), Visa (
) and MasterCard (
) are the leading financial services companies in the world
offering card payment products to consumers and businesses across
the globe. American Express is one of the 30 components of Dow
Jones Industrial Average and third among the major card companies
in the U.S. in terms of transaction volumes. Below we take a quick
look at the two most important segments to American Express'
price estimate for American Express stands at
which is roughly 10% premium to current market price.
The 2 Most Important Revenue Streams for American
Card Transaction & Execution Fee
- 73% of company stock
The transaction fee (also known as the discount fee) is the
commission charged to merchants as a percentage of the dollar value
of transaction on American Express cards. American Express charges
merchants a higher fee on its card products at close to 2.25%
compared to the industry average of 1.9% of the billed amount since
American Express customers tend to be higher income and higher
spending consumers on average.
American Express leverages its affluent card member base to
charge the retailer a higher commission on the transactions.
American Express's transaction fee has faced some push back from
merchants and some avoid accepting American Express cards compared
to Visa and MasterCard. The transaction fee on American Express
cards has reduced from over 2.23% in 2005 to current levels of
around 2%, and given the increasingly competitive landscape, the
trend is expected to continue well into the future.
2) Net Interest on Credit Cards and Other Investments - 8% of
American Express earns a net interest income on the spread
between the rate it earns from un-loaned amounts sitting in bank
deposits and short-term investments in financial securities and the
rates at which it extends credit to card members.
See our full analysis and
$49.60 price estimate for American Express