Even though American Express received pre-approval to provide transaction settlement
On the surface, Amex is in a better position in China than Mastercard or Visa in what has historically been somewhat of a roller coaster of emotions based on the ever-changing viewpoints the Chinese and American governments share toward each other.
While acknowledging Amex has been aided by its partnership with Chinese payments provider Lian Lian in securing pre-approval for network services, Amex CEO Stephen J. Squeri acknowledged his company faces a slow grind.
One stipulation China has established in the past for foreign companies is that they have a partnership with a domestic company.
"From our perspective, working with a partner that understands the market and one that allows us to reduce risk and increases speed to market for us; we think over the longer term it is a good opportunity," Squeri said Thursday during Amex's 2018 fourth-quarter earnings conference call.
"But in the shorter term, we have to get full approval, and we have to build out the network," Squeri added. "So this is not a 2019 or 2020 impact to our business because it is an ever-changing political and regulatory environment."
It's been
Amex is playing a different hand in its goal to provide services in China, seeing that massive market as a place for its global network services to take hold, as opposed to building a card and merchant acquiring business.
"We are really talking about routing transactions; we are not talking about technology for credit algorithms or fraud algorithms," Squeri said. "In fact, we are not issuing cards in China."
In China, Amex would look "exactly like Mastercard and Visa looks in the U.S. and other markets," Squeri added, explaining his company would not operate as a merchant acquirer or card issuer.
"We are truly a network, involved in transaction routing and fraud detection," Squeri said. "I don't want to underestimate the network technology, but it certainly is not as sophisticated as the technology that needs to exist to make credit underwriting decisions and the no-preset spending limits that we do to acquire customers."
The Amex venture in China will operate as Express Technology Services Company, extending its work with LianLian. The companies have partnered in China since 2012 when Amex provided the technology to get the
Amex is hoping any future business in China will only fuel what has been a run of strong overall earnings performances the past six quarters.
While
For the full year, Amex reported net income of $6.9 billion, compared with net income of $2.7 billion in 2017.
Amex added 12 million new cards during the past year and added 1 million new merchants accepting Amex cards.
As a general mantra, Amex continues to push its brand as one that customers see value in, executive vice president and chief financial officer Jeffrey Campbell said during the earnings call. In turn, there is an increasing confidence that strong billing and lending growth will continue with existing customers, he added.
"About 60 percent of our growth in lending came from existing customers this quarter," Campbell said.
Going forward, Amex will continue to concentrate on driving discount revenue growth, not the average discount rate, Campbell said, acknowledging the competitive nature of the card market.
The recent earnings reports have gone a long way to distance Amex from its loss of the
"It's a long, multiyear playbook here of our history around the world across our many different consumer and commercial products," Campbell said of the company's resiliency. "Every few years you refresh a product and add value, and we will keep running that playbook well in the future."
