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How’s American Express Positioning for Global Services?

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Global Commercial Services

American Express (AXP), through its Global Commercial Services division, offers global corporate payment services to large and mid-sized companies. These services include expense management and travel services through the Global Corporate Payments and Global Business Travel businesses. In 2016, the division is expected to attract more partnerships as the company pitches in and outside of the US on technology-based offerings.

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Its total revenue net of interest expenses fell by 48% to $817 million in the December quarter. It formed 10% of the company’s total revenue. This compares to $1.6 billion in the same quarter last year. It included gains on the sale of Concur. Excluding the Concur gain, the adjusted revenue fell 6%.

The net income for the division fell 78% to $132 million—compared to $594 million in 4Q14. This amount included gains on the sale of Concur.

American Express achieved operating profit margins of 74% in the last fiscal year. Here’s how some of American Express’s peers in the payment processing industry fared with their operating margins in the last year:

  • Mastercard (MA) – 54%
  • Visa (V) – 60%
  • Discover Financial (DFS) – 43.6%

Together, these companies account for 2.3% of the Technology Select Sector SPDR ETF (XLK).

Global initiatives

The total expenses for American Express’s Global Commercial Services division stood at $547 million in 4Q15—compared to $586 million in 4Q14. This included a portion of restructuring charges. The company continued to spend on technology development in order to support its growth initiatives.

American Express also offers corporate cards and corporate meeting cards. The cards are issued to individuals through a corporate account established by employers. The Global Commercial Services division also offers a suite of business-to-business payment solutions. For example, the corporate purchasing card is an account established by companies to pay for both everyday and big-ticket business expenses.

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