Amex CEO Reports Explosive Platinum Card Growth, $10 Billion In Annual Fees, And Hints At An Even More Ultra-Premium Card Coming

This morning’s American Express earnings call meant a lot of discussion of the Platinum card, its refresh, and what it means for Amex strategy going forward.

The Platinum franchise has $530 billion in charge volume worldwide. That includes consumer and business, and cards in all countries. By comparison, Delta cards do about $170 – $190 billion in charge volume at this point and is the largest Amex co-brand (and bigger than United’s which is bigger than American’s).

There have been over 500,000 Platinum cardmembers that requested the Mirror card.

Here are 9 key takeaways American Express revealed to analysts:

1. Platinum refresh is working (and is expensive now, accretive later). American Express reports that they’re seeing the strongest start ever for a U.S. Platinum Card refresh. New cardmember acquisitions are running at twice the rate compared to before the refresh. They’re seeing record bookings through Amex Travel now (a bigger credit would do this!).

   Benefits cost hits immediately, while fee revenue lags. Higher fees don’t kick in right away, and then they’re amortized. Cardmembers effectively get a “free preview” of benefits before having to consider paying a higher fee.

2. Annual fees keep rising. This is intentional More than 70% of new American Express accounts are fee-paying. Annual card fees have now hit $10 billion for Amex after 29 straight quarters of double-digit growth. This is their engine.

3. Shift away from travel. The Platinum card was originally a travel-focused product. They’ve gone more lifestyle and dining weight. The big shift came in 2021 (digital entertainment, wellness, Resy) and now retail perks are emphasized (e.g., Lululemon) are emphasized.

   Redemption is also evolving, and they are rolling out “amount-based redemptions.” Expect more flexible (low value) cash-like redemption options alongside transfer partners. The more uptake that has, the more they drive down their redemption costs.

4. Expect fewer retention bonuses. Management says retention offers play a small and possibly smaller role going forward. They expect to retain customers by explaining benefits to them – credits you can use worth more than the fee you pay.

   J.P. Morgan’s Rick Shane hypothesized that American Express would see greater expense trying to retain Platinum cardmembers who consider cancelling due to the annual fee increase,
   

   I’d kind of like to follow up…related to retention offers as the new higher fees roll out. I assume that that really sort of cascades over 12 months. I’m curious how we should think about perhaps what % of customers take retention offers or request retention offers, and if you expect that that response rate is going to be higher or lower this time based on the initial responses you’ve seen.

   CEO Steve Squeri pushed back,

   I think in general, that’s a very low percentage of how we retain our base. Most of the retaining in the base is actually just explaining the product to them. I think when you look at this product and you look at what you pay for the value that you get, it’s pretty easy to come to the conclusion that this is a product that I really want to keep.

   I think one of the things that we’ve really tried to do with this refresh is really make it easy to understand what the benefits are and easy to engage in those benefits. I think that’s critical because what that will do will lead to more retention, more engagement, will drive more business to our merchants, and we’ll have more loyalty all the way around.

5. Getting partners to pay for your benefits is a key strategy component. I explained merchant-funded offers and how they work four years ago. At American Express they report that partners delivered over $3 billion in value across benefits (including Amex Offers) over the last 12 months. So Amex is not picking up the full cost of richer benefits (while they pocket the increased annual fees).

6. Millennials and Gen-Z are their focus. They see younger cohorts as the growth flywheel. Millennials and Gen-Z are now 36% of total spend and transact 25% more than older cohorts. With longer time horizons and increased spend, greater wallet share, they see much higher customer lifetime value than in the past.

7. $6 billion in marketing spend is mostly acquisition bonuses. Bank of America’s Mihir Bhatia asked for Amex to break down the $6 billion in annualized marketing spend Amex is doing (“How much is broad-based sponsorships, brand building versus more micro, like, you know, the card member bonuses, retention type stuff?”). CFO Kristina Fink’s answer is it’s mostly initial card bonus offers.

   The biggest share and the one that is moving from one quarter to another when it comes to marketing is the size of the welcome incentives, right? That’s the biggest share of this marketing line.

   There is tension here in that number between we want to spend more marketing dollars, but we also want that marketing dollar to be more efficient. If you work here in the marketing organization, you’re constantly battling between let’s do more, let’s spend more, and yet at the same time, let’s make sure the dollars work really, really hard for us. The number that we end up spending each quarter and each year is the outcome of those two kind of like pressure points. We are very strict and disciplined about those two…

   We’re going to keep investing, and we’re going to keep investing at elevated levels. At the same time, we’re going to subject every single of these dollars to the level of rigor that we have spoken in the past, making sure that the return on that investment, which we treat that as an investment, meets our profitability criteria, right? We are very clear in terms of stopping those investments where they are not meeting these criteria. We are getting more and more sophisticated, you know, and measuring those, tracking those. That’s how we make that decision. It’s not like, let’s spend this year like $6 billion.

8. High credit quality even as they grow. Delinquencies are down ~1.3%. Net write-offs are down ~1.9% quarter-over-quarter. Loans and receivables are +7%. The average FICO score of Platinum applicants is up 15 points versus before the refresh.

9. They consider a more premium card than Platinum (but below Centurion). CEO Steve Squeri on the ladder from Gold to Platinum and whether there’s room for a card above Platinum:

   Gold continues to be a very strong product for us, and we continue to acquire new cardholders there. We haven’t seen gold card acquisition go down. We have seen upgrades, but it’s still early. I mean, we’re only three weeks in here. We will see how that plays out.

   Part of our strategy is to provide card members with a path to higher-end products that potentially meet their needs. Is there a product between Platinum and Centurion? Maybe. If you have any ideas, we’re open to those ideas. It’s something that we talk about from time to time. We will see.

   We’re really happy with where Centurion is, and we’re happy with where Platinum is. I think this refresh will continue to cement our position as the leading premium product.

   I think Chase could potentially do a higher-end card than Sapphire Reserve (indeed, they do sort of have one with J.P. Morgan Reserve but it’s effectively the same card with a United Club membership thrown in). I think that Capital One could definitely do it, given that their premium entry is at the $395 price point and I don’t think has been branded as a status symbol in the same way as Amex Platinum (it’s odd to think of Platinum that way, but it sort of is).

   A mass market card above Platinum certainly risks undermining Platinum, since that no longer would be ‘the best’ or ‘top tier.’ Consumers would have less of a reason to get it! Some would shift to the higher-end card, but they’d be cannibalizing their existing business and also risk shedding customers at the same time. So they’d need to be really sure of the numbers – how much higher fee revenue they’d generate, the incremental cost of benefits, and how that compares to their losses.

American Express says the Platinum refresh is off to its strongest start ever, doubling acquisition pace; benefits costs hit immediately while higher fees phase in, and annual fee revenue—now ~$10B after 29 straight quarters of double-digit growth—remains the core engine. The strategy is shifting from travel toward lifestyle/retail perks and more amount-based (cash-like, lower-value) redemptions, with fewer retention bonuses, partners subsidizing benefits (> $3B in the past year), and ~$6B of marketing spend largely directed to welcome offers.