American Express (AXP) is a global financial services company that competes directly with credit card rivals like Discover (DFS), Visa (V), and Mastercard (MA). While they may seem similar, these four companies differ in the customers they serve and the way they generate their revenues. Credit cards are not the only service American Express and its competitors offer. We explain how their other offerings and 澳洲幸运5官方开奖结果体彩网:business models differ.

American Express and Discover Issue Cards

澳洲幸运5官方开奖结果体彩网:American Express and Discover issue car🐼ds, which means they bear the financing risk. They charge customers to use their cards and also charge merchants a fee.

For instance, when you buy something on credit using your Amex or Discover card, the merchant gets approval for the transaction from the company directly. This sort of system is called an 澳洲幸运5官方开奖结果体彩网:open-loop system, rather than the so-called 澳洲幸运5官方开奖结果体彩网:closed-loop system assoc💛iated with the Visa and Mastercard business model.

Visa and Mastercard Are Not Financiers

澳洲幸运5官方开奖结果体彩网:Visa and Mastercard act as intermediaries in the credit card space. They don’t directly finance credit card transactions. Instead, they allow ♎financial institutions to participate in their networks and issue credit cards that bear the Visa or Mastercard brand name.

𝔉When you use your credit card, the merchant processes the transaction using the Visa or Mastercard network𓆉. Your issuing financial institution approves the transaction, indicating you have enough credit on your account. The business establishment then approves your purchase.

Visa and Mastercard receive a 澳洲幸运5官方开奖结果体彩网:processing and service fee from the credit card issuer. The issuing bank also gets a part of the transaction value as a fee and the merchant’s bank also receives a fee for its service. Consumers pay the issuing institutions annual fees, monthly charges for carrying a balance, and late fees.

Transaction Value vs. Volume

Interest and fees are significant revenue drivers for credit card companies. You're charged interest if you carry a balance on your card. Card companies also make money on the fees they charge, including fees for late payments, 澳洲幸运5官方开奖结果体彩网:balance transfers, and cash advances. In this case, the transaction value is what drives the credit card business🐷 of companies like Amex and Discover.

澳洲幸运5官方开奖结果体彩网:Transaction volume generatꦍes credit card revenue for Visa and Mas🌸tercard. The more transactions that consumers engage in with their Visa or Mastercard-branded cards, the more processing fees these companies get.

Consumer Diversification

American Express cards have typically been associated with affluence because of the card offerings, high spending limits and high annual fees, marketing efforts, and perception as a status symbol. To gain market share and diversify its customer base, the company expanded its card offerings to include prepaid 澳洲幸运5官方开奖结果体彩网:debit cards and different credit cards with low to no annual fees and lower annual income requirements.

The Bottom Line

American Express’s main direct cre🌟dit card competitors are Mastercard, Visa, and Discover. Whi﷽le Mastercard and Visa have a different business model than American Express, they all compete in the credit card space. Financial institutions that issue credit cards also compete with American Express for consumer business.