American Express’s Global Network and Merchant Services in 1Q16


Apr. 26 2016, Updated 5:06 a.m. ET

Global Network and Merchant Services segment

American Express’s (AXP) Global Network and Merchant Services segment’s total revenues net of interest expense fell by 3% to $1.1 billion in 1Q16. This formed 14% of the company’s total revenues.

On a constant dollar basis, revenues remained flat. These were impacted by a lower net merchant discount rate, which offset the benefit of higher card member spending. The division’s net income stood at $357 million, a decline of 3% from $369 million in the prior year’s quarter. The decline reflected the impact of the stronger US dollar.

American Express achieved net profit margins of 11% in the last fiscal year. Here’s how some of its peers in the payment processing industry fared with their net margins in the last fiscal year:

  • Mastercard (MA): 38%
  • Visa (V): 43%
  • Discover Financial Services (DFS): 27%

Together, these companies account for 1.9% of the iShares Core S&P 500 ETF (IVV).

Expenses and initiatives

The division’s total expenses fell by 3% to $521 million in 1Q16 compared to $537 million in 1Q15. On a constant dollar basis, expenses declined by 2%. The decline reflected lower merchant acquirer payments related to OptBlue, the company’s initiative to expand merchant coverage in the United States.

Billed business for the Global Network and Merchant Services division rose by 5%. On a constant dollar basis, the business grew 13%, reflecting its continued strong growth.

Billed business includes activities related to proprietary cards, cards issued under network partnership agreements, corporate payments, and insurance fees charged on proprietary cards.

The division operates a global payments network that processes and settles proprietary and non-proprietary card transactions. The division acquires merchants and provides point-of-sale products, multichannel marketing programs and capabilities, and services and data. These products and services leverage the company’s global closed-loop network.

Next, let’s see how American Express continues to reward its shareholders.

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