To expand its merchant network and increase spending volume,
American Express has revised its 2018 outlook for its discount rate—which is
the rate Amex-accepting merchants pay Amex per transaction—Amex president of
global merchant services and loyalty Anre Williams said during a recent Amex
investor conference call. The outlook had been a decrease of two to three basis
points, and the revised outlook calls for a decrease of five to six basis points.
Amex also is trying to increase its B2B volume for global
and large accounts and is negotiating with "key strategic partners that
are already enabling revenue growth," Williams said.
"We take a much broader view of the business than just
the trend of the discount rate. … At times, the discount rate is a lever we use
to drive expanded coverage and unlock profitable revenue growth," he
added.
Amex is known to have one of the highest discount rates
among card networks, which it justifies with high-spending cardholders. Data
compiled by Financial Times shows Amex's discount rate has declined steadily
from just below 2.6 percent in 2005 to 2.41 percent at the end of 2017. Multiple
drivers like Amex's small business-acquiring program OptBlue and merchant
negotiations in regulated international markets have contributed to recent
declines, according to recent Amex earnings calls.
On a quarterly basis over the past two years,
Amex's discount revenue averaged 5.3 percent growth, despite the decrease in
the discount rate, Williams noted. "This reflects strong momentum across
each of our businesses and company combined," he said. "We have a
spend-centric model, and spending can enable lending opportunities. If we add
interest income from lending activities and fees generated from cards, the
company's revenue growth over two years … averaged 6.5 percent growth."