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AMERICAN EXPRESS COMPANY | ANNUAL REPORT 2015 2
Ultimately, though, revenues did not pick up as we had expected during 2015. Our
changing view of both the environment and our own performance caused us to
issue a more cautious outlook for 2016 and 2017.
As I did in my recent conversation with investors during our fourth-quarter
earnings conference call, I’d like to spend the bulk of this letter addressing three
key questions:
• Why has our view of 2016 and 2017 evolved?
• What are we doing about it?
• Why are we confident in our ability to grow over the moderate to long term?
To answer the first question, we need to look at the operating environment.
While the macroeconomic headwinds that we’ve been discussing for some time
now are not new trends, they’ve lasted longer than we previously expected. The
stronger U.S. dollar has had a large impact on our business, reducing earnings
per share by about 3 to 4 percentage points in 2015. The price of oil, and its down-
stream impact on airfares and gasoline prices, created a drag on charge volume.
And the slow-growing U.S. economy has made businesses of all sizes more
cautious in their spending. These are cyclical challenges that will eventually turn.
We also face longer-term changes that are reshaping the payments industry.
They include:
• A reset in cobrand economics — Over time, these relationships have become
more expensive as contracts have come up for renewal and competition for them
has increased.
• Pressure on merchant fees — This is coming from several fronts: regulation in
key international markets, intensifying competition, and a lowering of our average
discount rate as we expand card acceptance among smaller merchants.
• Heightened competition for customers — As banks have been shifting invest-
ments to their card businesses, competition for our customers has increased in
every segment: consumer, small business, middle market and large corporations.
The Operating Environment