What is American Express?

What Is American Express?

American Express -- commonly known as Amex -- is a global financial services company and one of the major card payment networks. Founded in 1850 in New York, Amex has grown from an express mail service into one of the most recognised brands in financial services. It is one of the five founding members of the PCI Security Standards Council and a significant player in both consumer and corporate payments worldwide.

What makes American Express different from Visa and Mastercard is its business model. Visa and Mastercard are four-party networks -- they connect issuing banks and acquiring banks but do not issue cards or manage merchant relationships themselves. American Express is primarily a three-party network -- it issues cards directly to consumers, manages merchant relationships, and processes transactions through its own network. This vertical integration gives Amex more control over the cardholder experience, merchant acceptance terms, and transaction data.

How American Express Differs from Visa and Mastercard

The three-party model creates several important differences:

Pricing

Because Amex acts as both the issuer and the network, it sets its own merchant fees rather than relying on interchange rates set by the network and negotiated between issuing and acquiring banks. Historically, American Express merchant fees have been higher than Visa and Mastercard -- typically 1.5% to 3.5% compared to 0.5% to 1.5% for the other networks. This is the main reason some merchants choose not to accept Amex.

However, Amex has worked to narrow this gap in recent years, particularly in the UK and Europe, and the actual cost difference for many merchants is now smaller than the perception suggests.

Regulation

Because American Express is a three-party scheme, it is exempt from the EU and UK Interchange Fee Regulation that caps consumer card interchange fees at 0.2% for debit and 0.3% for credit. This exemption exists because Amex does not have traditional interchange -- it sets a single merchant discount rate directly. This regulatory difference means Amex can charge merchants more than the regulated rates that apply to Visa and Mastercard.

Cardholder Demographics

American Express has traditionally positioned itself as a premium brand. Its cardholder base tends to be higher income, higher spending, and more likely to be business travellers or corporate purchasers. Studies consistently show that Amex cardholders spend significantly more per transaction than the average Visa or Mastercard user. For merchants, this means that while the cost of acceptance may be higher, the revenue per transaction often is too.

American Express Card Products

Amex offers a wide range of card products:

• Personal cards Including the iconic Green Card, Gold Card, and Platinum Card, each offering increasing levels of rewards, travel benefits, and concierge services
• Business cards Designed for small business owners, offering expense management tools, higher credit limits, and business-specific rewards
• Corporate cards Enterprise-level expense management solutions used by large organisations to manage employee spending
• Charge cards Unlike credit cards, charge cards require the balance to be paid in full each month. Many of Amex's flagship products are charge cards rather than revolving credit cards
• Co-branded cards Partnerships with airlines (like BA), hotels, and retailers that offer brand-specific rewards points

American Express Card Numbers

Amex cards are easily identified by their numbering. Card numbers begin with 34 or 37 and are 15 digits long -- one digit shorter than Visa, Mastercard, and JCB cards. The card security code (known as the CID -- Card Identification Number) is four digits long and printed on the front of the card, above the main card number. This is different from the three-digit CVV on the back of other card types, and it is a common source of confusion for customers making phone or online payments.

American Express and Telephone Payments

Accepting Amex for telephone payments is straightforward from a technical perspective -- the same payment processing infrastructure that handles Visa and Mastercard transactions can typically process Amex as well. However, there are a few practical considerations:

• Card number length Amex's 15-digit card number means payment forms and IVR systems need to accommodate a different length than the standard 16 digits
• Security code position Agents and IVR prompts need to guide customers to the four-digit code on the front of the card, rather than the three-digit code on the back
• Separate merchant agreement Some merchants need a separate acceptance agreement with Amex in addition to their agreement with their Visa/Mastercard acquirer, although many modern payment processors bundle Amex acceptance

Should Merchants Accept American Express?

The decision to accept Amex depends on the business. Arguments in favour include:

• Amex cardholders spend more per transaction on average
• Refusing Amex can turn away premium customers, especially business travellers and corporate buyers
• The cost gap with Visa/Mastercard has narrowed significantly
• Amex's dispute resolution process can be more merchant-friendly for certain transaction types

Arguments against typically centre on the higher merchant fees, particularly for businesses with thin margins where every fraction of a percent matters. In sectors like travel, hospitality, and B2B services -- where the customer base skews towards higher spenders -- not accepting Amex can mean losing valuable business.