co -Supreme
Court case in 2018. This was arguably the most
important legal victory for their business model
in the modern era because it affirmed Amex's
ability to enforce what are called anti -steering
provisions. Anti -steering provisions. Okay,
hold on. That sounds like jargon. For you, the
listener, what does that victory mean in practical
terms? Right. Good question. It's absolutely
critical. Amex operates a two -sided market.
Cardholders on one side, merchants on the other.
Anti -steering means that Amex can legally block
a merchant, say a local store, from encouraging
you to use a different card, like Visa or MasterCard,
even if the fee is lower for the merchant. So
the merchant can't say, hey, if you use your
Visa, I'll give you a 2 % discount because it
saves me money. Correct. The Supreme Court upheld
Amex's argument that protecting the cardholder
experience, ensuring seamless acceptance and
rewards, justified the anti -steering clauses.
This ruling is fundamental to maintaining their
premium fee structure. Because it prevents merchants
from undermining the Amex network to save on
fees. It effectively protects Amex's right to
charge more. And their strategy now, knowing
they can legally maintain that high fee model,
is to double down on lifestyle and business services
to justify that premium. We see this in their
recent highly targeted acquisition spree. Their
current strategy is focused on creating a proprietary
ecosystem of tangible perks and tools. They acquired
Lounge Buddy in 2019 to enhance airport lounge
access. They also bought Cabbage in 2020, an
SMB lender. What do they do with Cabbage? They
leveraged Cabbage's technology and platform,
rebranding it in 2023 as American Express Business
Blueprint. This gave Amex integrated products
like Cabbage Checking and automated tech -driven
credit lines from $1 ,000 to $150. So they're
positioning themselves not just as a payment
option for small businesses, but as a full -service
banking partner. That's the goal. And their most
recent moves have reinforced their focus on high
-end dining and entertainment. Resi acquisition.
Absolutely. They acquired Resi, a restaurant
reservation platform. And in June 2024, they
acquired TikTok, another major restaurant reservation
platform. By buying these, Amex is directly inserting
itself into the high -end dining and travel experience.
So if you use a... interior lounge, you book
a flight through Amex Travel, and you book your
dinner through Rezzy or TikTok, you are locked
into the Amex ecosystem. Completely. And this
massive investment in ecosystem justifies the
rapidly rising cost of membership. The platinum
card fee hike announced for September 2025 is
astounding. It jumped from $695 to $895. That
is a massive hike. It reflects a confidence that
only Amex seems to possess in the face of competition.
So what does a customer get for nearly $900 a
year that justifies that cost? Well, they offset
it with new luxury perks and a complex web of
statement credits for targeted spending. Lululemon,
Oura Ring, Resi restaurants, increased credits
for luxury hotel stays, and new streaming subscriptions,
including Paramount plus YouTube Premium and
YouTube TV. So they're essentially selling access
to a high -end curated lifestyle bundle. Designed
to ensure that their affluent members feel that
the value proposition, even at $895, is... still
positive. It's a bold strategy, especially considering
that their network acceptance is still a global
challenge. While they're accepted at 99 percent
of U .S. merchants, Amex is still less accepted
in Europe and Asia compared to Visa and MasterCard.
Precisely. They have to sell lifestyle to compensate
for less geographical utility. They have embraced
the fact that their appeal is focused on the
high spending consumer for whom the perks and
status outweigh the occasional acceptance issue
abroad. Even with all the financial and regulatory
maneuvering, the American Express brand remains
one of the strongest and most recognizable in
the world. And that starts with its intentional
design identity. The branding is incredibly deliberate,
aimed at evoking classical antiquity, strength,
and stability, connecting to those early days
of trust and reliability. The logo features a
gladiator or centurion figure. And this imagery
is reinforced by the highest tier card. the Centurion
card, which literally means a Roman army officer.
Right. And there's a visual nod to stability
in the cards themselves. I always notice how
the classic card designs, especially the original
green card, bear a striking resemblance to United
States Federal Reserve notes. The engraving and
border patterns? Exactly. It reinforces the sense
of financial permanence and official government
trust, even though Amex is a private company.
That visual confidence is essential. But the
brand's power was equally forged through some
of the most iconic advertising campaigns in marketing
history. You have to start with the unforgettable
line, don't leave home without Femit. Developed
by the legendary David Oldlevy in 1975, this
campaign was a stroke of genius. It was initially
for the traveler's checks and famously featured
the actor Karl Malden for 25 years. He was the
public face of global security and reliability.
He reinforced the message that if you traveled,
you needed Amex. As the card grew in importance,
they transitioned seamlessly into the Do You
Know Me campaign. This was brilliant celebrity
marketing. So brilliant. A celebrity would give
hints about their identity, but their name would
only be revealed when imprinted on the Amex card
itself, right before the famous Hinglitzer told
you how to apply. That campaign perfectly leveraged
exclusivity and celebrity association, making
the card seem like the marker of a successful
life. Later, we saw more integrated celebrity
usage, like the late 90s webisodes, The Adventures
of Seinfeld and Superman, which was a massive
early experiment in digital marketing. Then the
next phase was the My Life, My Card brand campaign,
launched in late 2004, and later the Are You
a Card Member campaign in 2007. These campaigns
featured a massive array of high -profile celebrities,
encompassing actors like Robert De Niro, Tina
Fey, Kate Winslet, athletes like Tiger Woods,
and respected film directors like Martin Scorsese
and Wes Anderson. So it firmly established the
card not just as a financial tool, but as an
exclusive marker of achievement and individual
success. I remember the 2007 black and white
ad titled Animals, starring Ellen DeGeneres.
It was so effective it won the Emmy Award for
Outstanding Commercial. They truly understand
how to use mass media to reinforce the aspirational
nature of the product. It makes you want to be
part of that exclusive club. And here is a fun
specific detail that ties back to the advertising.
The sample name printed on many Amex ads, especially
those vintage campaigns, is C .F. Frost. I've
always wondered about that. That was not a fabricated
name. Charles F. Frost was a real, highly respected
advertising executive at Ogilvy and Mather, the
agency behind many of these iconic campaigns.
That's a great detail. A subtle nod to their
advertising powerhouse. Exactly. Beyond celebrity
and design, Amex was also a pioneer in linking
commerce with social good. They were one of the
earliest and most successful corporate users
of cause marketing. The defining example is the
1983 Statue of Liberty campaign. Amex announced
that for every purchase made with an American
Express card, they would contribute one penny
toward the massive Statue of Liberty renovation
project. The result was huge for the charity.
It raised $1 .7 million for the restoration.
But for Amex, the impact was even more transformative
on their business practices. That's the critical
part. The promotion generated an approximately
28 % increase in American Express card usage
by consumers. This taught Amex and many other
corporations a crucial lesson about the commercial
power of linking routine purchases to a recognized
positive national cause. It was profitable philanthropy.
That's it. And this commitment to brand and strategy
is supported by a significant global footprint,
even if card acceptance remains challenging in
certain areas. Their main operational headquarters
have evolved from 65 Broadway to the 51 -story
American Express Tower at 200 Vasey Street in
Lower Manhattan, where they moved in 1986. They
had to temporarily vacate and rehabilitate the
building after the 9 -11 attacks as it was located
directly opposite the World Trade Center. A symbol
of their resilience. For sure. And their operations
are now truly decentralized across the globe.
They maintain huge operational centers. Their
European service center in Brighton, UK, is massive.
And they have official EMEA headquarters in London.
And for Asia Pacific. Their HQs are in Singapore
and Sydney. But perhaps most tellingly, the source
suggests that the Gurgaon campus in India is
arguably the single largest employee location
by headcount. Which highlights the sheer scale
of their global back office, data analysis, and
customer service. service operations. Which have
to run 247 to support a $1 .7 trillion purchase
volume. So we see a company that is geographically
diverse for operations, but remains intensely
centralized and proprietary in its brand promise,
high fee network strategy, and ultimate control
over the customer experience. That's the perfect
summary. So what does this all mean for you,
the listener? We've traced American Express from
a Buffalo freight forwarder facing antitrust
scrutiny to a Dow Jones financial giant. The
story is one of a company that successfully navigated
the utter collapse of its original core business
freight forwarding, only to reinvent itself by
creating new financial instruments like the Traveler's
Check. Which, you know, essentially invented
global financial trust. And critically, Amex
used a deliberate, strategic, counterintuitive
approach. They leveraged exclusivity, starting
with that $1 higher fee than Diners Club, then
the invitation -only gold, platinum, and centurion
cards, to build... a premium aspirational brand.
This brand allowed them to withstand competition
and vitally justify higher fees. They survived
massive regulatory and market challenges, including
the humiliating corporate malice of the Safra
scandal, the costly merchant uprising known as
the Boston Fee Party, and the huge financial
impact of the Costco exit. The key takeaway for
the modern market is this. MX thrives on its
proprietary network model. Unlike Visa or MasterCard,
which are networks that rely on third -party
banks to issue the credit and underwrite the
risk, Amex controls the entire process. They
are the issuer, the network, and the acquirer.
That control is everything. It allows them to
manage risk better, instantly recognize and reward
high -spending, high -fee customers, and constantly
justify that premium cost structure by investing
heavily in a closed loop of lifestyle and business
services. Resi, TikTok, Cabbage, and the exclusive
Centurion lounges. Right. Their longevity demands
radical transformation. But maintaining that
meticulously curated Centurion brand identity
is what allows them to charge a premium others
cannot. Now for the provocative final thought.
Given Amex's long history of radical pivots,
from freight to financial products, from the
brokerage firm back to payments, and now heavily
into digital services and lifestyle platforms
like Resi and Tokit, we have to ask. How long
will the physical plastic or metal card remain
the central symbol of the American Express brand?
If their future is truly defined by digital services,
automated small business banking, and seamless
dining access via talk and resi, then the card
itself might become merely an authentication
token. It could. So what new form of access,
currency, or integrated digital platform will
define the next 175 years for American Express?
The physical card might just become a footnote
in their next great reinvention. Something to
mull over as you tap your way through the world.
That's it for this Deep Dive. We'll see you next
time.