American Express Company (2)

IV
INTERNATIONAL BANKING SERVICES
During World War I (1914-1918) the U.S. government nationalized and consolidated express deliveries on American railroads, eventually forcing American Express to discontinue its express business in 1918. In an effort to maintain steady revenues, American Express diversified by offering international banking services in 1919. After steady but relatively modest overseas growth during the 1920s and 1930s, the company dramatically increased the number of its offices around the world during the late 1940s and 1950s.
V

AMERICAN EXPRESS CARD
In 1958, eight years after Diners Club came out with the first credit card that could be used at a variety of establishments, American Express introduced its own credit card. The American Express credit card offered cardholders the convenience of being able to buy goods and services without needing cash at the time of purchase. The company generated revenues by charging cardholders an annual fee and by receiving a small percentage of card purchases from participating businesses. American Express did not charge cardholders interest for using the card, but it required them to pay their balances in full each month. Within three months of the card’s introduction, half a million people became American Express cardholders. In less than ten years, 2 million people carried American Express credit cards and annual charges on those cards exceeded $1 billion.
VI

DIVERSIFICATION
During the 1960s, 1970s, and early 1980s American Express grew into a global financial giant, acquiring a number of companies, including Fireman’s Fund Insurance Company in 1968 (which it sold in 1985) and the brokerage firms Shearson Loeb Rhoades Inc. in 1981 (which later grew into Shearson Lehman Brothers Holdings Inc.), Investors Diversified Services in 1984, and E. F. Hutton in 1987.
In 1987 the company introduced the American Express Optima credit card to compete with the growing popularity of cards issued by competitors MasterCard and Visa. Unlike its original American Express credit card, the Optima card did not require cardholders to pay their balances in full each month. Instead, like MasterCard and Visa, the Optima card allowed cardholders to pay balances in installments, plus interest.
VII

RECENT DEVELOPMENTS
In the late 1980s and early 1990s a downturn in the U.S. economy, coupled with increased competition from other credit card companies, led to a sharp decrease in earnings for American Express. In 1991 the company initiated a major reorganization at a cost of $110 million. At the same time American Express invested $155 million in a reserve to cover expected losses from its various credit lines.
Harvey Golub took over as chairman of American Express in 1993. Golub sold many of the company’s holdings and cut millions of dollars in costs. Earnings at the company rose steadily during the mid-1990s, as American Express broadened its credit card business, strengthened its investment-services group, and expanded its international business holdings. The number of American Express cardholders grew from 26 million in 1993 to 59 million in 2001.
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