American Express (AXP) Industry Analysis

INDUSTRY ANALYSIS US CARD SERVICES 0123 4567 8901 2345 MONTH/YEAR 0000 VALID THRU 12/12 CARDHOLDER NAME merican Express is one of the four major players in the US card services industry, which comprises companies that process credit and debit card transactions on behalf of merchants and card issuing companies, such as banks. Together, these companies facilitate the transfer of funds around the globe through their payment networks and authorized merchants, and charge financial insitutions for their services. Charges are split into a transaction fee – which is charged at a flat rate - and a discount fee which is charged at a variable rate based on the value of the transaction. A SNAPSHOT OF THE GLOBAL CARD SERVICES INDUSTRY DISCOVER AMERICAN EXPRESS NETWORK VISA MasterCard $307bn Worldwide chase Volume in 2012 $3.65tr $888bn $6.29tr $31.6bn $7.6bn Total Revenues in 2012 $10.4bn $7.4bn 1,2bn 104m 52m Number of Cards in Force 2,1bn American Express's Primary Competitors Visa Inc. (V): Visa is the world's largest payment processing network for credit and debit card transactions. The company was publicly listed in 2008, and was added as a component of the Dow Jones Industrial Index in 2013. It processed $6.3 trillion worth of payments through its network in 2012. VISA MasterCard Incorporated (MA): MasterCard is the second-largest payment network in the world, and Visa's main competitor. MasterCard, along with its expansive Maestro debit network, is probably one of the most recognizable brands outside the US, where it has a larger market share in terms of purchase volumes. MasterCard DISCOVER Discover Financial Services (DFS): NETWOEK Discover is another major US card companỳ that óperates as an alternative credit card network in the US. The company is also making inroads into the debit card segment with its Pulse debit network. US Debit Card Market Shares by Payment Volumes US Credit and Charge Card Market Shares by Payment Volumes DISCOVER 5% b% AMERICAN EXPRESS DISCOVER 27% VISA MasterCard 27% 44% 67% VISA MasterCard 24% WORLDWIDE ANNUAL CREDIT AND DEBIT CARD PAYMENT VOLUMES (BILLIONS) |Credit Card Payments Debit Card Payments $b,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2011 2012 2009 2010 2007 2008 2006 Growthinpayment volumes in foreignmarkets is important for card companies, since a significant share of their revenues is generated from international operations. MasterCard, for example, earns 61% of its revenues from operations outside the US, while Visa generates 45% of its revenues from foreign markets. Growth in Debit and Prepaid Card Usage Global debit card purchase volumes have risen at a three-year compound annual growth rate (CAGR) of 14%, higher than credit card payment volumes, which have averaged around 8% growth every year over the same period. These trends indicate that as lower-income households in emerging markets start using bank accounts, their first payment card is likely to be a debit card. In response, American Express is said to be ramping up its debit and online account segment, which is part of its Enterprise Growth business. Similarly, total card payment volumes in the US have increased at an average annual rate of 12,5% over the last three years, and the trend is expected to sustain going forward. Card network companies like American Express are expected to post healthy growth rates, despite fears ofa slowdown in the economy following budget cuts. BIDNESS SOURCES: Etc. Company Data, SEC fili ngs, Bloomberg Professional Services Bidness Etc(TM) and related marks are owned by Bidness Etc. Any other trademarks appearing on this website are the property of their respective owners, and are not used to indicate the origin of goods or services offered or provided by Bidness Etc herein or to suggest approval for or affiliation with Bidness Etc. DISCLAIMER: