American Express is known worldwide for its charge cards, travelers’ services, and financial services. It is one of the best-known and most-respected global brands. As it grew from a 19th Centurynineteenth- express company into a travel services expert by the mid-1900s, American Express (AMEXAMEX) became associated in the minds of consumers with prestige, security, service, international acceptability, and leisure. Advertising for the company, which began in earnest in the 1960s, reinforced these associations. For example, the now-famous taglinetag line “Don’t leave home without it” was created to convey the essentiality of owning an American Express cardAmerican Express Card. As the company grew, it expanded into a variety of financial categories, including brokerages, banking, and insurance, and by the late 1980s, American Express was the largest diversified financial services firm in the world. The difficulty the company encountered integrating these broad financial services, combined with increased competition from Visa and MasterCard, compelled AMEXAMEX to divest many of its financial holdings in the early 1990s and focus on its core competencies of travel and cards. The company weathered a decrease in cardholdercardholders at this time by greatly increasing the number of merchants that accepted American Express cardAmerican Express Cards and developing new card offerings, including co-branded cards and a genuine credit card that allowed customers to carry over the monthly balance. By the end of the 1990s, American Express was again seeking to broaden its brand to include select financial services in order to achieve growth. Beyond the challenge of integrating these services, AMEXAmerican Express faced a number of issues in the 2000s, including a highly- competitive credit card industry, a slowing economy, and a subdued travel industry.
American Express Builds a Financial Empire
Early History of American Express
The American Express Company was formed in 1850 when two competing express companies merged. The express business, which was less than two decades old, specialized in shipping packages that were smaller than the bulk freight that railroads handled but were over the U.S. Postal Service size limits. Before express companies began operating, stagecoach drivers and even civilian travelers were recruited to deliver packages. Express companies also carried packages that required special handling or were particularly valuable. Bank transactions involving cash, securities, and goldGold gave express companies much of their business.
In response to losing business to express companies, the U.S. Postal Service created the money order, which allowed people to send a cash equivalent through the mail that could only be cashed only by a specified recipient. The cash delivery service was traditionally the domain of express companies, since because postal workers would often steal cash sent through regular mail. To counter the Postal Service’s move into financial services, American Express created its own money order in 1881. The American Express money orders were easier to use than the Post Office money orders, and AMEXAMEX extended the line to include orders in foreign currency that could be cashed internationally. The money order was a great success, selling 250,000 in its first year and more than half a million the next.
In the late 1880’s, AMEXAMEX president J.C. Fargo returned from a trip complaining about how difficult it was to use his letter of credit, used to obtain cash abroad, at foreign banks. To solve the problem of obtaining credit abroad, in 1890 American Express employee Marcellus F. Berry designed the “Travelers Cheque,” intentionally using the British spelling of check to give it an international flair. The Travelers Cheque used the same signature security system still in use today and had exchange rates guaranteed by...