Stocks

AmEx (AXP) Revamps Its Platinum Card to Lure Customers

American Express Co. AXP has refurbished its popular Platinum Card, which now offers unparalleled travel and lifestyle experiences across dining, wellness, retail and entertainment.

This is one strategic step to lure and retain more customers after suffering business declines last year due to the pandemic. The company, however, hiked its annual fees on the refreshed card to $695 from $500. Even with this fee raise, there will be several takers for the new card as the benefits and rewards it provides via its Platinum edition outweigh its annual charges . Management says that the revamped card provides value worth $1400.

What Does the Relaunched Card Offer?

The Platinum card has always been a favorite with affluent customers . This time, the card provides $200 of credit for Hotel booking made through American Express Travel card; $179 of credit for expedited security screening at select airports and stadiums across the United States; access to 1,300 airport lounges at 500 plus airports and in 140 countries around the world as well as discounts when joining Wheels Up as well as flight credits.

These travel benefits are designed keeping in mind that the travel trends will gradually return. American Express is positioning itself well in advance to cash in on the travel spending by its customers. The Platinum card is most sought after by travelers as it provides luxurious services and aims at wealthy individuals. Other card alternatives to the American Express Platinum card are Chase Sapphire Reserve by JP Morgan Chase & Co. JPM, Capital One Venture Rewards by Capital One Financial Corporation COF, U.S. Bank Altitude Reserve Visa Infinite Card by U.S. Bancorp USB

Apart from travel perks, these cards also come with new everyday benefits to squeeze out revenues from those customers who are wary of travel. These benefits range from credits on, eligible purchases or subscriptions with Peacock, Audible, SiriusXM and The New York Times plus purchases of select Equinox Fitness Club monthly memberships.

The company also provided easy payment options, such as Pay It Plan It and Pay Over Time to push customers to make high-value purchases by deferring payments. There are other many benefits and rewards too.

Laying Groundwork

These revamped rewards are part of American Express’ strategic efforts to ramp up revenues this year. The company generates revenues from consumers and small businesses, primarily through net card fees and travel commissions. Net card fees represent revenues earned from annual card membership fees. Travel commissions and fees are earned by charging a transaction or management fee to both customers and suppliers for travel-related transactions. For American Express, travel spend generates a large chunk of its total revenues.

American Express follows a “spend-centric” operating model.  It focuses on generating revenues, primarily by driving spending on its cards through attractive reward programs for card members. This helps the company earn discount revenues (the biggest component of its revenues) from merchants. With this model, American Express targets affluent customers who are likely to spend more. It focuses on the total amount spent by the customers rather than the volume of transactions processed.

In 2020, the company’s discount revenues plunged 20% due to decline in proprietary consumer billed business. Further, other fees and commissions decreased 40% due to lower travel commissions and fees from its consumer travel business.

We believe, the company’s recent initiative along with recovering economy poise it well for growth.

Year to date, the stock has gained 40.6% compared with its industry's growth of 15.4%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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