Global Network Services

(1)

1

Global Network Services

David House,

Group President, Global Network and

Establishment Services and

Travelers

Cheques and Prepaid Services Group

February 4, 2004

(2)

Global Network Services

Benefits of Partnership

!

Leverage processing network

!

Drive high value business to merchants

!

Pave the way for competition

!

Deliver value to consumers

!

(3)

3

GNS Global Business Partnerships

(4)

GNS Global Business Partnerships

(5)

5

GNS Global Business Partnerships

(6)

Global Network Services

5 Questions to be Answered Today

!

What is GNS?

!

How does GNS make money?

!

Who benefits from a GNS partnership

and how?

!

(7)

7

Global Network Services

5 Questions to be Answered Today

!

What is GNS?

!

How does GNS make money?

!

Who benefits from a GNS partnership

and how?

!

How do GNS partnerships enhance the

Amex brand?

!

(8)

GNS Results to Date

!

79 partners in 89 countries

!

350 products launched

!

6.4MM Cards issued

!

(9)

9

1999

2001

2003

1999

2001

2003

Cards in Force

CAGR

24

24 %

%

Billed Business

CAGR

16

16 %

%

GNS Results to Date

(10)

GNS Results to Date

In 2003, GNS delivered

… 1 in 5 new cards acquired worldwide

… 1 in 3 new cards acquired outside the U.S.

… 1 in 3 new merchants acquired

(11)

(12)

Independent

Operators

!

License to issue AXP cards

and acquire AXP merchants

in markets where AXP does

not have local currency

proprietary card business

30 partners

44 markets

Partnership Constructs

(13)

13

6%

17%

2001

2003

Card Share*

Capturing AXP

-branded

-

branded

Share of Cards

–

Ecuador

Building Parity Coverage

–

Pakistan

AXP Spend Coverage**

25%

98%

2001

2003

* Share of General Purpose Charge and Credit cards in the marke

tplace represented by AXP

-

branded cards

** Estimated. Based on Internal Data

IO Partnerships

(14)

!

Form equity partnership

to issue cards and/or

acquire merchants

5 partners

21 markets

Joint

Ventures

Partnership Constructs

(15)

15

Non Proprietary

Licenses

(NPL)

!

License to issue AXP

branded cards on the

AXP network

(non AXP format)

44 partners

24 markets

Partnership Constructs

(16)

Banco

Popular, Puerto Rico

35%

60%

AXP

–

Branded Cards

CAGR 1998

-

2003

NPL Partnerships

(17)

17

Global Network Services

5 Questions to be Answered Today

!

What is GNS?

!

How does GNS make money?

!

Who benefits from a GNS partnership

and how?

!

How do GNS partnerships enhance the

Amex brand?

!

(18)

Revenue Streams

IO

!

Fees driven by

number of cards issued

in local markets

!

Spending on cards

issued in local markets

JV

!

Discount Revenue

!

Net Spread Income

!

Annual Card and

Other Fees

(19)

19

Revenue Breakdown

NPL Partnerships

Typical NPL

AXP Global Cards

Card

Transaction

(20)

Principle Cost Components

for GNS

Operating expenses

Other Costs are Minimized:

!

Card marketing and acquisition

!

Credit risk and fraud

!

(21)

21

Cost Comparison

GNS vs. Proprietary*

Lower

Revenues

Expenses

ROE

Higher

* Non US

(22)

Fixed

Variable

Costs

10% Increase in

Transaction volume

1.5% Increase in

Network Costs

International

10% Increase in

Transaction volume

1% Increase in

Network

Costs

US (Potential)

90%

GNS

(23)

23

Global Network Services

5 Questions to be Answered Today

!

What is GNS?

!

How does GNS make money?

!

Who benefits from a GNS partnership

and how?

!

How do GNS partnerships enhance the

Amex brand?

!

(24)

Premium

Economics

!

Card issuing revenues

!

Billed business revenues

!

Merchant acquiring fees

Benefits to Bank Partners

(25)

25

Loyalty Programs

Benefits to Banks

–

Marketing Examples

(26)

(27)

27

Premium

Economics

!

Card issuing revenues

!

Billed business revenues

!

Merchant acquiring fees

!

Targeted marketing

!

Global reach via AXP Travel Service Offices

Premium

Capabilities

Benefits to Bank Partners

(28)

Premium

Economics

Benefits to Bank Partners

Premium

Capabilities

!

Card issuing revenues

!

Billed business revenues

!

Merchant acquiring fees

!

Targeted marketing

!

(29)

29

Strong Brand Image

Pakistan

–

Union Bank

Benefits to Bank Partners

(30)

Benefits to Consumers

!

Greater customer choice

!

Enhanced value

!

(31)

31

Benefits to Consumers

!

Emergency Assistance

!

Concierge Service

_{Concierge Service}

!

Travel Accident Insurance

!

Car Rental Insurance

_{Car Rental Insurance}

!

Trip Inconvenience Service

!

Emergency Roadside

Assistance

!

Emergency Card / Travelers

Cheque

Replacement &

Emergency Funds Access at

Amex Travel Service Offices

Card Features and Benefits

!

Loyalty Programs

!

Purchase Protection

!

Extended Warranty

!

Best Value Guarantee

_{Best Value Guarantee}

!

Fee Insurance

!

Credit Protection

_{Credit Protection}

!

(32)

Benefits to Merchants

!

High spending

Cardmembers

!

Incentives to drive spend

!

(33)

33

Unique Marketing Capabilities

Benefits to Merchants

Membership Privileges

(34)

Benefits to Merchants

!

High spending

Cardmembers

!

Incentives to drive spend

!

Increased value of marketing programs

!

(35)

35

Global Network Services

5 Questions to be Answered Today

!

What is GNS?

!

How does GNS make money?

!

Who benefits from a GNS partnership

and how?

!

How do GNS partnerships enhance the

Amex brand?

!

(36)

Service

Product

!

Product

standards to

support brand

!

Features and

benefits for

each product

Brand

!

Brand standards

and policies

!

Marketing

standards

!

Advertising and

!

Issuer

servicing

standards

!

Network

quality policy

GNS Partner Standards

(37)

37

Security / Firewalls

(38)

Selecting Partners

!

Commitment to quality

!

Marketing expertise

and broad, local

customer base

!

(39)

39

Key Customer Groups

!

High spending

!

Affluent and

aspirational

!

Loyalty / reward driven

!

Frequent business travelers

!

Affinity / co

-

brand

cardmembers

!

(40)

Argentina Accelerators

Cards in Force

Billed Business*

+22%

+55%

Incentives to Banks

(41)

41

100

260 2,060

Classic

Gold

Platinum

* Classic Indexed to 100

Incentives to Banks

Partner Platinum Card Launch

2003 Average Spend / Card

Asia

(42)

Global Network Services

5 Questions to be Answered Today

!

What is GNS?

!

How does GNS make money?

!

Who benefits from a GNS partnership

and how?

!

How do GNS partnerships enhance the

Amex brand?

(43)

43

Conclusion of DOJ Case

Estimated Timeline

2

ndnd

_{Circuit Rules}

for DOJ

V/MC petitions for

rehearing

en banc

2

ndnd

_{Circuit denies}

_Circuit

_denies

motion for

rehearing

en banc

V/MC files petition for

certiorari

with

U.S. Supreme Court

Supreme Court decision

on

certiorari

expected

Sept 03

First MBNA/AXP

card issued

Jan

04

04 May 04

May

04 U.S. District

U.S. District

Court Ruling

Oct 01

Q4 04

_Q4

04

(44)

American Express Readiness

!

Technology infrastructure

!

Valuable experience

!

Third party card processors

!

(45)

45

!

Expanded merchant network

!

Incremental value to merchants and Amex

!

Enhanced brand presence

RESULTS

2004 Plan

ACTIONS

!

Ensure MBNA partnership launch is

strong and successful

!

(46)

Opportunities

(47)

47

Summary

GNS has already had a positive impact on

American Express outside the U.S. The unique

U.S. opportunity will accelerate that contribution.

!

Leveraged American Express’ global merchant

network investment and capabilities

!

Increased value to merchants

!

Delivered substantial revenues to both

American Express and to our partners

(48)

(49)

NOTE RELATING TO NON-GAAP FINANCIAL DISCLOSURES

This presentation contains certain non-GAAP financial disclosures, which are disclosed on a "managed" basis. Managed basis (a) assumes no securitization transactions in the TRS business segment, i.e., all securitized loans and related income effects are reflected as if they were in the Company's balance sheet and income statement, respectively, and (b) presents aggregate revenues in the AEFA business segment on a basis that is net of provisions for losses and benefits. Information relating to comparable GAAP financial measures may be found on the relevant slides and on American Express Company's investor relations website at ir.americanexpress.com.

INFORMATION RELATED TO FORWARD LOOKING STATEMENTS

This presentation includes forward-looking statements, which are subject to risks and uncertainties. The words "believe," "expect," "anticipate," "optimistic," "intend," "plan," "aim," "will," "should," "could," "likely," and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: the ability of the Company in 2004 to moderate the growth of its marketing,

promotion and rewards expenses, realize $1 billion in re-engineering benefits, and control other expenses to achieve margin improvement; the continuation of favorable trends, such as increasing T&E spending, strong equity markets, lower interest rates and improving credit provisions; the success of the Company in continuing to grow primarily through organic expansion of its businesses; the ability of AEFA to improve its investment performance and reduce outflows of invested funds; the ultimate outcome in the Department of Justice suit against Visa and MasterCard challenging their restrictions on member banks issuing cards on the American Express Network in the U.S.; any continuing effects of the conduct that was the subject of the Department of Justice suit against Visa and MasterCard; the success of the Company’s GNS business in the U.S., which will depend in part on the extent to which such business: further enhances the Company’s brand, allows the Company to leverage its significant processing scale, expands merchant coverage of the network, provides U.S. GNS bank partners the benefits of greater cardmember loyalty and higher spend per customer, and merchants benefits such as greater transaction volume and additional higher spending customers; and the Company’s ability to grow and manage its proprietary business in the U.S. at the same time there is expansion in the U.S. GNS business.