American Express Company (AXP) Earnings Call Transcript & Summary

All right. Well, thank you, everyone, for joining. We're delighted to have American Express up next. And probably doesn't need a ton of introduction, but CEO and Chairman, Steve Squeri; as well as Jeff Campbell, CFO; and Vivian, Head of IR, here with us as well.

Steve -- I mean, obviously, first, I want to thank you for doing the conference at what is a unique moment in time. And maybe just to set the stage, I mean, if I think about the last 12 to 24 months for Amex, I mean, clearly a tremendous amount of resilience at the beginning of COVID. Better than expected, at least for most people. Rebounds in terms of both your volumes and market share. And as we kind of roll it all forward, I know I'm over simplifying the guidance and the aspirational targets over the next couple of years, but it's kind of gone from a high single-digit growth outlook to a double-digit growth outlook almost structurally. And we could probably spend the whole hour -- the underlying drivers of that, but it's still one of the most common questions I get from investors. Like, hey, I've known Amex for 20, 30 years, and I've always thought of it one way, and now I'm thinking of it in another way. So if you were to highlight for people 2 or 3 things that have really enabled that shift, what would be top of your list to really make it tangible for investors?

Well, first, thanks for having me, and thanks for everybody that came in-person. It's nice to see people in-person as opposed to doing these things over Zoom, but I know there's a lot of people on the call as well as my IR team warned me. So -- but no, look, I think that, look, the pandemic for everybody has been an interesting time. But for us, I think it's a convergence of sort of 3 interrelated factors. I think the strategy we had pre-pandemic, the momentum we had coming out of the pandemic, and I think you just had some structural -- we just had some structural shifts, I believe, in the industry as well. And if you look at it, not only during the pandemic but pre-pandemic, we've been investing in our brands. We've been investing in value proposition. We've been investing in coverage, technology, our talent, our customers and so forth, and I think that drove a few things for us. Number one, when you look at our consumer business, we become a lot more generationally relevant. You hear us talk about Millennials and Gen Zs all the time. That's not something we were talking about a number of years ago. And I think when you look at sort of our small business, we've had a lot of momentum on B2B, and we've had a lot of momentum around being a working capital provider to small businesses, and I think that's helped us. Coverage continues to be a big driver of growth for us. I think what people fail to realize is that the more places that people can use the card, the more spending you're going to get. And that continues to increase not only in the United States we have parity but where you have international. And then finally, I think just with the whole digitalization, I mean, we made it a lot easier for our customers for -- to have these journeys. You put that together with the momentum that we've had, I mean, we've had some -- you just look at the first quarter coming out of 2021, you had record levels of acquisition as it related to our Consumer Platinum, our Consumer Gold, our SME Platinum. Delta in March was through the roof for us. We're retaining customers, and I think that people don't give us enough credit for retaining customers. It is a huge driver of growth by not having to fill a leaky bucket. And when you have 98% consumer retention, 97% small business retention, these are numbers that we have not seen. And now we've seen them for a couple of years in a row, and our plan is to continue that. And we're engaging our customers a lot more. You saw more goods and services spending, you some more online spending and things like that. And you combine now with some of the structural shifts. I mean, who among us did not buy stuff online, right? And for us, that has stuck. You look at small business formation. That was up like 23%. And in B2B payments and B2B digitization. So you put all that together and as Jeff and I and the team roll up the numbers, this is what you come to. It's a culmination of a strategy that we've implemented pre-pandemic. Momentum, I think, because I think we made a lot of smart moves during the pandemic, especially from a customer retention perspective but then investing right after, and the structural shifts. And so you put all that together, and that's where our -- that's where we came out with our new growth plan.

And clearly, that kind of growth requires continuous investment going forward. And I thought one of the most striking comments from the earnings call was this paraphrasing, but we have more investments than we initially anticipated. I mean, maybe help us understand what are some of the areas that are surprising you to the upside? What are some of the investments you're most excited about making over the next few months?

Yes. I think -- and we've made that comment over the years. I mean, you've heard us say we've had -- we have a plethora of investments that we just don't have the funding to do. And we've got such a discipline that we've got a really analytical machine. And we sort of stumbled almost into this analysis because for years, we set sort of this marketing budget. And when you set a marketing budget, you've got to be really crisp about where you want to invest and how you want to invest across the various businesses. Because when you think about our business, you've got a network business, you've got corporate card, you've got small business, you've got a consumer and you have that internationally, you've got an acquiring business. And we just made the decision as a group that we would -- as we look at all these deciles, we would just take it. There's no reason to leave stuff on the table. And so that's why you see our marketing spending going up because there are good returns. And when we make our investments, we're making these investments through the cycle. And that's not only -- that's our marketing investments and our acquisition investments. And so yes, we were a little bit surprised. But you have a market when you think about the opportunities, the premium space is growing. The premium space is growing probably 3x faster than the overall market. Small business, I just mentioned before, small business formation is up almost 23%, so we see tremendous opportunities there. The other thing that I think people don't think about a lot is we do a lot of investment in our existing customer base. Those investments are about 3x more effective and efficient than acquisition investments. And when we talk about those kinds of investments, those are investments of upgrading people, maybe from a Gold Card to a Platinum Card, maybe extending a little bit more credit here, maybe offering personal loan, whatever it might be. And we're using our analytical machine to look at card members that are similar to these card members and make those offers that way because we know how it's going to perform. So yes, we were surprised just a little bit more. But just in the pandemic, when we didn't have that line of sight, we were able to pull back and you saw us invest a lot more in our customers. So right now, we feel good about the investment opportunities we have, and we have line of sight. And that -- when you have line of sight into these investment opportunities, it's really important.

Well, I was screened out of your Delta program because I used to game the system, and I can confirm...

We don't like that.

You can confirm me still have some discipline. I still get qualified for that. It's that of an offer.

We don't like gamers.

Maybe on that investment, I mean clearly, one concern, one fear investors have, you referenced your investing through the cycle, but there's a wide fear of a recession over the next 6, 12, 18 months, whatever timeframe you want to pick. So how do you kind of talk with investors? A, if things stay good, how do we avoid a competitive war? And B, is there any point where you think about proactively pulling back not because of anything you're seeing or doing in your book, but just because of this macro risk we might face 12 months down the road?

I mean, look, you could sort of go into the prevent defense, if you want, but I'm not that sure it's just the way to win, being a longtime Jet fan. That's certainly not the way to win, but -- lots of other issues there. But -- and I think -- I don't know if Brian was here, he was at the conference yesterday, Brian Moynihan, and he basically said, look at -- we look at blue chip economic forecast, and out of 40 economists, I think one is predicting sort of a recession. And most of the blue chip forecasts that we use or that we see, like everybody else, we see inflation moderating in 2023. The other thing I would say is, look, we had GDP growth decline in the first quarter. Stock market hadn't been doing all that great, and we had 35% billings growth. So -- and historically, we have not seen a correlation between sort of either GDP or stock market performance with our card base, and I think pulling back is not the right strategy for us. But here's what I would say. When you look at it and as we run the business, when we see signs, we start being very circumspect about sort of credit limits and things like that. Prior to the pandemic, and I've talked about this quite a bit, prior to the pandemic, we through -- we put a plan together called winning through the cycle. Because we thought there was going to be a credit crunch, there was going to be a recession. And at that particular point in time, little did we know we'd have to pull that off the shelf for a pandemic. But it worked, and we continually scenario plan. But what we did during that pandemic is we shifted investment. We shifted investment away from acquisition, and we put investment into value proposition and we put investment into our customers. And again, of all the investments that we make, we go through the cycle. And the reality is this, if you pull back too much, you're going to miss an opportunity for growth. Our ability -- Look, the reason we have the retention levels as we have is that we invested in our customers during the pandemic. We invested in them from a value proposition perspective, from a financial relief perspective. And while we didn't -- we weren't as sort of bullish from a card acquisition perspective, we still acquired over 1 million cards per quarter, and we never shut the engine down. And you can't shut that engine down. And it's really important to continue to fuel that and keep the discipline within the company. And so what happens is when you come out, you're able to roar out of this pandemic situation that we had. And the other thing I think that's really critical is we've been around 172 years. I've got card members that have gone through sort of the financial crisis with us, going through the pandemic. And yes, their spending may moderate during these things, but they're still with us. And so we monitor it, we look at it, but we're not going to sort of pull the cord and stop investing on the anticipation that something might happen. Again, we'll manage everything right through that cycle. And it's worked for us, and that strategy worked really well through the pandemic.

Well, maybe sticking with the scenario planning and the soft landing, everything is okay scenario, how worried are you about a competitive war? Is there any pockets of competition you would say are overheated right now? Or is it still pretty rational? Obviously, it's a testament to how attractive your customer is that many people want the same customers.

Yes, I wouldn't say it's rational. I don't think -- I've been at Amex for 37 years. And since -- look, since the financial crisis, it's been competitive as hell, right? Because I think people woke up and realized it's card business is a pretty attractive business, and it's sustainable. People are going to continue to spend. It's a category that grows at like 8% a year. So banks have done a great job, and I think they've done a really good job in coming up with good products. I think we've responded or anticipated also very well. And I think competition makes everybody better, and I think it's good for the consumer. And you just look at -- you look at how we're competing now in the premium space. if you go back, and I always quote this, because I think Chase Sapphire did so much for the premium space. They really -- I always tell Gordon Smith this, who's now retired that, when they got in, they put so much time, money, effort and spotlight on it that it made it attractive to a lot of other constituencies that we probably wouldn't have gone after. And if you look at it, since, Chase Sapphire launched, our Platinum Card base has doubled, and we've raised the fee twice. So that's -- it's competitive, but I think that's why you invest in the business. That's why you continually expand your value propositions, and that's why you never stand pat. And if you look at -- we've been on a journey now to refresh not just Platinum, but we refresh Green, we refresh Gold, we refresh all our Delta products, Hilton products, Marriott and so forth. And we just don't do that in the United States, we do that globally. And when you talk about competition, everybody talks about the premium U.S. card space. There's competition in the SME space, there's competition in the U.K., in Germany. I mean, it's competition all over. Its competition in the Corporate Card space. And I think competition makes us better, it keeps us on our game, but I don't see it -- I don't know when it's cooled down other than during the pandemic. And I think it will continue to be there. And you'll have these swings, you'll have these lulls every once in a while. But right now, I think it's hot as it has ever been.

You referenced the annual fee category, and it has to be one of the biggest surprises to me over the course of my career. I would have thought annual fees on credit cards are sitting duck and just a race to 0 over 10 or 20 years. And as you pointed out, the opposite has happened. The percentage of people who are willing to pay annual fees has gone up, and the price they're willing to pay has gone up. Talk us through a little bit how you've been able to do that? And as you kind of continue on that journey, because, it hasn't just been raising the price, it's been raising the value in tandem. Is there any elasticity? Is there any point you're hitting where no matter how much value you put in, they're sticker shock? Or is it something that you can kind of continue to see happening over the next couple of years?

Yes. So I mean, as I said, I've been around a long, long time, and I remember when we used to just raise the annual fee just for the sake of raising the annual fee because it generated more revenue. That doesn't work. And it's all about value. And as I say to people, as I said, look at the beginning of the year, Brian, you give me $700. And by the end of the year, I'm going to give you $1,400 back. That's a pretty good investment. And so when you look at it, when we look at sort of the product, what we look at is, what is the value that we can put in it. And we always put in a lot more value than we put -- than we raise the fee. And you said, well, geez, how can you do that? Well, you have to think about our model. And when you think about our model, as you said, we have a very attractive card base. That card base, as we continue to grow, it becomes more and more attractive. It becomes attractive to our merchant partners. Our merchant partners want access to that card base, and between our analytics and our ability to reach in and to get those card members into those merchants, they're willing to fund a lot of value, and we are able to drive a lot of business. And so this becomes this virtuous cycle. As we get more card members, merchants want to put more -- we get more merchants, merchants want to put more value and the membership model gets better. I think the other thing that's helped us tremendously, quite honestly, is the Internet and the fact of all this comparison shopping. It's when you -- and especially the rational part of it, I mean, especially when you look at Gen Zs and millennials, which are acquiring our product at record clip. 75% of -- are Gold and Platinum Card acquisition and the first quarter was all Gen Z and millennial. They look at it and say, look, I can invest -- I can get a Platinum card for -- the $695, and I'm going to get this plethora of value. And rationalization helps. And then you put on top of that experiences, access, service, rewards and so forth. And so is there a limit? I don't know. I don't think there is a limit. I think it's all about value. However, if you move away from the value play, if you just think you're going to raise the price of the card without putting in a lot more value, then you got a house of cards. And not good house of cards, bad house cards. We have a pretty good house of cards right now, but you have a bad house of cards because, it'll start to collapse. And so we are committed. When we say we're committed to refreshing those products, we're putting more and more value in. And when you look at it, that value takes many, many different forms. Whether it's putting pay overtime on the card, whether it's adding other services. And we're getting a lot of engagement with our card base with that. So I don't think there is a ceiling. And look at the Centurion Card. I mean, I get people that e-mail me begging for the Centurion Card. And that's -- it's a $5,000 fee. So you're somewhere in between there, right?

Vivian told me I get that with the fee waived this year.

Well, yes, because you were nice enough to have us on. You got the fee waived.

It won't be activated. I'll just get to put it on my desk. Yes.

We got a lot of those cards, in case.

One of the testaments to the success, and I believe I've got the stat right, that Platinum, Gold and Delta all hit monthly highs for new acquisitions recently. Clearly, those customers don't hit peak value all at once, right? There's a ramp. There's a lifetime. There's -- the spend ramps up, the lend ramps up. How should we think about that kind of tailwind going forward? Any boundaries you can give us on time? And any insights you can give us on strategies, you might put forth to maximize that? What is the way you make sure the customers that are getting reward turn into fully ramped up, high spending Amex most of them are just 12 months down the line?

Yes. Look, it's all about analytics, and it's about customer engagement. Remember, one of the things I said earlier in this talk is that, our customer investments and those engagement investments, whether that be to upgrade people or to turn them on to different categories of spending. And so look, when you -- if you look at 75% of our acquisition in Gold and Platinum from a consumer perspective or millennial and Gen Z, now, there's a couple of things that you look at there. Number one, they're going to be around a lot longer than if you go get a boomer or a Gen X-er right now. And so the lifetime value of these card members is a lot higher. Their spending will ramp up over time, but they're also a hell of a lot more loyal and more brand conscious. And they tend to promote the product a lot more. And we have a program called Member Get Member, and it's one of the most successful acquisition programs that we have. It's one of the most successful acquisition programs to get millennials and Gen Zers. So over time, we anticipate they ramp up. The other thing that we're seeing with these new acquisitions is pristine credit. And so it takes a little bit of time to ramp them up, but remember, we're getting them a hell of a lot earlier. And it's interesting because years ago, we would never start a young person on a fee-based card. We would get them into the franchise with a no-fee product. And as I said, I think Chase Sapphire changed a lot of that, so we're getting a little bit of millennials here and there. But once that opened up, our product became very hot and -- hotter than it was. And so from my perspective, we have a long runway with very loyal customers. And a nice part about it is, every year, there's a new set of college graduates, there's a new set of small business owners that are Gen Zers that are coming into the workplace. And that's why I talked about early on, there's generational relevance. Our product never was generationally relevant. Our product was relevant for a particular archetype, and that's not the case anymore. You can go through our product portfolio, and you'll find all different age groups. And we used to sit around and say, okay, now the average age of card base has just clicked up another year. We won't say that anymore because it's not clicking up, and I think that's really important for us.

Maybe shifting gears. I mean, clearly, there's a lot of focus in the near term on spend volumes, credit quality, can spend volume hold up as the economy weakens? Can credit just gently normalize? And maybe starting with credit, just to kind of get that out of the way. How are you feeling? Clearly, you've signaled that it is going to normalize. We can't expect delinquencies and charge-offs to be at a record low forever, but any insights you can give us? Is it happening as you budgeted, a little faster, a little slower? What are you kind of seeing?

Yes. I mean, we're seeing pretty much what we expected right now. I mean, look, you saw the first quarter results, we're still under 1% in terms of delinquencies and write-offs. I mean, I've been around forever, and I have never seen this before, and it continues. What I would say is this. As you look at -- as you go through the year, we do not expect either one of those statistics to be at pre-pandemic levels. And yes, it ticked up some basis points last quarter relative to the fourth quarter, but we're not seeing any deterioration -- significant deterioration at all in that. What you'll see is you'll see us as we build loan balances and revolve. You'll see our reserves obviously go up. And as reserves go up, we anticipate that delinquencies will go up a little bit. As loans go up, delinquencies will go up a little bit, write-offs will go up. But again, just as I -- where it started is, we don't see the write-off of delinquencies to reach pre-pandemic levels in 2022 at all.

And then maybe to quiz you on some of the spend trends. I mean, you've always got great earnings slides kind of slicing and dicing things. First, if you have any comments on what you're seeing so far in 2Q and overall spend? But then maybe to follow up specifically on travel, and kind of what you're seeing just kind of conceptually consumer travel, clearly through the roof. Is that continuing? And is this travel may be lagging behind of what you're seeing?

Yes. I mean, look, we talked about in the first quarter that consumer travel was back and above. It was like 120% of what it was in 2019. And as we look at sort of quarter-to-date now, SME travels above where it was in 2019 and large market, large corporate is probably about 50%. But the leading indicator for us is, consumer bookings are up 40% over pre-pandemic levels in April, and international bookings are higher than they were pre-pandemic. So we're seeing people getting out there, traveling and booking. And so from a T&E perspective, consumer is real strong, SME is back and large corporates are coming back. But the consumer for the last 2 years really hasn't traveled, and they're out there traveling in droves right now. When you look at broadly at T&E, restaurants were really strong last year, continue to be very, very strong. And while airlines and lodging have not reached 2019, overall 2019 levels they're getting there. And -- and so we're pretty pleased with the progress. But when you start looking at the whole thing, we're also pleased that we're continuing with the goods and services. I mean, it's 21% up in the first quarter, and that -- that momentum has continued for the first couple of months of this -- for the first 2 months of this quarter. So we feel really good about what we're seeing from a spend perspective. And remember, as we get into this year, our spending levels were rising. So we're growing off a bigger base as we move along the year. And we're still seeing that growth. So again, that's why, I mean, we could talk ourselves into a recession. I'm just not seeing it with the card base.

Maybe kind of online and card not present, you've referenced the tailwind that the pandemic created for that category. We've seen it moderate a little bit. In your book, the growth rate is still clearly growing very nicely. And maybe some concern through the market as you look through some online companies around how much of that growth will stick around in a more normal world. Just -- how do you think about sustainability of the growth trend and your outlook for online spend over the long term?

Yes. I mean, look, we're -- I think we were up sort of like 17%, but online spending was really up. What's -- the other side of that is off-line spending, I think, in the first quarter, was up like 29% for us. So look, we did a number of things during the pandemic to engage our customers more from an online perspective and whether it was value proposition enhancements, offers, things like that, and that is sticking. So I -- and our customers are savvy online spenders. And with a lot of the partnerships that we have, that works out well for us. The other thing is when you think about sort of this -- and I talked about a structural shift, but when we look at our international business, our online coverage is much, much better than our off-line coverage. And so that structural shift is really helping to fuel a lot of our growth in international. Remember, pre-pandemic, Small Business, International and Consumer were the fastest-growing parts of our business. And both are growing very, very nicely at this point, with Small Business up in the first quarter almost 35%. And International consumer up over 40%.

Maybe to follow up on that small business. I mean, you've identified it clearly over a number of years as an engine of growth. One of the pushbacks I sometimes get is, you're really so big in the space and you already as you pointed out, growing 30% year-over-year right now. How do you drive continued growth in that space even being a market leader, even growing that much? What are the strategies in place to make it continue to be an engine of growth?

Yes. Look, we are -- certainly in the U.S., we are a market leader, and I think what -- we continue to grow. And as -- and again, I go back to that other statistic. Look, small businesses are coming out of the woodwork. I mean, you're going to get 23% small business formation last year. So -- and we've expanded what we do. I mean, when we started this, if I go back 4 years ago, our small business offering was a Platinum Card and we had a -- we have a credit card as well, and we have a few co-brand cards. But now you've got -- we've put in a transaction banking account, we have a debit card, we have working capital loans, we have other short-term loans, we've bought the Kabbage platform. And when you look at our share of small business in the U.S., probably around whatever it is, 40% or so share, but we only have about 20% share of lending. And so there's a lot of opportunity to grow our short-term lending business to small businesses. And I think when we think about our small businesses, one of our stated strategies is to be the working capital provider to small businesses. And so that was the genesis of the Kabbage acquisition, the transaction banking accounts. You have even more insight and you're able to meet their cash flow needs. So I think there's a lot -- there's a tremendous amount of growth from a small business perspective. And the other thing, just as a small businesses form, they also go -- they go out as well. But our credit and our retention levels, our retention levels in small business with 97% and our credit metrics are probably better than our consumer metrics at this point. And then I'll point you to International, where it's in its infancy. And it's -- it's a business that is nowhere near where the U.S. is from a maturity perspective. And so we take those assets and we think about moving those to International, which is why it was the fastest -- International was the -- small business was the fastest growing part of American Express prior to the pandemic, and we hope to get it back there as well.

Maybe one program note, I forgot to mention. You can submit questions. I'll go to audience questions in a bit here. Hopefully, everyone has used the system already, the Pigeonhole system. If not, I believe there's a QR code in the back you can scan. But I'll start monitoring those and taking a few in a moment here. So you referenced internationally, you were talking about SME in particular there. But if I broaden it out, one of the strategic challenges has always been coverage and acceptance. You referenced being at parity already in the U.S., approaching or getting closer in some international markets. Talk about your strategy to continue to grow coverage outside the U.S.? How do you get to where you need to be and pick your spots on international coverage?

Yes. And look, I used to run the merchant business many years ago, and international coverage was always a bit of an issue. But I think we changed our focus a few years ago, and what we did was, we started to really look at what we call priority cities. And we identified like 48 priority cities and getting those cities up to 75%. And I would say it's 75% LIF coverage, which means locations in force. But not every location is equal, so we focus a lot on big merchants. We focus a lot on e-commerce sites, which are easy for us to sign. We focus a lot on tourist attractions, restaurant, hotel airlines and so forth. And so we have separate targets within those categories, and some of those categories, we want to get 100%. But the reality is, not every location is created equally. And so what our objective is, is to really cover as much as a card member spending as possible. And those 2 numbers are very different. When you have 75% LIF coverage and you have how much spending you can actually cover. We can cover a large percent -- a much higher percentage of our card member spending that way. But I think we got a lot more focused from a coverage perspective over the last few years internationally, and we will continue to grow it. Look, in International big place, take China out of it. We signed 3.7 million merchants in 2020 during a pandemic year, and we signed 7 million merchants last year, internationally. That's a lot of merchants. And you look at that as an Achilles heel, except international card and small business were the fastest-growing part. So I look at that as an opportunity. And we're in enough places right now where the card has tremendous utility and tremendous value. And if you think about it, while it's perceived as an Achilles heel, I think it's still an opportunity for us. If it truly was, we wouldn't have sort of the position that we have from a corporate card perspective nor would we have the position that we have from a consumer or a small business perspective internationally. So we're going to continue to work on it because I think what we've learned in the United States is having those details on every single door, and we talk about virtual parity coverage in the United States. You can always find a place here or there that doesn't take it. And when somebody does, they let us know. And we can sign them pretty much instantaneously. It's just that some things fall between the cracks. And what we found is, it just gives people a better sense of overall calm, that they can go into any store and it will be accepted. And millennials and Gen Zs like that a lot as well, and so we're getting a larger percentage of their wallet as a result of that.

Maybe shifting gears to loan growth overall. Clearly, payment rates have been as high as any of us have ever seen in our career, maybe the highest we'll ever see. You've talked about it moderating, but slowly. How do you see loan growth evolving? And what's kind of the timeframe you would peg for payment rates to maybe come back down to earth here?

Look, I think the first thing that I'd say is, you have to remember our model where almost 80% of our revenue is generated from non-net interest income. And so -- and I think that's an important context setting because pre-pandemic, we were growing loans twice the rate of the industry, and we'll probably continue to do that. Because when you look at it, and I just mentioned this before, we only have 20% of our small -- we have over 40% share of small business spending but only a 20% share of small business lending. And when you look at our share of wallet from a consumer perspective, we may have on average of 45% of our consumer share of wallet. But we only have, again, about 20% to 25% of their share of lending. And what people don't think about a lot is how Platinum cardholders borrow. And so we put Pay Over Time features on all of our products. And in fact, if you're new to the franchise, you don't even know that the only way you used to be able to pay your bill was to pay in full. You now have that optionality to revolve for a month or 2 months or what have you. And so I think you'll see a slower growth. And we're not back to where we were obviously pre-pandemic from a receivables perspective, but our intent is to get there. And as far as paydown rates, hard to say. It's really hard to say at this point where you've seen them tick up a little bit, but nothing significant. And we're -- remember, we're very different. And Jamie was here at the conference yesterday and talked about 6 to 9 months of sort of consumer availability of funds, and that's probably true. But our consumer base is a lot different than the general consumer population.

You made me feel old with the painful. I'm old enough to know. Remember, Jerry Seinfeld, teaching me, I can use it at the pump.

That was a very good ad campaign.

Maybe before I take some investor Q&A, a little bit on technology. We've seen a big valuation shake out in fintech this year, so I get fewer questions about how Buy Now, Pay Later is going to disrupt model and all that. But it's still very competitive. You're investing a ton in your own capabilities. You're using fintech's a lot as partners and investing in some cases. Is it possible maybe to highlight one or two areas that you feel Amex is particularly well positioned in technology. And maybe investors don't fully appreciate? And then maybe on the flip side, what areas are you watching the most for competitiveness? Where would you say you're most concerned -- or concern is the wrong word, but watching fintech as a competitor in the business the most?

Yes. So let me do a little context setting. I think when you think about Amex versus a bank, we -- the only investments we're going to make are in our network, our acquiring business and our issuing business. When you think about Amex versus fintech, one of the advantages they have is, they pick one vertical, they pick one thing and they do it really, really well. And so we're sort of in between from an -- if you think about a tech stack perspective. Because if you're doing one thing, boy, it's pretty easy to get it. I think it's pretty easy to get it right. But when you're looking like we are, we run a network business like Visa, Mastercard. We have an acquiring business like an FIS or Fiserv, and we have an issuing business, but our issuing business is not just in the United States, and it's not just consumer. It's in 29 countries. It's global. It's corporate card, it's small business. It's -- we're not like Discover, which is with a couple of products, so that makes it a little bit more complex. But the advantage that we have is that, that is our focus. Our focus is on the card business. And a lot of our systems are global. I mean, if you think about it, we have a global authorization system. I mean, no matter where you are, anywhere in the world, within less than 2 seconds, we can authorize that transaction. And we're able to leverage our globality and our global systems and our global infrastructure across all of these countries and across all of these businesses that we have. Now, that's not to say that there are offshoots of these things that you have to do in various markets, especially when you think about some of the local -- data localization issues and things like that. But I think that's a huge advantage for us, is that our technology investment is only focused on our card business, number one. And a lot of the things we do, we try and do on a global basis. Whether it's the app, whether it's our authorization systems, as we think about accounts receivable systems and account payable systems. Or at a minimum, at least, we do U.S. and international. And so I think that's important. As far as fintechs go, look, lots more people out there with a lot of great ideas. And we look at them all. And we learn a lot. And I'm not going to go through all the details. But we've learned from some fintechs about how to do better underwriting, believe it or not. And we think we're the best in the world at underwriting, but you may underwrite a start-up different than you underwrite a regular business. And -- and we've looked at other things and said, I don't think these models are going to work. And -- but we look at fintechs all the time. We embrace them. We partner with them, and look at our partners between PayPal and Stripe and Square. I mean, all of these are big Amex partners for us. And we work with them, and it works out well. And in our acquisitions that we've done, whether that be Resi or a LoungeBuddy or something like that. We're extending the value proposition. And I think what people don't appreciate enough is that Resi, for us, not only is an extension and value proposition because it gets you access to restaurant. It's a great acquisition vehicle for us. Because Resi's an open platform. It's open for anybody that's not a card member. Now, there's special things that card members get that non-card members don't get. So it becomes an acquisition engine for us as well. So look, we're able to integrate in our acquisitions. We're able to integrate and work with a lot of fintechs and -- not a fintech, obviously, but Apple. Look, Apple will tell you it's easier to work with us in all the markets because of our globality. And so when we integrate Apple Pay. It's relatively easy for them to work with us to do that because they can roll out in various countries with Amex by working with the same platform, and that's an advantage.

I'll kind of go through the lightning round of investor questions here. And maybe I wanted to start. The comment you made about your customer being different, it's not necessarily about the cash buffer in their deposit account. But clearly, there's a wealth effect, stock markets, housing, and these things could continue to be a little soft in the coming months and years. I think you referenced earlier that, there hasn't been as much reflexivity maybe as people think there. If I caught that comment right. But maybe flesh that out, how does your -- what is clearly an attractive high-end customer, but how do they keep spending strongly even if they're feeling a little pinched on their wealth accounts?

Again, as -- the comment I made was that, we have never seen -- we've never really seen that correlation between GDP and the stock market. Now, I want to talk about a stock market crash. We're talking about these swings of 15% to 20%, and we're not seeing it. Obviously, during the financial crisis, we were hurt just like everybody else was hurt. And mortgages, I think, played a big part of that for us. But not that we lost mortgages, but our models at that particular point in time probably weren't as sophisticated as it needed to be in some of the areas which we have spruced up since then. We were also weren't as good as we needed to be from a collections perspective back then. We were a little bit more focused on asking how the customer was versus asking if they had any money. It's always better to, when you're collecting to actually ask for the money. And -- so we just haven't seen it. I mean, obviously, look, if you're looking at a 50%, 60% stock market dip, our customers will be impacted by that as well. I don't think that's what we're talking about here, and so that's how we look at it. But these vagrants -- these variances of 20% up, 20% down, that just hasn't impacted. And the only thing I can say is, I'm just looking at the first quarter, and I'm looking at what I'm seeing right now, and I'm looking at what we're projecting. And I just don't see it go through. I just don't see it happening.

Maybe a fun topic. I'm glad someone else asked this, so I don't have to be blamed. Reserves and CECL, we've never lived through a CECL reserve building cycle other than really that first one with the pandemic. How do you think about that over the next couple of years? How do you think about the earnings impact? How do you evaluate it relative to the business? Because clearly, it's new and it could be big at times even though it's not really signaling a problem in the business.

We'll try not to think about it. I'll let Jeff think about it. But, look -- and I'm actually glad you actually asked that because, just look at the craziness that we all endured over the last 2 years. I mean, we built up so much reserves in 2020, then -- and I think we released over $3 billion of reserves last year. And we did a reserve release, as much smaller reserve release in the first quarter. And so it's just -- it doesn't give you a true picture, which is why in the first quarter -- we rarely do this, but we talked about operating EPS. And I think that's important because, look, we've got to grow over this year of $3 billion of reserve releases. And so -- and I think we saw it was sort of countercyclical, which is what everybody thought CECL was going to be, but we are where we are. Doesn't make a lot of sense to us, but play by the rules. But yes, I think we'll see builds. We're going to see builds just because of loan growth. The question will be, will we see sort of outsized bills because of macroeconomic forecast, which may or may not come in? I don't know about that. We survived it, right? I mean, we survived 2020, and as a result, our earnings were really depressed in 2020. And we had a bit of a tailwind last year. But I think when you strip that out and then you contrast each year, you saw operating income minus reserve releases growing, and I think that's what you'll see this year as well.

Maybe one on the other side of the balance sheet, deposits. It's been one of the huge shifts over the past 15 years, moving to a mostly deposit-funded model. Can you talk about the ability to continue to grow deposits? And also, any thoughts on pricing and betas as we move through this rate cycle?

Yes. I mean, look, we're -- we try and price sort of in the middle of the pack, and so obviously, rates are going to go up and we'll stay there. I don't think we need to be at the top. We're not going to be at the bottom, so we'll continue to be -- to be in the middle. And it's been sticky for us. It's been a great, great funding source for us. It's not the only funding source that we have because not all of our assets are in the bank, which is where we're a little bit different. We've got an International business, and I can't fund that business with U.S. deposits and I have some other businesses, I can't do it either. But it's been -- it was a great strategy for us coming out of the financial crisis. And those deposits have been very, very sticky for us, and we'll continue to gather them. And as I said, we'll pay more in the middle of the back.

Maybe a question about fintech platforms, and maybe one way to take it in particular. The concern that lingers out there is, is there some way that people will figure out how to sidestep credit card networks altogether. I'm not sure how relevant a category ice cream trucks are, but I've noticed like they all want you to pay with Venmo now when you go with your kids. How do you think about that risk? How do you maintain relevance, the competitive moat of the credit card network? What are maybe some of the things people underappreciate? It's easy to say you're going to sidestep the credit card networks. It's not always hard -- it's not always easy.

I mean, look, people have been sidestepping the credit card network for -- trying to sidestep it for years and years. And I think it gets down to value. And I think what you realize is that consumers have a choice. And yes, I mean, look -- look, there's still Italian delis I go to that are cash-owned in my neighborhood in Queens, but that's just the way it is. But that's not the way everything is. And I think that when you look at it, it's a category that's growing at 8%, consistently growing at 8% with all of this disintermediation threat. And why does it continue to grow? Well, it continues to grow because it provides value. It provides value to the consumer. It provides liquidity. I mean, you can only use your Venmo account if you actually have money. And so yes, I think some of those small purchases you might see and will see. But right now, you've had consistent growth in this category. I think you're going to have consistent growth, but it's up to us to continue to innovate. It's up to us to continue to drive value, not only for our cardholders but for our merchants. It's up for us as an industry to drive value for the system, whether it's fraud and so forth. And with all these other things, and -- because we deal with this in Europe bank-to-bank transactions. Disputes are a big thing. And having customer service and having a company that has your back, and I can't even imagine what would have happened during the pandemic or what happened to those people that paid with check or paid with cash when they didn't have a company like American Express representing them to various airlines, to cruise lines and so forth. I mean, looking at Crystal Cruises, it's quite a business. Think about if you pay Crystal Cruises with a check versus think about if you paid with credit cards. So there's a lot of value that is out there and you hear a lot of noise in here. But look, there's always going to be people looking at creating a better mousetrap. And some of those mousetraps will catch some different mice. And -- but again, the category continues to expand, and we'll continue to innovate. And as long as we continue to add value, I think we'll continue to grow.

Maybe in the end here, regulatory risk, CFPB, junk fees, late fees, all that kind of stuff that's out there. I mean, clearly, to set the stage, your exposure to all of that is much, much lower than the industry average. But any evolutions, product changes, things you're expecting? Any help you can give us on that?

I mean, we don't -- that's not how we make our money, right? I mean, so we're not banking on late fees. We're not -- we're very transparent with our customers. Again, 80% of our revenues comes really from card. Traditional card fees and merchant fees is a very small percentage that come from that. And look, I think when UDAP came in -- back when UDAP came in, I think it made everybody a little bit better, and I think it was better for the consumer. And I think, yes, there'll be some push on this stuff. And we'll comply like everybody else. But where we need to. But it's not going to affect our business model at all. But again, and you started this with, can you continue to raise the fee? And look, we'll continue to add value to our products. We'll add fees for that. But what I will leave you with is this, when you think about sort of credit card fees, when you see that credit card fee income growing double-digit quarter-to-quarter, even during the pandemic. That's not driven because we're just raising the fee. That's driven because we're getting more fee-generating card members, and that's what generates most of the fee. We're either upselling people to higher card products or you're bringing in more fee paying cardholders.

Maybe one last one to wrap up here. When you referenced the structural shifts at the top, one of them you referenced was the digitization of B2B payments, and it is pretty remarkable how many checks and accounts payable and receivable departments are still are out there. As you look out over 3, 5 years, what are some of the big picture shifts you'd expect in B2B?

Well, I think you saw some of these shifts just during the -- people couldn't get to their offices to write checks and -- or people couldn't get to the office to open the mail to cash the checks. And so we did an acquisition of ACOM Pay. And if you notice, you'll always -- you read about partnerships we're doing with various purchasing solution companies. Whether that's a Bill.com or Coupa or whoever it may be. And so a [ Rebellion ] which we've had for years. So you're going to see more and more automation of these payments over time. And that was a -- that accelerated during the pandemic. And with our corporate card relationships, with our small business relationships, if you realize, over 80% of our small business spending is B2B spending. It's B2B spending to run their businesses. And when you look at corporate card, probably only half of our corporate card -- little bit more than half of our corporate card spend is actually T&E. It's purchasing volume as well. So we'll continue to grow in that area.

Steve, I want to thank you for taking the time...

My pleasure.

Out of your busy schedule, but always a pleasure to have you. And hopefully, we'll continue to see you in years ahead.

Much obliged. Good to see you.