American Express Co. felt the full brunt of the global Covid-19 pandemic in the opening weeks of the second quarter, and on Friday it released numbers showing just how hard the swoon in travel and other key sectors hit the company. Executives also took time on a conference call with equity analysts to discourage merchants from shunning AmEx transactions and to dismiss, for now at least, the notion of introducing a debit card.
The New York City-based card company reported total revenue for the April-through-June quarter of $7.68 billion, down 29% from the $10.84 billion it posted in the same period last year. For the entire first half of the year, revenue totaled $17.99 billion, off 15% from last year’s $21.2 billion.
Business shut-downs and state-by-state shelter-at-home orders began to take effect late in the first quarter, and hammered all payments companies particularly hard in April. But AmEx began to bounce back in May and June, according to its latest numbers, as states started to allow businesses to reopen.
“We now realize mid-April was the trough in second-quarter declines,” chief executive Stephen Squeri told analysts on the call. “Spending volumes have been improving since April,” he added, though he cautioned travel-and-entertainment spending, which he said accounted for 30% of total volume before the pandemic struck, isn’t recovering as fast as other parts of the business.
“We see T&E as still being slow,” Squeri said, particularly in corporate travel. “We see restaurants coming back before airlines and hotels,” he added, pointing out that in many cases “people are driving” and staying at alternatives such as Airbnb locations. But, while “corporate travel will take a while to come back,” he predicted, “you’ll have this unbelievable pent-up demand for consumer travel.”
Depressed spending led to a 39% drop year-over-year in the company’s discount revenue for the quarter, to just over $4 billion. Discount revenue, made up acceptance fees paid by merchants, accounts for 52% of AmEx’s total revenue. The average discount rate fell 14 basis points to 2.23%.
Responding to an analyst who asked about the idea of an AmEx debit card as a way to stoke spending, Squeri said the company looks at the idea “on an ongoing basis.” Adding that “we continue to look at ways to serve our customers on a transaction basis as well as a credit basis,” he pointed out that China, where AmEx last month was approved to do business, “will be both a credit and debit market for us.”
AmEx in October took another step in that direction, Squeri added, in a deal with PayPal Holdings Inc.’s Venmo payment service in which users can elect through the AmEx mobile app to split payments with others and still receive full points for the purchase.
When another analyst asked about the risk of merchants discouraging customers from using “high-cost cards,” Squeri said the move would be “foolhardy” in the face of the overall effort to recover from the pandemic-induced recession. “I have not seen that,” he said. “I’m not seeing a big push on store cards, either. Now is not the time to be aggravating your customers.”