Dive Brief:

• American Express CEO Steve Squeri, speaking Thursday at the Bernstein Strategic Decisions Conference in New York City, conveyed confidence in the card company’s customer base and the broader economic outlook. Amex management expects inflation to moderate in 2023, and believes economists mainly aren’t predicting a U.S. recession, Squeri said.
• “We’re seeing pretty much what we expected right now,” he said. Amex hasn’t seen any notable deterioration in credit quality, with delinquencies and write-offs remaining under 1%. Squeri said the company doesn’t expect either one of those statistics to hit pre-pandemic levels this year.
• “We feel really good about what we’re seeing from a spend perspective,” Squeri said later during the conversation. “We can talk ourselves into a recession. I’m just not seeing it with the card base.”

Dive Insight:

As inflation hit a 40-year-high this spring, it's raised concerns over the potential effect on consumer spending or the possibility of a recession. But even as first-quarter gross domestic product growth declined and the stock market experienced volatility, Amex card member spending grew 35%, Squeri noted Thursday. 

Historically, Amex hasn’t observed any correlation between those economic headwinds and the activity of the company's customer base, he said. “Pulling back is not the right strategy for us,” Squeri added. 

Earlier this year, Amex and card rivals Visa and Mastercard said the travel resurgence boosted earnings in their most recent quarter. Discover Financial Services said inflation drove a modest portion of the first quarter’s growth and it was expected to continue to benefit sales growth in the near term.

Credit reporting agency Equifax said this week that the consumer "remains healthy with strength expected to continue throughout 2022," according to a report from Cowen Equity Research. However, credit card balances are higher than they were a year ago, and most Americans say it's harder to obtain credit now.

Early in the COVID-19 pandemic, New York-based Amex shifted its focus from customer acquisition to increasing perks for its current customers who weren't using their travel rewards as much because of the deadly worldwide contagion.

“If you pull back too much, you're going to miss an opportunity for growth,” he said. The company wasn’t as bullish on acquisitions during that time but still acquired over one million cards per quarter. "We never shut the engine down,” Squeri said.

Amex executives monitor the effect of macro-economic headwinds, “but we’re not going to pull the cord and stop investing on the anticipation that something might happen,” Squeri said. He noted this approach "worked really well through the pandemic.”

In the “competitive-as-hell” card industry, Squeri noted the premium space is growing “probably three times faster than the overall market." Amex has added younger consumers to its customer base and witnessed changes in the products they gravitate toward.

More people are willing to pay an annual fee for a premium card, and the price they’re willing to pay has increased, if the value is apparent to them, Squeri said. Recent research indicated travel perks continue to draw premium cardholders.

“I don’t think there is a ceiling,” he said of annual fees, adding that demand remains high for the Amex black card, which has a $5,000 annual fee.

In the first quarter, he said 75% of gold and platinum card acquisitions were Gen Z and millennial consumers, who have demonstrated a healthy appetite for cards with fees. 

Typically, Amex would bring young consumers into the fold with a no-fee product and transition them to a card with an annual fee over time, Squeri said, but that’s no longer the case. There’s a variety of age groups throughout Amex’s portfolio, which has been a crucial change for the company, he said.

In the past, “our product never was generationally relevant," he said. "Our product was relevant for a particular archetype. That’s not the case anymore.”