American Express 2003 Annual Report Download - page 10

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We achieved this growth while improving our already strong credit performance. For the year, our charge card
loss rate reached an historic low and past-due rates improved. Within our lending business, write-off and past-
due rates continued to improve. We maintained strong coverage ratios for past-due receivables and loans even
as our lending portfolio grew substantially.
Our recent results reflect what we believe are the competitive advantages of our spend-centric business model
in the global payments business. These advantages include our:
•relationships with high-spending consumer, small business and corporate customers;
•diverse sources of revenue derived from cardmember spending, lending and fees;
•tremendous product breadth (charge, credit, cobrand and prepaid cards);
•substantial geographic breadth through proprietary card activities in 68 countries and network relationships
across 89 markets;
•leadership in the rewards arena through products and programs that deliver superior value for both card-
members and merchants;
•deep and wide-ranging partnerships with merchants, including retailers, hotels and airlines, as a result of
our closed-loop merchant network; and
•the reputation we have earned for outstanding customer service.
While each of these advantages is significant on its own, together they form a powerful model that is funda-
mentally different from others in the industry — one that represents a terrific competitive advantage for us.
The diversity of our revenue sources is a particular strength for American Express. Card issuers generate the
majority of their income through some combination of: (1) customer spending — which generates payments
from merchants for card transactions, (2) lending — finance charges on revolving credit card balances, and
(3) customer fees. Most issuers’ business models are concentrated on one of the three revenue streams. American
Express’ advantage is that we have strength in all three, but we have a unique edge in spending.
In fact, on average, consumers spend about four times as much on their American Express cards as they do on
their Visa or MasterCard. We generate revenues from this spending through the fee charged to merchants for
(p.8_axp)
LOYALTY INCENTIVES — American Express’ industry-leading rewards programs are an important driver of spending world-
wide. In 2003, we continued to offer cardmembers more ways to earn rewards — from cash back to airline miles to retail goods
and more — through a variety of card products and enrollment in Membership Rewards.