American Express 2006 Annual Report Download - page 27

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national business. Middle-market customers are a particularly high-spending, profi table
group for American Express.
Network Partnerships. Given the strong foundation we have established with our
network of bank partnerships outside the United States in the past decade, along with
the early progress we have made in partnerships with U.S. banks, we believe GNS will
continue to be an excellent source of growth. Over the past five years, spending on
GNS partner cards has risen 32 percent, compounded annually. In 2006, the pace of
growth accelerated.
Since we launched the GNS business, one of the questions we have heard is whether
network partners issuing cards with our brand “cannibalize” existing cardmembers in pro-
prietary markets. This has not been the case. In fact, in key markets where we have both a
major domestic card-issuing business and a substantial GNS partnership
—
including
Argentina, Australia, Singapore and the United States
—
our GNS and proprietary
businesses have grown side-by-side.
By selecting the right partners and working with them to attract high-spending,
creditworthy customers, we expand the presence of American Express in many markets
around the world. As a result, GNS and proprietary have taken share from other
networks. And in markets where we don’t have a large proprietary presence, the GNS
model enables us to scale up quickly with the right partner. The upside potential of this
business is obvious, and we will continue to focus on signing new partners and helping
them drive spending.
Our established businesses clearly afford us the greatest potential for growth. But we
also have taken steps to position American Express for the continued expansion of card
usage and electronic payments. We see promise in several developing areas, such as:
• Business-to-business payments
—
The buying and selling of things like equipment,
raw goods, supplies and services among businesses is a roughly $10 trillion market
opportunity, most of it transacted with cash or checks.
• New forms of payment
—
Radio-frequency identifi cation and other wireless technologies
are driving innovations in “contactless” payments, such as ExpressPay, and giving
consumers alternative transaction channels.
• Online commerce
—
The marketing capabilities we have developed to help merchants
build their business can be extended to the online world. We are using the Internet in a
variety of ways to drive cardmember spending and create experiences that build brand
loyalty. We also see opportunity for cooperation with the major Internet companies to
improve the effectiveness and value of search results for online shoppers.
Needless to say, we won’t be pursuing these opportunities alone. Competition continues
to intensify across the payments industry. Once Visa follows MasterCard in becoming
a public company and Morgan Stanley completes its planned spin-off of Discover, it
will mark the fi rst time that four independent, publicly owned payments networks have
competed head-to-head.
[ 25 ]
letter to shareholders