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American Express SWOT & PESTLE Analysis

ID : 52380653 | Apr 2018

COMPANY PROFILE - American Express

Business Sector : Banking and Financial Services

Operating Geography : Global

About American Express :

American Express is a financial services MNC founded in 1850. It is headquartered in New York City. It provides charge and credit card products, travel-related services to consumers and businesses globally, merchant acquisition and processing, servicing and settlement, point-of-sale marketing and information products and services for fraud prevention. Its vision is to become the world’s most respected service brand by providing the premium value products and unsurpassed service to customers. It had 56,400 employees as of 2017. It is #40 in America’s top public companies by Forbes.

American Express Mission Statement states " The mission of our program is to bring to life the American Express value of good corporate citizenship by supporting diverse communities in ways that enhance the company’s reputation with employees, customers, business partners and other stakeholders.”

American Express Revenue : $3211.9 billion(FY Dec 2017)

Competitive Analysis of American Express

The SWOT analysis of American Express is presented below:
Strengths
Weaknesses
1. Strong brand with global footprint
2. Spend Centric Business Model
3. Broad portfolio of global consumer services
4. Global Merchant Services (GMS)
1. Overdependence on Digital systems for operations
2. Substantial Reliance on third-party for key services
Opportunities
Threats
1. Technological Advancements to supplement growth
2. Strategic mergers and acquisitions
3. Development of alternate payment Channels for greater market share
1. Stiff Competition in Banking Sector
2. High Regulatory Requirements
3. Competitive Merchant discount rates
4. Risk of currency fluctuation

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Detailed SWOT Analysis of American Express

 

Strength

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Weakness

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Opportunity

1. Technological Advancements to supplement growth: Innovative payment mechanisms, services and advancement in data management and analytics will enhance customer interactions and communication and authentication processes. This will increase its competitiveness in domestic and international market. If American Express’s new product development keeps pace with the changes in banking industry then it can further expand its market penetration globally which will increase its revenue. Technological advancement like usage of distributed ledger technologies (e.g. blockchain), app and mobile based services, use of big data, etc. Can ensure greater transparency, increased risk management and information management. This will lead to efficient operations and also reduce the operational costs and increases profit margins.

2. Strategic mergers and acquisitions: Mergers and acquisitions can improve the scale of American Express’s operations. If the bank continues to undertake potential transactions then its services, operations and financial condition will significantly improve and facilitate further expansion. Centurion Bank will be combined with American Express by mid-2018 and integrate more financial services into their product offerings and support its closed-loop functionality. Strategic M&A can also ease operational difficulties and get greater market access even in emerging economies by exploiting the brand value of the domestic institutions. It lowers operational costs through technological spill over, greater synergies and thus reduces liabilities. It will create new customer acquisition channels as well. The will also lead to deep rooted market growth as well as widen its global footprint as more products and services are offered.

3. Development of alternate payment Channels for greater market share: American Express continues to develop alternate payment channels for payment of credit card outstanding and other payments and dues like AmEx Express Checkout. It has also partnered with Ripple, the third largest cryptocurrency by market cap. This will increase liquidity and leverage the alternate non-card payments. Such mechanisms can increase cross-border financial flow like from USA to Britain in this case. This can improve AmEx’s credit books and efficiency. More integration in payment gateways with more food joints, local brands & enabling peer-to-peer transfer mechanisms for payments through its digital payment. By expanding alternate payment systems to e-wallet, mobile-wallet, contactless payments it can tap on the growing consumer demand and attract more merchants for digital payments through its faster and seamless banking system and thus, can capture greater market share.

Threat

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The PESTLE/PESTEL analysis of American Express is presented below:
Political
Economical
1. Impact of Jobs Act and Tax Cuts in U.S
2. Adverse impact on Brexit on Global Business Travel
1. Impact of Interest rate movements
2. Impact of Sluggish economic growth
Social
Technological
1. Employee training and diverse workforce
2. Growing social acceptance of online and card payments
3. Favourable demographics to increase online payment
1. Digital Payment Mechanism and services
2. American Express vPayment technology for virtual card
3. Technological advancements for secure banking
Legal
Environmental
1. Impact of BHC Act
2. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)
3. Federal Deposit Insurance Act (FDIA)
4. Surcharge Laws
1. Sustainable Practices contributing to lower GHG
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Detailed PESTLE Analysis of American Express

 

Political

1. Impact of Jobs Act and Tax Cuts in U.S : This Act will bring about changes in the macroeconomic business environment and spending habits in America. This will increase consumer spending as firms expand their scale and share profits in the form of increased wages. This act will have positive impact on its billings, loan balances, credit metrics and margins. It will also be offer better value propositions, products and services if it uses cross-selling strategies to capture greater customer base. The Tax Act will reduce its income tax outlay & effective tax rate to the low 20s. There is a decline in federal statutory corporate income tax rate from 35 percent to 21 percent. Though the group had to bear $2.6 billion charge in 2017 due to Tax Act due to a one-time deemed repatriation tax on its previous undistributed earnings of certain non-U.S. subsidiaries, future earnings are expected to grow.

2. Adverse impact of Brexit on Global Business Travel: Brexit led to a fall in consumer and business activity in UK and other European countries due to volatility around new EU laws, decrease in overall tourism (especially air travel), mobility and depreciation of pound sterling. Macroeconomic environment has become unfavourable for its corporate clients as the value of Euro and pond sterling depreciates against US dollar. This could negatively affect its revenue from international operations as card spending falls and the number of payment defaulters increase as lose ability and willingness to repay. A significant share of 11% of their billing business comes from EMEA which puts greater uncertainty around implication on its financials and regulatory environment. If the disruptions in business travel continue then there maybe adverse impact on its overall earnings.

Economic

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Social

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Technological

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Legal

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Environmental

1. Sustainable Practices contributing to lower GHG: American Express has a dedicated work plan to reduce their carbon footprint. In 2016, they reduced tier carbon footprint by 30% with 2011 as base year. Greenhouse Gas Emissions and e-sort have fallen over the years due to use of alternate forms of energy which made garbage and then electricity. It also uses fuel efficiency and built a green building with LEED’s certification met through operational assets. Their energy efficient 2016 consumption fell by 24% due to slowdown in real estate business. The global real of MWH increased energy use of carbon-free electricity. They also observe earth hour which they used carbon-free electricity and saved 80% of their global real estate. They offer $2.7 million for environment and wildlife through by gifting using Gift Matching and Serve2Gether or use of grant programs.

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Check out analysis of other relevant companies

References used in American Express Analysis Report

1. http://about.americanexpress.com/csr/docs/Amex-CSR-Report-Full-2016.pdf

2. http://www.snl.com/Cache/c392232277.html

3. https://www.forbes.com/sites/ciocentral/2018/03/15/how-american-express-excels-as-a-data-driven-culture/#2470e96c1635

4. https://www.pymnts.com/news/b2b-payments/2018/american-express-conferma-travel-booking/

5. https://www.ft.com/content/715d785e-23fc-11e8-ae48-60d3531b7d11

6. https://thefinancialbrand.com/68528/top-payment-trends-banking-p2p-digital/

Copyrights and Disclaimer

American Express SWOT and PESTLE analysis has been conducted by Kanupriya Sheopuri and reviewed by senior analysts from Barakaat Consulting.

Copyright of American Express SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.