Amex's billed business accelerated slightly in Q4 (AXP, COST, AMZN, DELL)

annual change in amex us consumer card billed business Business Insider Intelligence

US billed business which is Amexs largest segment, making up 32% of its billed business during the quarter grew by 9% year-over-year in Q4 2018. That marks an acceleration from the 8% annual growth the firm saw in Q4 2017 , but a slight deceleration sequentially from the segments 10% annual growth during Q3 2018 .

In the firms Q4 2018 earnings call , Amex CEO and chairman Steve Squeri highlighted four areas the firm has been focusing on since October 2017.Those growth areas include expanding leadership in the premium consumer space, building on its strong position in commercial payments, strengthening its global integrated network, and making Amex an essential part of customers digital lives.

Amexs efforts throughout 2018 to reach a new customer segment and expand its merchant acceptance network continued into Q4 2018, putting the firm on track for a strong year ahead.

Amex continued to emphasize rewards in Q4 2018, particularly targeting millennials.Rewards spending which has consistently been Amexs largest single expense grew by 11% annually to reach $2.5 billion in Q4 2018. The increase in rewards spending reflects Amexs push to drive engagement and spending; one effort included revamping its Premier Rewards Gold Card to appeal to millennials by making the rewards structure more food- and travel-centric and adding a new design. This update built on other efforts by the firm to attract new customers, specifically millennials: In the past two years, Amex has bolstered its digital channels, launched a no-fee cash back card, and partnered with millennial-driven companies like SoulCycle for exclusive offers. Pursuing this customer segment has proven worthwhile for Amex thus far, as it has made up more than half of its acquisitions on the Platinum card alone. Further, investing in rewards can drive spending and cause certain cards to reach primary card status while ultimately increasing overall volume: Three of the top four factors cited by respondents in a Business Insider Intelligence study as most important in choosing a primary card were related to rewards.
Business cardholders were also a big area of focus for Amex in Q4 2018.Amex launched or continued to build out several products catered toward its business customers during Q4 2018, including updates to its Business Platinum Card which will become available in February with features that give cardholders access to WeWork memberships and the ability to earn statement credits when they use the card to shop at Dell. And Amex partnered with Amazon to launch a no-fee cobrand credit card for US small and medium-sized businesses (SMBs). SMBs, which make up 99% of businesses in the US, are an extremely valuable segment to target, and Amex has acknowledged that: The investments weve made in commercial payments are one of the key reasons that SMBs continue to be one of our fastest growing customer segments worldwide, Squeri noted in the companys earnings call.

Amex will continue expanding its merchant acceptance network in 2019 as it pursues parity with Mastercard and Visa.In 2018, Amex added 1 million new merchants in the US to its merchant network for the second year in a row.

Initiatives throughout 2018, like SMB programs and partnerships and cutting down its merchant acceptance fees, likely contributed to that uptick in merchant partners throughout the year. Amex uses the fees it charges to fund its reward offerings, but a wider merchant acceptance network could promote increased spending on cards, making it important for the firm to find a balance so that it can continue these initiatives going forward.