ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

EXECUTIVE OVERVIEW

BUSINESS INTRODUCTION

We are a globally integrated payments company with three reportable operating segments: Global Consumer Services Group (GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate functions and certain other businesses and operations are included in Corporate & Other.

Our range of products and services includes:

• Credit card, charge card and other payment and financing products

• Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants

• Network services

• Other fee services, including fraud prevention services and the design and operation of customer loyalty programs

• Expense management products and services

• Travel and lifestyle services

Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail, telephone, in-house sales teams, and direct response advertising. Business travel-related services are offered through our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).

The following types of revenue are generated from our various products and services:

• Discount revenue, our largest revenue source, primarily represents the amount we earn on transactions occurring at merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. The amount of fees charged for accepting our cards as payment for goods or services, or merchant discount, varies with, among other factors, the industry in which the merchant does business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the related card acceptance agreement between the merchant and us (e.g., domestic or global) and the transaction amount. In some instances, an additional flat transaction fee is assessed as part of the merchant discount, and additional fees may be charged such as a variable fee for “non-swiped” card transactions or for transactions using cards issued outside the United States at merchants located in the United States;

• Interest on loans, principally represents interest income earned on outstanding balances;

• Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account;

• Other fees and commissions, primarily represent Card Member delinquency fees, foreign currency conversion fees charged to Card Members, loyalty coalition-related fees, service fees earned from merchants, travel commissions and fees, and Membership Rewards program fees; and

• Other revenue, primarily represents revenues arising from contracts with partners of our GNS business (including commissions and signing fees less issuer rate payments), cross-border Card Member spending, ancillary merchant-related fees, earnings (losses) from equity method investments (including the GBT JV), insurance premiums earned from Card Members, and prepaid card and Travelers Cheque-related revenue.

NON-GAAP MEASURES

We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included within this report constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.

BUSINESS ENVIRONMENT

The COVID-19 pandemic has brought unprecedented challenges to businesses and economies around the world. Our 2020 financial results were significantly down year-over-year, reflecting the impact of the deterioration in the global economy due to the pandemic and the related containment measures. There remains a high degree of uncertainty relating to the ongoing spread and severity of the virus and new variants, as well as the availability, distribution and use of effective treatments and vaccines. To the extent that the global economy continues to be negatively impacted by the pandemic, our results will be affected, with credit trends and spending volumes being the key drivers of our financial performance. Throughout 2020, we focused and made substantial progress on our four priorities to manage through this period of uncertainty: supporting our colleagues and winning as a team; protecting our customers and our brand; structuring the company for growth in the future; and remaining financially strong.

Since the first quarter of 2020, our colleague base has successfully operated in a mostly remote working environment and we have sought to ensure that our colleagues have the flexibility and resources they needed to stay safe, healthy and productive. To support our customers and merchants, we offered financial and other assistance, added product benefits to reflect today’s environment, and provided the high level of customer service they expect and rely on. We experienced lower voluntary attrition rates on our proprietary products compared to the prior year. In addition, our Card Members continued to recognize our commitment to service excellence, ranking us number one in the J.D. Power U.S. Credit Card Satisfaction Study for the tenth time. We worked with our strategic partners on initiatives to support our communities and launched our largest ever Shop Small campaign to help support small merchants. In addition, we remained committed to strengthening inclusion and diversity, and committed to an action plan to promote racial, ethnic and gender equity for our colleagues, customers and communities.

Reflective of the impacts of the pandemic and the broader macroeconomic environment, our billed business for the year was down 19 percent compared to the prior year, with a low in mid-April followed by a gradual recovery over the remainder of the year. Proprietary billed business, which accounted for 86 percent of our total billings and drives most of our financial results, was also down by 19 percent. Since mid-April, we have seen steady improvement in our overall billed business, with different recovery trends in T&E and non-T&E spend. Non-T&E spend, which has historically accounted for a large portion of our billed business, recovered to pre-pandemic levels in the second half of the year resulting in a full year decline of 1 percent compared to the prior year. T&E spend continued to be significantly impacted throughout the course of the year, although we saw a modest improvement from the lows of mid-April primarily driven by proprietary consumer T&E spend, resulting in a year-over-year decline of 61 percent.

Revenues net of interest expense decreased 17 percent compared to the prior year, consistent with the trend in billings. Discount revenue, our largest revenue line, decreased 22 percent, which was a larger contraction than the decline in billed business for the year due to a decrease in the average discount rate. The average discount rate decrease was driven by a shift in spend mix to non-T&E categories. Other fees and commissions and Other revenues declined year-over-year, primarily driven by a reduction in travel-related revenues. Card fee revenues, which are recognized over a twelve-month period and therefore are slower to react to economic shifts, continued to grow as compared to the prior year. While Card Member retention remained high throughout the year, net card fee growth decelerated as we slowed new card acquisitions to manage through the peak of uncertainty during the crisis. Net interest income declined by 7 percent year-over-year, primarily driven by lower average loans.

As a result of the spend-centric nature of our business model, Card Member loans and receivables declined 16 percent and 24 percent year-over-year, respectively, due to lower billed business volumes. Provisions for credit losses increased, primarily due to a higher reserve build reflecting the deterioration of the global macroeconomic outlook, including unemployment and gross domestic product (GDP), partially offset by improved credit performance and lower loan and receivable volumes.

In order to provide support to our customers impacted by the pandemic, we created a short-term Customer Pandemic Relief program and enhanced our longer-term financial relief programs. The total balance of loans and receivables that were in a delinquent status or in one of our financial relief programs peaked in the second quarter and then declined sequentially through the remainder of the year. In addition, our write-offs and delinquencies were down year-over-year reflecting our strong risk management practices, the record levels of government stimulus and the broad availability of forbearance programs.

Card Member rewards, Card Member services and business development expenses are generally correlated to billings or are variable based on usage, and were lower this year due to the decline in billing volumes and lower usage of travel-related benefits. During the year, we remained focused on controlling operating expenses, while investing in marketing initiatives to support our customers, such as enhancements that we made to value propositions for many of our card products and our largest ever Shop Small campaign.

Throughout the year, our liquidity levels and capital position remained strong, with capital ratios that are well above our targets and regulatory requirements. These robust liquidity and capital levels provide us with significant flexibility to maintain the strength of our balance sheet through this uncertain period. Looking forward, we remain committed to capital distributions through dividend payments and resuming share repurchases up to our maximum capacity authorized by the Federal Reserve in the first quarter of 2021.

Our progress in managing through the pandemic over the last year confirms the resilience of our differentiated business model, which includes a loyal and diverse customer base, a valued brand, our global merchant network, and our integrated payments platform. All of this, supported by our resilient colleagues around the world, provides us with a solid foundation as we move into 2021, which we see as a transition year. We will still be managing through the effects of the pandemic, but with an increased focus on maximizing investments in areas that will enable us to rebuild growth momentum.

See “Supervision and Regulation” in “Business” for information on legislative and regulatory changes that could have a material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” for information on additional potential impacts of the COVID-19 pandemic and the potential impacts of economic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business.

CONSOLIDATED RESULTS OF OPERATIONS

Refer to the "Glossary of Selected Terminology" for the definitions of certain key terms and related information appearing within this section.

The discussions in the “Financial Highlights”, “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the year ended December 31, 2020 compared to the year ended December 31, 2019, as presented in the accompanying tables. These discussions should be read in conjunction with the discussion under "Business Environment," which contains further information on the COVID-19 pandemic and the related impacts on our consolidated results of operations. For a discussion of the financial condition and results of operations for 2019 compared to 2018, please refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 13, 2020.

As a result of the adoption of CECL on January 1, 2020, there is a lack of comparability in both the reserves and provisions for credit losses for the periods presented. Results for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods. Refer to Note 3 to the "Consolidated Financial Statements" for further information.

TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE

Years Ended December 31,										Change				Change
(Millions, except percentages and per share amounts)	2020			2019			2018			2020 vs. 2019				2019 vs. 2018
Total revenues net of interest expense	$	36,087		$	43,556		$	40,338		$	(7,469)	(17)	%	$	3,218	8	%
Provisions for credit losses	4,730			3,573			3,352			1,157		32		221		7
Expenses	27,061			31,554			28,864			(4,493)		(14)		2,690		9
Pretax income	4,296			8,429			8,122			(4,133)		(49)		307		4
Income tax provision	1,161			1,670			1,201			(509)		(30)		469		39
Net income	3,135			6,759			6,921			(3,624)		(54)		(162)		(2)
Earnings per common share — diluted(a)	$	3.77		$	7.99		$	7.91		$	(4.22)	(53)	%	$	0.08	1	%
Return on average equity(b)	14.2		%	29.6		%	33.5		%
Effective tax rate (ETR)	27.0		%	19.8		%	14.8		%
Adjustments to ETR(c)							6.1		%
Adjusted ETR(c)							20.9		%

(a)Represents net income, less (i) earnings allocated to participating share awards of $20 million, $47 million and $54 million for the years ended December 31, 2020, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $79 million, $81 million and $80 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(b)Return on average equity (ROE) is computed by dividing (i) one-year period of net income ($3.1 billion, $6.8 billion and $6.9 billion for 2020, 2019 and 2018, respectively) by (ii) one-year average of total shareholders’ equity ($22.0 billion, $22.8 billion and $20.7 billion for 2020, 2019 and 2018, respectively).

(c)The adjusted ETR for 2018 is a non-GAAP measure. The 2018 adjusted ETR excludes a benefit of $496 million relating to changes in the tax method of accounting for certain expenses, the resolution of certain prior years’ tax audits, and a final adjustment to our 2017 provisional tax charge related to the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act).

TABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY

Years Ended December 31,							Change				Change
(Millions, except percentages)	2020		2019		2018		2020 vs. 2019				2019 vs. 2018
Discount revenue	$	20,401	$	26,167	$	24,721	$	(5,766)	(22)	%	$	1,446	6	%
Net card fees	4,664		4,042		3,441		622		15		601		17
Other fees and commissions	2,163		3,297		3,153		(1,134)		(34)		144		5
Other	874		1,430		1,360		(556)		(39)		70		5
Total non-interest revenues	28,102		34,936		32,675		(6,834)		(20)		2,261		7
Total interest income	10,083		12,084		10,606		(2,001)		(17)		1,478		14
Total interest expense	2,098		3,464		2,943		(1,366)		(39)		521		18
Net interest income	7,985		8,620		7,663		(635)		(7)		957		12
Total revenues net of interest expense	$	36,087	$	43,556	$	40,338	$	(7,469)	(17)	%	$	3,218	8	%

TOTAL REVENUES NET OF INTEREST EXPENSE

Discount revenue decreased, primarily due to a decrease in worldwide billed business of 19 percent. U.S. billed business decreased 16 percent and non-U.S. billed business decreased 23 percent due to the impacts of the COVID-19 pandemic during 2020.

Additional billed business highlights for the full year 2020 as compared to full year 2019:

• Worldwide non-T&E billed business decreased 1 percent and T&E billed business decreased 61 percent.

• Proprietary consumer billed business decreased by 17 percent, primarily driven by declines in T&E, and offline non-T&E spend, which were partially offset by increased online and card-not-present spend at non-T&E merchants.

• Proprietary commercial billed business decreased by 21 percent, primarily driven by year-over-year decreases in T&E spend by large and global corporate card customers, with less pronounced billed business declines from small and mid-sized enterprises, where T&E volumes made up a lower proportion of spend.

See Tables 5 and 6 for more details on billed business performance.

The decrease in discount revenue was also driven by a decrease in the average discount rate primarily due to a shift in spend mix to non-T&E categories. The average discount rate was 2.28 percent for 2020 and 2.37 percent for 2019.

Net card fees increased, primarily driven by our premium card product portfolios. Card fees, which are recognized over a twelve-month period, are slower to react to economic shifts, such as those arising from the impacts of the COVID-19 pandemic.

Other fees and commissions decreased, primarily due to the impacts of travel restrictions related to the COVID-19 pandemic, which resulted in lower foreign exchange conversion revenue related to decreased cross-border Card Member spending and lower travel commissions and fees from our consumer travel business, as well as a decline in late fees due to lower delinquencies.

Other revenues decreased, primarily driven by a net loss in the current year, as compared to net income in the prior year, from the GBT JV and lower revenue earned on cross-border Card Member spending due to the impacts of the COVID-19 pandemic, including travel restrictions.

Interest income decreased, primarily driven by a reduction in benchmark interest rates and lower average Card Member loan volumes.

Interest expense decreased, primarily driven by lower interest rates paid on deposits and a reduction in outstanding debt.

TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY

Years Ended December 31,							Change				Change
(Millions, except percentages)	2020		2019		2018		2020 vs. 2019				2019 vs. 2018
Card Member receivables
Net write-offs	$	881	$	900	$	859	$	(19)	(2)	%	$	41	5	%
Reserve build	134		63		78		71		113		(15)		(19)
Total	1,015		963		937		52		5		26		3
Card Member loans
Net write-offs	2,170		2,235		1,843		(65)		(3)		392		21
Reserve build	1,283		227		423		1,056		#		(196)		(46)
Total	3,453		2,462		2,266		991		40		196		9
Other
Net write-offs - Other loans(a)	111		98		79		13		13		19		24
Net write-offs - Other receivables(b)	27		20		32		7		35		(12)		(38)
Reserve build - Other loans(a)	66		28		44		38		#		(16)		(36)
Reserve build (release) - Other receivables(b)	58		2		(6)		56		#		8		(133)
Total	262		148		149		114		77		(1)		(1)
Total provisions for credit losses	$	4,730	$	3,573	$	3,352	$	1,157	32	%	$	221	7	%

# Denotes a variance greater than 100 percent

(a)Relates to Other loans of $2.9 billion, $4.8 billion, and $3.8 billion less reserves of $238 million, $152 million, and $124 million, as of December 31, 2020, 2019 and 2018, respectively.

(b)Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $3 billion, $3.1 billion, and $2.9 billion, less reserves of $85 million, $27 million, $25 million as of December 31, 2020, 2019, and 2018, respectively.

PROVISIONS FOR CREDIT LOSSES

Card Member loans and receivables provision for credit losses increased, primarily driven by a higher reserve build reflecting the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in the outstanding balance of Card Member loans and receivables.

Other provision for credit losses increased, primarily driven by a higher reserve build and higher net write-offs.

Refer to Note 1 to the "Consolidated Financial Statements" for further information about CECL, including the January 1, 2020 implementation impact on reserves.

TABLE 4: EXPENSES SUMMARY

Years Ended December 31,							Change				Change
(Millions, except percentages)	2020		2019		2018		2020 vs. 2019				2019 vs. 2018
Marketing and business development	$	6,747	$	7,125	$	6,477	$	(378)	(5)	%	$	648	10	%
Card Member rewards	8,041		10,439		9,696		(2,398)		(23)		743		8
Card Member services	1,230		2,223		1,777		(993)		(45)		446		25
Total marketing, business development, rewards and Card Member services	16,018		19,787		17,950		(3,769)		(19)		1,837		10
Salaries and employee benefits	5,718		5,911		5,250		(193)		(3)		661		13
Other, net	5,325		5,856		5,664		(531)		(9)		192		3
Total expenses	$	27,061	$	31,554	$	28,864	$	(4,493)	(14)	%	$	2,690	9	%

EXPENSES

In January 2020, we re-launched our Delta cobrand products following the renewal extending our cobrand relationship with Delta Air Lines on March 31, 2019. The contract renewal included new pricing terms, some of which became effective upon contract signing and others that were tied to the product re-launch. These pricing changes, as well as changes in the expense classification of certain benefits associated with the re-launch, resulted in an increase to Marketing and business development and decreases to both Card Member rewards and Card Member services expenses, as compared to the prior year.

Marketing and business development expense decreased, primarily due to a temporary reduction in proactive marketing for Card Member acquisitions, as well as decreases in corporate client incentives and network partner payments due to lower billed business, all of which were a result of the impacts of the COVID-19 pandemic, partially offset by incremental investments in limited time enhancements to our Card Member value proposition to maintain customer engagement and the Delta changes described above.

Card Member rewards expense decreased, primarily driven by decreases in Membership Rewards and cash back rewards expenses of $1,579 million and cobrand rewards expense of $819 million, both of which were primarily driven by lower billed business as a result of the impacts of the COVID-19 pandemic. In addition, changes in redemption mix due to a decline in higher cost travel redemptions since the onset of the COVID-19 pandemic contributed to a decrease in the Membership Rewards weighted average cost (WAC) per reward point and expense. Cobrand rewards expense also reflected the impact of the Delta changes described above.

The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded up) at both December 31, 2020 and 2019.

Card Member services expense decreased, primarily due to lower usage of travel-related benefits as a result of the impacts of the COVID-19 pandemic, as well as the Delta changes described above.

Salaries and employee benefits expense decreased, primarily driven by lower incentive compensation expenses, partially offset by increased payroll costs due to a higher full year average headcount as compared to the prior year.

Other expenses decreased, primarily driven by a prior year litigation-related charge, lower employee-related operating costs and lower professional services expense, partially offset by a prior year non-income tax-related benefit.

INCOME TAXES

The effective tax rate for 2020 was 27.0 percent. The effective tax rate for 2019 was 19.8 percent. The increase in the effective tax rate in the current period primarily reflected discrete tax charges related to the realizability of certain foreign deferred tax assets, resulting from cumulative losses in certain non-U.S. legal entities that were exacerbated by the impacts of the COVID-19 pandemic. The tax rates in both periods reflect the level of pretax income in relation to recurring permanent tax benefits and the geographic mix of business.

TABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION

										Change		Change
Years Ended December 31,	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Billed business: (billions)
U.S.	$	693.1		$	827.7		$	777.6		(16)	%	6	%
Outside the U.S.	317.5			413.1			406.4			(23)		2
Total	$	1,010.6		$	1,240.8		$	1,184.0		(19)		5
Proprietary	$	870.7		$	1,070.5		$	1,002.6		(19)		7
GNS	139.9			170.3			181.4			(18)		(6)
Total	$	1,010.6		$	1,240.8		$	1,184.0		(19)		5
Cards-in-force: (millions)
U.S.	53.8			54.7			53.7			(2)		2
Outside the U.S.	58.2			59.7			60.3			(3)		(1)
Total	112.0			114.4			114.0			(2)		—
Proprietary	68.9			70.3			69.1			(2)		2
GNS	43.1			44.1			44.9			(2)		(2)
Total	112.0			114.4			114.0			(2)		—
Basic cards-in-force: (millions)
U.S.	42.2			43.0			42.3			(2)		2
Outside the U.S.	49.1			50.0			50.3			(2)		(1)
Total	91.3			93.0			92.6			(2)		—
Average proprietary basic Card Member spending: (dollars)
U.S.	$	18,085		$	21,515		$	20,840		(16)		3
Outside the U.S.	$	12,264		$	16,351		$	15,756		(25)		4
Worldwide Average	$	16,352		$	19,972		$	19,340		(18)		3
Average discount rate	2.28		%	2.37		%	2.37		%
Average fee per card (dollars)(a)	$	67		$	58		$	51		16	%	14	%

(a)Average fee per card is computed based on proprietary net card fees divided by average proprietary total cards-in-force.

TABLE 6: BILLED BUSINESS-RELATED STATISTICAL INFORMATION

	2020				2019
	Percentage Increase(Decrease)		Percentage Increase (Decrease) Assuming No Changes in FX Rates(a)		Percentage Increase(Decrease)		Percentage Increase (Decrease) Assuming No Changes in FX Rates(a)
Worldwide
Proprietary
Proprietary consumer	(17)	%	(17)	%	8	%	9	%
Proprietary commercial	(21)		(21)		6		6
Total Proprietary	(19)		(19)		7		8
GNS	(18)		(17)		(6)		(2)
Worldwide Total	(19)		(18)		5		6
T&E-related volume (14% and 30% of Worldwide Total for 2020 and 2019, respectively) (b)	(61)		(60)		4		6
Non-T&E-related volume (86% and 70% of Worldwide Total for 2020 and 2019, respectively) (b)	(1)		(1)		6		7
Airline-related volume (3% and 8% of Worldwide Total for 2020 and 2019, respectively) (b)	(76)		(76)		1		3

U.S.
Proprietary
Proprietary consumer	(15)				7
Proprietary commercial	(18)				5
Total Proprietary	(16)				6
U.S. Total	(16)				6
T&E-related volume (13% and 25% of U.S. Total for 2020 and 2019, respectively) (b)	(57)				6
Non-T&E-related volume (87% and 75% of U.S. Total for 2020 and 2019, respectively) (b)	(1)				6
Airline-related volume (2% and 7% of U.S. Total for 2020 and 2019, respectively) (b)	(75)				4

Outside the U.S.
Proprietary
Proprietary consumer	(21)		(21)		10		14
Proprietary commercial	(32)		(31)		7		11
Total Proprietary	(26)		(25)		9		13
Outside the U.S. Total	(23)		(22)		2		6
Asia Pacific, Australia and New Zealand	(16)		(16)		1		5
Latin America & Canada	(32)		(26)		4		10
Europe, the Middle East & Africa	(30)	%	(31)	%	1	%	5	%

(a)The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply to the corresponding prior-year period against which such results are being compared).

(b)Based on billed business from merchants we acquire or merchants acquired by third parties on our behalf (e.g., OptBlue merchants).

TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION

As of or for the Years Ended December 31,										Change		Change
(Millions, except percentages and where indicated)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Worldwide Card Member loans:
Card Member loans: (billions)
U.S.	$	64.2		$	76.0		$	72.0		(16)	%	6	%
Outside the U.S.	9.2			11.4			9.9			(19)		15
Total	$	73.4		$	87.4		$	81.9		(16)		7
Credit loss reserves:
Beginning balance (a)	$	4,027		$	2,134		$	1,706		89		25
Provisions - principal, interest and fees	3,453			2,462			2,266			40		9
Net write-offs — principal less recoveries	(1,795)			(1,860)			(1,539)			(3)		21
Net write-offs — interest and fees less recoveries	(375)			(375)			(304)			—		23
Other (b)	34			22			5			55		#
Ending balance	$	5,344		$	2,383		$	2,134		#		12
% of loans	7.3		%	2.7		%	2.6		%
% of past due	727		%	177		%	182		%
Average loans (billions)	$	74.6		$	82.8		$	75.8		(10)		9
Net write-off rate — principal only (c)	2.4		%	2.2		%	2.0		%
Net write-off rate — principal, interest and fees (c)	2.9		%	2.7		%	2.4		%
30+ days past due as a % of total	1.0		%	1.5		%	1.4		%

Worldwide Card Member receivables:
Card Member receivables: (billions)
U.S.	$	30.5		$	39.0		$	39.0		(22)		—
Outside the U.S.	13.2			18.4			16.9			(28)		9
Total	$	43.7		$	57.4		$	55.9		(24)		3
Credit loss reserves:
Beginning balance (a)	$	126		$	573		$	521		(78)		10
Provisions - principal and fees	1,015			963			937			5		3
Net write-offs - principal and fees less recoveries	(881)			(900)			(859)			(2)		5
Other (b)	7			(17)			(26)			#		(35)
Ending balance	$	267		$	619		$	573		(57)	%	8	%
% of receivables	0.6		%	1.1		%	1.0		%
Net write-off rate — principal and fees (c)(d)	2.0		%	1.6		%	1.6		%

# Denotes a variance greater than 100 percent

(a)Includes an increase of $1,643 million and decrease of $493 million to the beginning reserve balances for Card Member loans and receivables, respectively, as of January 1, 2020, related to the adoption of the CECL methodology. Refer to Note 3 to the "Consolidated Financial Statements" for further information.

(b)Other includes foreign currency translation adjustments.

(c)We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.

(d)Refer to Tables 10 and 13 for Net write-off rate - principal only and 30+ days past due metrics for GCSG and Global Small Business Services (GSBS) receivables, respectively. A net write-off rate based on principal losses only for Global Corporate Payments (GCP), which reflects global, large and middle market corporate accounts, is not available due to system constraints.

TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS

Effective for the first quarter of 2020, we made certain enhancements to our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These enhancements resulted in a change to the interest expense not attributable to our Card Member loan portfolio and therefore also on our Net Interest Yield on Average Card Member loans. Prior period amounts have been revised to conform to the current period presentation.

Years Ended December 31,
(Millions, except percentages and where indicated)	2020			2019			2018
Net interest income	$	7,985		$	8,620		$	7,663
Exclude:
Interest expense not attributable to our Card Member loan portfolio (a)	1,295			1,833			1,592
Interest income not attributable to our Card Member loan portfolio (b)	(668)			(1,227)			(1,010)
Adjusted net interest income (c)	$	8,612		$	9,226		$	8,245
Average Card Member loans (billions)	$	74.6		$	82.8		$	75.8
Net interest income divided by average Card Member loans(c)	10.7		%	10.4		%	10.1		%
Net interest yield on average Card Member loans (c)	11.5		%	11.1		%	10.9		%

(a)Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables.

(b)Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment portfolios.

(c)Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to “Glossary of Selected Terminology” for the definitions of these terms. We believe adjusted net interest income is useful to investors because it represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net interest yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a GAAP measure, includes elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not representative of net interest yield on average Card Member loans.

BUSINESS SEGMENT RESULTS OF OPERATIONS

We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and Part I, Item 1. “Business” for additional discussion of products and services that comprise each segment.

Effective for the first quarter of 2020, we made certain enhancements to our transfer pricing methodology related to the sharing of revenues among our card issuing, network and merchant businesses, and our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These enhancements resulted in certain changes to Non-interest revenues and Interest expense within Total revenues net of interest expense and Operating expenses within Total expenses across our reportable operating segments.

The enhancements related to the allocation of certain funding costs also resulted in a change to our Net interest income divided by Average Card Member loans metric and Net Interest Yield on Average Card Member loans, a non-GAAP measure, within our reportable operating segments.

For all of the above-referenced changes, prior period amounts have been revised to conform to the current period presentation.

Results of the reportable operating segments generally treat each segment as a stand-alone business. The management reporting process that derives these results allocates revenue and expense using various methodologies as described below.

TOTAL REVENUES NET OF INTEREST EXPENSE

We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the GCSG and GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue.

Net card fees and Other fees and commissions are directly attributable to the segment in which they are reported.

Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates.

PROVISIONS FOR CREDIT LOSSES

The provisions for credit losses are directly attributable to the segment in which they are reported.

EXPENSES

Marketing and business development expense is included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue. Rewards and Card Member services expenses are included in each segment based on the actual expenses incurred.

Salaries and employee benefits and other operating expenses reflect both costs incurred directly within each segment, as well as allocated expenses. The allocated expenses include service costs allocated based on activities directly attributable to the segment, and overhead expenses allocated based on the relative levels of revenue and Card Member loans and receivables.

INCOME TAXES

An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates applicable to the various businesses that comprise the segment.

GLOBAL CONSUMER SERVICES GROUP

TABLE 9: GCSG SELECTED INCOME STATEMENT DATA

Years Ended December 31,										Change				Change
(Millions, except percentages)	2020			2019			2018			2020 vs. 2019				2019 vs. 2018
Revenues
Non-interest revenues	$	14,178		$	16,702		$	15,357		$	(2,524)	(15)	%	$	1,345	9	%
Interest income	8,199			9,413			8,323			(1,214)		(13)		1,090		13
Interest expense	1,051			1,730			1,448			(679)		(39)		282		19
Net interest income	7,148			7,683			6,875			(535)		(7)		808		12
Total revenues net of interest expense	21,326			24,385			22,232			(3,059)		(13)		2,153		10
Provisions for credit losses	3,148			2,635			2,431			513		19		204		8
Total revenues net of interest expense after provisions for credit losses	18,178			21,750			19,801			(3,572)		(16)		1,949		10
Expenses
Marketing, business development, rewards and Card Member services	9,668			12,043			10,796			(2,375)		(20)		1,247		12
Salaries and employee benefits and other operating expenses	4,903			4,967			4,585			(64)		(1)		382		8
Total expenses	14,571			17,010			15,381			(2,439)		(14)		1,629		11
Pretax segment income	3,607			4,740			4,420			(1,133)		(24)		320		7
Income tax provision	906			933			805			(27)		(3)		128		16
Segment income	$	2,701		$	3,807		$	3,615		$	(1,106)	(29)	%	$	192	5	%
Effective tax rate	25.1		%	19.7		%	18.2		%

GCSG primarily issues a wide range of proprietary consumer cards globally. GCSG also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages certain international joint ventures and our partnership agreements in China.

TOTAL REVENUES NET OF INTEREST EXPENSE

Non-interest revenues decreased, primarily driven by lower discount revenue and other fees and commissions, partially offset by higher net card fees. Discount revenue decreased 20 percent, reflecting a decrease in proprietary consumer billed business of 17 percent. See Tables 5, 6 and 10 for more details on billed business performance.

Other fees and commissions decreased 40 percent, primarily due to the impacts of travel restrictions related to the COVID-19 pandemic, which resulted in lower travel commissions and fees from our consumer travel business and lower foreign exchange conversion revenue related to decreased cross-border spending, as well as a decline in late fees due to lower delinquencies.

Net card fees increased 16 percent, driven by a year-over-year increase in the average fee per card of our premium card products.

Net interest income decreased, primarily due to lower average Card Member loan volumes and a reduction in benchmark interest rates, partially offset by a lower cost of funds.

PROVISIONS FOR CREDIT LOSSES

Provisions for credit losses increased, primarily driven by a higher reserve build in Card Member loans, partially offset by lower net write-offs in both the Card Member loans and receivables portfolios. The higher reserve build primarily reflected the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in the outstanding balance of loans and receivables.

EXPENSES

Marketing, business development, rewards and Card Member services expenses decreased due to reductions in Card Member rewards and Card Member services expenses, partially offset by increased Marketing and business development costs. The decrease in Card Member rewards expense was primarily driven by a decrease in billed business and a change in redemption mix due to a decline in higher cost travel redemptions since the onset of the COVID-19 pandemic. The decrease in Card Member services expense was primarily driven by lower usage of travel-related benefits. Those decreases were partially offset by increased Marketing and business development expense, primarily due to incremental investments in limited time enhancements to our Card Member value proposition to maintain customer engagement, partially offset by a temporary reduction in proactive marketing for Card Member acquisitions.

TABLE 10: GCSG SELECTED STATISTICAL INFORMATION

As of or for the Years Ended December 31,										Change		Change
(Millions, except percentages and where indicated)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Proprietary billed business: (billions)
U.S.	$	337.6		$	398.8		$	371.1		(15)	%	7	%
Outside the U.S.	121.1			154.0			140.3			(21)		10
Total	$	458.7		$	552.8		$	511.4		(17)		8
Proprietary cards-in-force:
U.S.	37.7			37.9			37.7			(1)		1
Outside the U.S.	16.7			17.5			16.8			(5)		4
Total	54.4			55.4			54.5			(2)		2
Proprietary basic cards-in-force:
U.S.	26.6			26.9			27.0			(1)		—
Outside the U.S.	11.6			12.1			11.6			(4)		4
Total	38.2			39.0			38.6			(2)		1
Average proprietary basic Card Member spending: (dollars)
U.S.	$	12,641		$	14,801		$	14,161		(15)		5
Outside the U.S.	$	10,175		$	12,884		$	12,348		(21)		4
Average	$	11,881		$	14,212		$	13,613		(16)		4
Total segment assets (billions)	$	86.7		$	106.3		$	102.4		(18)		4
Card Member loans:
Total loans (billions)
U.S.	$	51.4		$	62.4		$	59.9		(18)		4
Outside the U.S.	8.7			10.9			9.6			(20)		14
Total	$	60.1		$	73.3		$	69.5		(18)		5
Average loans (billions)
U.S.	$	53.0		$	59.4		$	55.1		(11)		8
Outside the U.S.	8.6			10.0			8.9			(14)		12
Total	$	61.6		$	69.4		$	64.0		(11)	%	8	%

U.S.
Net write-off rate — principal only (a)	2.4		%	2.3		%	2.1		%
Net write-off rate — principal, interest and fees (a)	2.9		%	2.8		%	2.5		%
30+ days past due as a % of total	1.0		%	1.6		%	1.4		%
Outside the U.S.
Net write-off rate — principal only (a)	3.0		%	2.4		%	2.1		%
Net write-off rate — principal, interest and fees (a)	3.7		%	2.9		%	2.6		%
30+ days past due as a % of total	1.7		%	1.8		%	1.6		%
Total
Net write-off rate — principal only (a)	2.5		%	2.3		%	2.1		%
Net write-off rate — principal, interest and fees (a)	3.0		%	2.8		%	2.5		%
30+ days past due as a % of total	1.1		%	1.6		%	1.5		%

										Change		Change
(Millions, except percentages and where indicated)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Card Member receivables: (billions)
U.S.	$	11.9		$	14.2		$	13.7		(16)	%	4	%
Outside the U.S.	6.8			8.6			7.8			(21)		10
Total receivables	$	18.7		$	22.8		$	21.5		(18)	%	6	%

U.S.
Net write-off rate — principal only (a)	1.3		%	1.4		%	1.3		%
Net write-off rate — principal and fees (a)	1.4		%	1.6		%	1.5		%
30+ days past due as a % of total	0.4		%	1.2		%	1.1		%
Outside the U.S.
Net write-off rate — principal only (a)	2.5		%	2.2		%	2.1		%
Net write-off rate — principal and fees (a)	2.7		%	2.4		%	2.3		%
30+ days past due as a % of total	1.0		%	1.3		%	1.3		%
Total
Net write-off rate — principal only (a)	1.7		%	1.7		%	1.6		%
Net write-off rate — principal and fees (a)	1.9		%	1.9		%	1.8		%
30+ days past due as a % of total	0.6		%	1.2		%	1.2		%

(a) Refer to Table 7 footnote (c).

TABLE 11: GCSG NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS

As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)	2020			2019			2018
U.S.
Net interest income	$	6,222		$	6,660		$	5,985
Exclude:
Interest expense not attributable to our Card Member loan portfolio(a)	288			276			233
Interest income not attributable to our Card Member loan portfolio(b)	(189)			(220)			(179)
Adjusted net interest income(c)	$	6,321		$	6,716		$	6,039
Average Card Member loans (billions)	$	53.0		$	59.4		$	55.1
Net interest income divided by average Card Member loans(c)	11.7		%	11.2		%	10.9		%
Net interest yield on average Card Member loans(c)	11.9		%	11.3		%	11.0		%
Outside the U.S.
Net interest income	$	926		$	1,024		$	890
Exclude:
Interest expense not attributable to our Card Member loan portfolio(a)	101			85			69
Interest income not attributable to our Card Member loan portfolio(b)	(11)			(15)			(8)
Adjusted net interest income(c)	$	1,016		$	1,094		$	951
Average Card Member loans (billions)	$	8.6		$	10.0		$	8.9
Net interest income divided by average Card Member loans(c)	10.8		%	10.2		%	10.0		%
Net interest yield on average Card Member loans(c)	11.9		%	10.9		%	10.7		%
Total
Net interest income	$	7,148		$	7,683		$	6,875
Exclude:
Interest expense not attributable to our Card Member loan portfolio(a)	389			361			302
Interest income not attributable to our Card Member loan portfolio(b)	(200)			(234)			(187)
Adjusted net interest income(c)	$	7,337		$	7,810		$	6,990
Average Card Member loans (billions)	$	61.6		$	69.4		$	64.0
Net interest income divided by average Card Member loans(c)	11.6		%	11.1		%	10.7		%
Net interest yield on average Card Member loans(c)	11.9		%	11.3		%	10.9		%

(a)Refer to Table 8 footnote (a).

(b)Refer to Table 8 footnote (b).

(c)Refer to Table 8 footnote (c).

GLOBAL COMMERCIAL SERVICES

TABLE 12: GCS SELECTED INCOME STATEMENT DATA

Years Ended December 31,										Change				Change
(Millions, except percentages)	2020			2019			2018			2020 vs. 2019				2019 vs. 2018
Revenues
Non-interest revenues	$	9,652		$	12,242		$	11,481		$	(2,590)	(21)	%	$	761	7	%
Interest income	1,586			1,900			1,621			(314)		(17)		279		17
Interest expense	619			1,034			898			(415)		(40)		136		15
Net interest income	967			866			723			101		12		143		20
Total revenues net of interest expense	10,619			13,108			12,204			(2,489)		(19)		904		7
Provisions for credit losses	1,493			918			900			575		63		18		2
Total revenues net of interest expense after provisions for credit losses	9,126			12,190			11,304			(3,064)		(25)		886		8
Expenses
Marketing, business development, rewards and Card Member services	4,991			6,237			5,844			(1,246)		(20)		393		7
Salaries and employee benefits and other operating expenses	3,199			3,261			2,996			(62)		(2)		265		9
Total expenses	8,190			9,498			8,840			(1,308)		(14)		658		7
Pretax segment income	936			2,692			2,464			(1,756)		(65)		228		9
Income tax provision	200			501			452			(301)		(60)		49		11
Segment income	$	736		$	2,191		$	2,012		$	(1,455)	(66)	%	$	179	9	%
Effective tax rate	21.4		%	18.6		%	18.3		%

GCS primarily issues a wide range of proprietary corporate and small business cards. In addition, GCS provides payment, expense management and commercial financing products.

TOTAL REVENUES NET OF INTEREST EXPENSE

Non-interest revenues decreased, primarily driven by lower discount revenue and other fees and commissions. Discount revenue decreased, primarily due to a decrease in commercial billed business of 21 percent. See Tables 5, 6 and 13 for more details on billed business performance. Other fees and commissions decreased, primarily due to a decline in late fees due to lower delinquencies, as well as lower foreign exchange conversion revenue related to decreased cross-border spending, primarily driven by the impacts of travel restrictions related to the COVID-19 pandemic.

Net interest income increased, primarily driven by a lower cost of funds, partially offset by a reduction in benchmark interest rates.

PROVISIONS FOR CREDIT LOSSES

Provisions for credit losses increased, primarily driven by a higher reserve build and higher net write-offs. The higher reserve build primarily reflected the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in the outstanding balance of loans and receivables.

EXPENSES

Marketing, business development, rewards and Card Member services expenses decreased, primarily due to reductions in Card Member rewards expense and Marketing and business development expense. The decrease in Card Member rewards expense was primarily driven by a decrease in billed business. The decrease in Marketing and business development expense was primarily due to a decrease in corporate client incentives and a temporary reduction in proactive marketing for Card Member acquisitions, partially offset by incremental investments in limited time enhancements to our Card Member value proposition to maintain customer engagement.

TABLE 13: GCS SELECTED STATISTICAL INFORMATION

As of or for the Years Ended December 31,										Change		Change
(Millions, except percentages and where indicated)	2020			2019			2018			2020 vs. 2019		2019 vs. 2018
Proprietary billed business (billions)	$	406.5		$	513.3		$	486.2		(21)	%	6	%
Proprietary cards-in-force	14.5			14.9			14.5			(3)		3
Average Card Member spending (dollars)	$	27,769		$	34,905		$	34,058		(20)		2
Total segment assets (billions)	$	42.1		$	52.8		$	51.3		(20)		3
GSBS Card Member loans:
Total loans (billions)	$	13.2		$	14.1		$	12.4		(6)		14
Average loans (billions)	$	12.9		$	13.3		$	11.7		(3)	%	14	%
Net write-off rate - principal only(a)	2.1		%	1.9		%	1.7		%
Net write-off rate - principal, interest and fees(a)	2.4		%	2.2		%	2.0		%
30+ days past due as a % of total	0.7		%	1.3		%	1.3		%
Calculation of Net Interest Yield on Average Card Member Loans:
Net interest income	$	967		$	866		$	723
Exclude:
Interest expense not attributable to our Card Member loan portfolio(b)	478			772			693
Interest income not attributable to our Card Member loan portfolio(c)	(170)			(222)			(161)
Adjusted net interest income(d)	$	1,275		$	1,416		$	1,255
Average Card Member loans (billions)	$	13.0		$	13.4		$	11.8
Net interest income divided by average Card Member loans(d)	7.4		%	6.5		%	6.1		%
Net interest yield on average Card Member loans(d)	9.8		%	10.6		%	10.7		%
Card Member receivables:
Total receivables (billions)	$	25.0		$	34.6		$	34.4		(28)	%	1	%
Net write-off rate - principal and fees(a)(e)	2.1		%	1.4		%	1.5		%
GCP Card Member receivables:
Total receivables (billions)	$	10.9		$	17.2		$	17.7		(37)	%	(3)	%
90+ days past billing as a % of total(e)	0.6		%	0.8		%	0.7		%
Net write-off rate - principal and fees(a)(e)	1.9		%	0.8		%	1.1		%
GSBS Card Member receivables:
Total receivables (billions)	$	14.1		$	17.4		$	16.7		(19)	%	4	%
Net write-off rate - principal only(a)	2.1		%	1.9		%	1.7		%
Net write-off rate - principal and fees(a)	2.3		%	2.1		%	2.0		%
30+ days past due as a % of total	0.7		%	1.7		%	1.6		%

(a)Refer to Table 7 footnote (c).

(b)Refer to Table 8 footnote (a).

(c)Refer to Table 8 footnote (b).

(d)Refer to Table 8 footnote (c).

(e)For GCP Card Member receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. GCP delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.

GLOBAL MERCHANT AND NETWORK SERVICES

TABLE 14: GMNS SELECTED INCOME STATEMENT AND OTHER DATA

Years Ended December 31,										Change				Change
(Millions, except percentages and where indicated)	2020			2019			2018			2020 vs. 2019				2019 vs. 2018
Revenues
Non-interest revenues	$	4,595		$	5,903		$	5,790		$	(1,308)	(22)	%	$	113	2	%
Interest income	18			28			30			(10)		(36)		(2)		(7)
Interest expense	(80)			(303)			(244)			223		(74)		(59)		24
Net interest income	98			331			274			(233)		(70)		57		21
Total revenues net of interest expense	4,693			6,234			6,064			(1,541)		(25)		170		3
Provisions for credit losses	88			20			22			68		#		(2)		(9)
Total revenues net of interest expense after provisions for credit losses	4,605			6,214			6,042			(1,609)		(26)		172		3
Expenses
Marketing, business development, rewards and Card Member services	1,303			1,422			1,243			(119)		(8)		179		14
Salaries and employee benefits and other operating expenses	1,914			2,010			2,256			(96)		(5)		(246)		(11)
Total expenses	3,217			3,432			3,499			(215)		(6)		(67)		(2)
Pretax segment income	1,388			2,782			2,543			(1,394)		(50)		239		9
Income tax provision	434			650			633			(216)		(33)		17		3
Segment income	$	954		$	2,132		$	1,910		$	(1,178)	(55)		$	222	12
Effective tax rate	31.3		%	23.4		%	24.9		%

Total segment assets (billions)	$	14.3		$	17.5		$	15.5		$	(3.2)	(18)	%	$	2	13	%

# Denotes a variance greater than 100 percent

GMNS operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network. GMNS manages our partnership relationships with third-party card issuers, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network. GMNS also manages loyalty coalition businesses.

TOTAL REVENUES NET OF INTEREST EXPENSE

Non-interest revenues decreased, primarily driven by lower discount revenue due to lower worldwide billed business and a decline in the average discount rate, primarily due to a shift in spend mix to non-T&E categories, as well as a decrease in other fees and commissions, due to lower foreign exchange conversion revenue related to decreased cross-border spending as a result of the impacts of the COVID-19 pandemic. For a detailed discussion on billed business and the average discount rate, please refer to the “Consolidated Results of Operations.”

Net interest income decreased, primarily driven by a lower interest expense credit relating to internal transfer pricing, which results in a net benefit for GMNS due to its merchant payables.

EXPENSES

Marketing, business development, and rewards and Card Member services expenses decreased, primarily driven by lower Marketing and business development expense, including decreased network partner payments due to lower spend volumes as a result of the impacts of the COVID-19 pandemic.

Salaries and employee benefits and other operating expenses decreased, primarily reflecting lower incentive compensation expense and lower professional services expense.

CORPORATE & OTHER

Corporate functions and certain other businesses are included in Corporate & Other.

Corporate & Other net loss was $1.3 billion and $1.4 billion in 2020 and 2019, respectively. The decrease in the net loss in 2020 compared to 2019 was primarily driven by a prior year litigation-related charge, a higher gain in the current year related to our strategic investments and lower incentive compensation in the current year, partially offset by a net loss in the current year as compared to net income in the prior year, related to the GBT JV.

CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY

Our balance sheet management objectives are to maintain:

• A solid and flexible equity capital profile;

• A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and

• Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period in the event we are unable to continue to raise new funds under our traditional funding programs during a substantial weakening in economic conditions.

We are closely monitoring the changing macroeconomic environment and actively managing our balance sheet to reflect evolving circumstances. Our objective is to remain financially strong against a backdrop of an uncertain operating environment and outlook.

CAPITAL STRATEGY

We believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value. Our objective is to retain sufficient levels of capital generated through net income and other sources, such as the exercise of stock options by employees, to maintain a strong balance sheet, provide flexibility to support future business growth, and distribute excess capital to shareholders through dividends and share repurchases. See "Dividends and Share Repurchases" below.

The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy Assessment Process, which takes into account our business activities, as well as marketplace conditions and requirements or expectations of credit rating agencies, regulators and shareholders, among others. As a bank holding company, we are subject to regulatory requirements administered by the U.S. federal banking agencies. The Federal Reserve has established specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure to maintain minimum regulatory capital levels at American Express or our U.S. bank subsidiary, American Express National Bank (AENB), could affect our status as a financial holding company and cause the banking regulators with oversight of American Express or AENB to take actions that could limit our business operations.

We seek to maintain capital levels and ratios in excess of the minimum regulatory requirements, specifically within a 10 to 11 percent target range for American Express' Common Equity Tier 1 risk-based capital ratio.

We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory requirements. These infused amounts can affect our capital and liquidity positions at the American Express parent company level.

We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating risk-weighted assets.

The following table presents our regulatory risk-based capital and leverage ratios and those of AENB, as of December 31, 2020.

TABLE 15: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS

	Effective Minimum (a)		Ratios as of December 31, 2020
Risk-Based Capital
Common Equity Tier 1	7.0	%
American Express Company			13.5	%
American Express National Bank			16.2
Tier 1	8.5
American Express Company			14.7
American Express National Bank			16.2
Total	10.5
American Express Company			16.2
American Express National Bank			18.3
Tier 1 Leverage	4.0	%
American Express Company			11.0
American Express National Bank			10.9%

(a)Represents Basel III minimum requirements and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer (SCB) for American Express Company and the capital conservation buffer for American Express National Bank. Refer to “Capital and Liquidity Regulation” under “Supervision and Regulation” and Note 22 to our “Consolidated Financial Statements” for additional information.

The following table presents American Express Company's regulatory risk-based capital and risk-weighted assets, which are calculated in accordance with standard regulatory guidance as described below:

TABLE 16: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS

American Express Company ($ in Billions)	December 31, 2020
Risk-Based Capital
Common Equity Tier 1	$	18.7
Tier 1 Capital	20.3
Tier 2 Capital	2.1
Total Capital	22.4

Risk-Weighted Assets	138.3
Average Total Assets to calculate the Tier 1 Leverage Ratio	$	185.1

Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital adequacy guidelines. On- and off-balance sheet items are weighted for risk, with off-balance sheet items converted to balance sheet equivalents, using risk conversion factors, before being allocated a risk-adjusted weight. Off-balance sheet exposures comprise a minimal part of the total risk-weighted assets.

Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as Common Equity Tier 1 capital (CET1), divided by risk-weighted assets. CET1 is the sum of common shareholders’ equity, adjusted for ineligible goodwill and intangible assets, certain deferred tax assets, as well as certain other comprehensive income items as follows: net unrealized gains/losses on securities, foreign currency translation adjustments and net unrealized pension and other postretirement benefit/losses, all net of tax. CET1 is also adjusted for the CECL final rules, as described below.

Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets. Tier 1 capital is the sum of CET1, our perpetual preferred stock and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held by insurance subsidiaries. The minimum requirement for the Tier 1 risk-based capital ratio is 1.5 percent higher than the minimum for the CET1 risk-based capital ratio. We have $1.6 billion of preferred shares outstanding to help address a portion of the Tier 1 capital requirements in excess of common equity requirements.

Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets. Tier 2 capital is the sum of the reserve for loan and receivable credit losses adjusted for the CECL final rules (limited to 1.25 percent of risk-weighted assets), and $360 million of eligible subordinated notes, adjusted for capital held by insurance

subsidiaries. The $360 million of eligible subordinated notes reflect a 40 percent, or $240 million, reduction of Tier 2 capital credit for the $600 million subordinated debt issued in December 2014.

Tier 1 Leverage Ratio — Calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent quarter.

We elected to delay the impact of the adoption of the CECL methodology on regulatory capital for two years followed by a three-year phase-in period pursuant to rules issued by federal banking regulators (the CECL final rules). As of December 31, 2020, our reported regulatory capital excluded the $0.9 billion impact to retained earnings upon the adoption of the CECL methodology and 25 percent of the impact of the $1.5 billion increase in reserves for credit losses from January 1, 2020 to December 31, 2020. We will begin phasing in the cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022. Refer to "Capital and Liquidity Regulation" under Part 1, Item 1. "Business - Supervision and Regulation" for additional details.

DIVIDENDS AND SHARE REPURCHASES

We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans.

During the year ended December 31, 2020, we returned $2.3 billion to our shareholders in the form of common stock dividends of $1.4 billion and share repurchases of $0.9 billion. We repurchased 7 million common shares at an average price of $121.14 in 2020. These dividend and share repurchase amounts collectively represent approximately 70 percent of total capital generated during the year.

In addition, during the year ended December 31, 2020, we paid $79 million in dividends on non-cumulative perpetual preferred shares outstanding. For additional information on our preferred shares, refer to Note 16 to the “Consolidated Financial Statements.”

Our decisions on capital distributions depend on various factors, including: our capital levels and regulatory capital requirements; actual and forecasted business results; economic and market conditions; revisions to, or revocation of, the Federal Reserve’s authorization of our capital plan; and the Comprehensive Capital Analysis and Review (CCAR) process.

Due to the uncertain business environment, we suspended share repurchases in March 2020 to maintain financial strength. Subsequently, the Federal Reserve announced that it would prohibit share repurchases in the third and fourth quarters of 2020 for all banking organizations participating in CCAR and would allow them to pay common stock dividends provided (a) they do not increase the amount of the dividend and (b) they do not exceed the average of a firm's net income for the four preceding calendar quarters. Based upon the results of its second round of 2020 stress testing, the Federal Reserve announced on December 18, 2020, certain modifications to its capital distribution restrictions that would apply for the first quarter of 2021. Refer to "Stress Testing and Capital Planning" under Part 1, Item 1. "Business - Supervision and Regulation" for additional details.

We plan to resume share repurchases under our previously disclosed share repurchase program in the first quarter of 2021, up to our maximum capacity of approximately $440 million authorized by the Federal Reserve. Share purchases under publicly announced programs are made pursuant to open market purchases or privately negotiated transactions (including employee benefit plans) as market conditions warrant and at prices we deem appropriate.

FUNDING STRATEGY

Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to meet our maturing obligations, cost-effectively finance asset growth in our global businesses, as well as to maintain a strong liquidity profile. The diversity of funding sources by type of instrument, by maturity and by investor base, among other factors, mitigates the impact of disruptions in any one type of instrument, maturity or investor. The mix of our funding in any period will seek to achieve cost efficiency consistent with both maintaining diversified sources and achieving our liquidity objectives. We seek to diversify our funding sources by maintaining scale and relevance in unsecured debt, asset securitizations and deposits. Our direct retail deposits have become a larger proportion of our funding over time and we expect that will continue. Our funding strategy and activities are integrated into our asset-liability management activities. We have in place a funding policy covering American Express Company and all of our subsidiaries.

Our global proprietary card-issuing businesses generate significant assets in both domestic and international Card Member lending and receivable activities. Our financing needs are in large part a consequence of our proprietary card-issuing businesses, and the maintenance of a liquidity position to meet regulatory requirements and support all of our business activities, such as merchant payments. We generally pay merchants for card transactions prior to reimbursement by Card Members and therefore

fund the merchant payments during the period Card Member loans and receivables are outstanding. We also have additional financing needs associated with general corporate purposes. Our funding plan to meet these financing needs is in turn driven by, among other factors, our liquidity position, size and mix of business asset growth, choice of funding sources, and our maturing obligations.

Due to the impact of COVID-19, we experienced significant reductions in our business volumes and decline in the balances of our Card Member loans and receivables. The decline in Card Member loans and receivables balances resulted in substantial liquidity levels, which were further strengthened by the strong growth in our direct retail deposits in 2020.

FUNDING PROGRAMS AND ACTIVITIES

We meet our funding needs through a variety of sources, including direct and third-party distributed deposits and debt instruments, such as senior unsecured debt, asset securitizations, borrowings through secured borrowing facilities and a committed bank credit facility.

We had the following consolidated debt and customer deposits outstanding as of December 31:

TABLE 17: SUMMARY OF CONSOLIDATED DEBT AND CUSTOMER DEPOSITS

(Billions)	2020		2019
Short-term borrowings	$	1.9	$	6.4
Long-term debt	43.0		57.8
Total debt	44.9		64.2
Customer deposits	86.9		73.3
Total debt and customer deposits	$	131.8	$	137.5

We may redeem from time to time certain debt securities prior to the original contractual maturity dates in accordance with the optional redemption provisions of those debt securities.

Our funding plan for the full year 2021 includes, among other sources, a limited amount of unsecured and secured term debt issuance. Actual funding activities can vary from our plans due to various factors, such as future business growth, the impact of global economic, political and other events on market capacity and funding needs, demand for securities offered by us, regulatory changes, ability to securitize and sell receivables, and the performance of receivables previously sold in securitization transactions. Many of these factors are beyond our control.

Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding strategy. Our asset securitization activities are rated separately.

TABLE 18: UNSECURED DEBT RATINGS

Credit Agency

American Express Entity

Short-Term Ratings

Long-Term Ratings

Outlook

Fitch

All rated entities

F1

A

Negative

Moody’s

American Express Travel Related Services Company, Inc.

N/A

A2

Negative

Moody's

American Express Credit Corporation

Prime-1

A2

Negative

Moody’s

American Express National Bank

Prime-1

A3

Negative

Moody's

American Express Company

N/A

A3

Negative

S&P

American Express Travel Related Services Company, Inc.

N/A

A-

Stable

S&P

American Express Credit Corporation and American Express National Bank

A-2

A-

Stable

S&P

American Express Company

A-2

BBB+

Stable

These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at the sole discretion of the rating organization.

Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding costs, as well as higher fees related to borrowings under our unused credit facilities. Declines in credit ratings could also reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding mix, including the proportion of U.S. retail deposits insured by the Federal Deposit Insurance Corporation (FDIC) to total funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs.

SHORT-TERM FUNDING PROGRAMS

Short-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less, as well as interest-bearing overdrafts with banks. Our short-term funding programs are used primarily to fund working capital needs, such as managing seasonal variations in receivables balances. The amount of short-term borrowings issued in the future will depend on our funding strategy, our needs and market conditions.As of December 31, 2020, we had nil in commercial paper outstanding and we had an average of $628 million in commercial paper outstanding during 2020. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.

DEPOSIT PROGRAMS

We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to an amount that is at least $250,000 per account holder through the FDIC. Our ability to obtain deposit funding and offer competitive interest rates is dependent on, among other factors, the capital level of AENB. Direct retail deposits offered by AENB is our primary deposit product channel, which makes FDIC-insured high-yield savings account and certificates of deposit (CDs) products available directly to consumers.AENB also sources deposits through third-party distribution channels as needed to meet our overall funding objectives. As of December 31, 2020, we had $86.9 billion in deposits. Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits.

LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMS

As of December 31, 2020, we had $43.0 billion in long-term debt outstanding, including unsecured debt and asset-backed securities. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.

We periodically securitize Card Member loans and receivables arising from our card business, as the securitization market provides us with cost-effective funding. Securitization of Card Member loans and receivables is accomplished through the transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to third-party investors. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset securitizations.

On February 1, 2020, we removed U.S. consumer and small business Card Member receivables from the American Express Issuance Trust II (the Charge Trust) and substantially replaced them with U.S. corporate Card Member receivables.

On April 20, 2020, we added approximately $1.7 billion of additional U.S. corporate Card Member receivables to the Charge Trust.

Given the significant reductions in our business volumes and our resulting substantial cash and liquidity position, we did not issue any unsecured or secured term debt during 2020.

LIQUIDITY MANAGEMENT

Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to maintain liquidity sources in amounts sufficient to meet our expected future financial obligations and business requirements for liquidity for a period of at least twelve months in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions.

Our liquidity management strategy includes a number of elements, including, but not limited to:

• Maintaining diversified funding sources (refer to the “Funding Strategy” section for more details);

• Maintaining unencumbered liquid assets and off-balance sheet liquidity sources;

• Projecting cash inflows and outflows under a variety of economic and market scenarios; and

• Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements.

We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash and other liquid assets, committed bank credit facilities and secured borrowing facilities. Through our U.S. bank subsidiary, AENB, we also hold collateral eligible for use at the Federal Reserve’s discount window.

The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy include market-wide, firm-specific and combined liquidity stresses. We consider other factors in determining the amount and type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations, growth in our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources and credit rating agency guidelines and requirements.

We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements. As of December 31, 2020, we had a total of $54.6 billion in Cash and cash equivalents and Investment securities (which are substantially comprised of U.S. Government Treasury obligations). The increase of $21.7 billion from $32.9 billion as of December 31, 2019 was primarily driven by the decline in the balances of our Card Member loans and receivables and the growth in our direct retail deposits.

The net interest expense to maintain these liquidity resources depends on the amount of liquidity resources we maintain and the difference between our cost of funding these amounts and their investment yields. As the amount of our liquidity resources has substantially increased, the level of future net interest expense to maintain these resources is expected to be significant, as the investment income is less than the cost of funding.

Securitized Borrowing Capacity

As of December 31, 2020, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2022, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the Charge Trust. As the balance of Card Member receivables in the Charge Trust fluctuates over time in line with business volumes, our capacity to draw on the Charge Trust facility may be reduced when volumes decline. We also maintained our committed, revolving, secured borrowing facility, with a maturity date of September 15, 2022, which gives us the right to sell up to $2.0 billion face amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust). Both facilities are used in the ordinary course of business to fund working capital needs, as well as to further enhance our contingent funding resources. As of December 31, 2020, no amounts were drawn on the Charge Trust facility or the Lending Trust facility.

Federal Reserve Discount Window

As an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco, subject to the amount of qualifying collateral that it may pledge. The Federal Reserve has indicated that both credit and charge card receivables are a form of qualifying collateral for secured borrowings made through the discount window. Whether specific assets will be considered qualifying collateral and the amount that may be borrowed against the collateral remain at the discretion of the Federal Reserve.

We had approximately $64.8 billion as of December 31, 2020 in U.S. credit card loans and charge card receivables that could be sold over time through our securitization trusts or pledged in return for secured borrowings to provide further liquidity, subject in each case to applicable market conditions and eligibility criteria.

Committed Bank Credit Facility

In addition to the secured borrowing facilities described above, we maintained a committed syndicated bank credit facility as of December 31, 2020 of $3.5 billion, with a maturity date of October 15, 2022. The availability of this credit line is subject to compliance with certain covenants by American Express Credit Corporation (Credco), principally the maintenance by Credco of a 1.25 ratio of its combined earnings, certain capital contributions and fixed charges, to fixed charges. As of December 31, 2020 and 2019, Credco was in compliance with each of these covenants. As of December 31, 2020, no amounts were drawn on the committed credit facility. We may, from time to time, use this facility in the ordinary course of business to fund working capital needs. Any undrawn portion of this facility could serve as backstop for the amount of commercial paper outstanding.

Our committed bank credit facility does not contain a material adverse change clause, which might otherwise preclude borrowing under the credit facility, nor is it dependent on our credit rating.

CASH FLOWS

The following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating, investing and financing cash flows for the year ended December 31, 2020 compared to the year ended December 31, 2019.

TABLE 19: CASH FLOWS

(Billions)	2020		2019		2018
Total cash provided by (used in):
Operating activities	$	5.6	$	13.6	$	8.9
Investing activities	11.6		(16.7)		(19.6)
Financing activities	(9.1)		(0.5)		5.1
Effect of foreign currency exchange rates on cash and cash equivalents	0.4		0.2		0.1
Net increase (decrease) in cash and cash equivalents	$	8.5	$	(3.4)	$	(5.5)

Cash Flows from Operating Activities

Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, deferred taxes and stock-based compensation and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.

The decrease in net cash provided by operating activities was primarily driven by decreases in Net income and Accounts payable due to decreases in merchant payables reflecting the significant decline in billed business in the current year, and an increase in Other assets due to purchases of loyalty program points from certain of our cobrand partners. These points are held as prepaid assets until they are used for rewards, promotions and incentives.

Cash Flows from Investing Activities

Our cash flows from investing activities primarily include changes in Card Member loans and receivables, as well as changes in our available-for-sale investment securities portfolio.

The increase in net cash provided by investing activities was primarily due to a decline in the outstanding balances of Card Member loans and receivables driven by a significant decline in Card Member spending during the period as a result of the continued impacts of the COVID-19 pandemic and the resulting containment measures, combined with pay down of outstanding balances by Card Members, partially offset by a net increase in the investment securities portfolio.

Cash Flows from Financing Activities

Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term borrowings, as well as dividend payments and share repurchases.

The increase in net cash used in financing activities was primarily driven by higher net repayment of debt, partially offset by higher growth in customer deposits and the suspension of the share repurchase program.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We have identified both on- and off-balance sheet transactions, arrangements, obligations and other relationships that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, or liquidity and capital resources.

CONTRACTUAL OBLIGATIONS

The table below identifies transactions that represent our contractually committed future obligations. Purchase obligations include our agreements to purchase goods and services that are enforceable and legally binding and that specify significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.

TABLE 20: COMMITTED FUTURE OBLIGATIONS BY YEAR

	Payments due by year(a)
(Millions)	2021		2022-2023		2024-2025		2026 and thereafter		Total
Long-term debt	$	11,829	$	21,324	$	5,757	$	4,132	$	43,042
Certificates of deposit	3,828		3,698		483		—		8,009
Interest payments on long-term debt(b)	713		760		402		1,058		2,933
Lease obligations	141		273		232		1,024		1,670
Deemed repatriation tax(c)	—		14		582		416		1,012
Purchase obligations(d)	231		174		34		—		439
Other long-term liabilities(e) (f)	243		36		6		38		323
Total	$	16,985	$	26,279	$	7,496	$	6,668	$	57,428

(a)The table above excludes approximately $0.8 billion of tax reserves related to the uncertainty in income taxes as inherent complexities and the number of tax years currently open for examination in multiple jurisdictions do not permit reasonable estimates of payments, if any, to be made over a range of years. Refer to Note 20 to the “Consolidated Financial Statements” for additional information.

(b)Estimated interest payments were calculated using the effective interest rates as of December 31, 2020, and includes the effect of existing interest rate swaps. Actual cash flows may differ from estimated payments.

(c)Represents the remaining obligation under the Tax Act to pay a one-time transition tax on unrepatriated earnings and profits of certain foreign subsidiaries.

(d)The purchase obligation amounts represent either the early termination fees or non-cancelable minimum contractual obligations, as applicable, by period under contracts that were in effect as of December 31, 2020.

(e)As of December 31, 2020, there were no minimum required contributions, and no contributions are currently planned, for the U.S. American Express Retirement Plan. For the U.S. American Express Retirement Restoration Plan and non-U.S. defined benefit pension and postretirement benefit plans, contributions in 2021 are anticipated to be approximately $47 million, and this amount has been included within other long-term liabilities. Remaining obligations under defined benefit pension and postretirement benefit plans aggregating $659 million have not been included in the table above as the timing of such obligations is not determinable. Additionally, other long-term liabilities do not include $9.8 billion of Membership Rewards liabilities, which are not considered long-term liabilities as Card Members in good standing can redeem points immediately, without restrictions, and because the timing of point redemption is not determinable.

(f)As of December 31, 2020, we had committed to provide funding related to certain tax credit investments resulting in a $208 million unfunded commitment included in other long-term liabilities. In addition to this amount, there was a further $106 million of contractual off-balance sheet obligations that have not been included in the table above as the timing of such obligations is not determinable. Refer to Note 6 to the “Consolidated Financial Statements” for additional information.

In addition to the contractual obligations noted in Table 20, we have financial commitments related to agreements with certain cobrand partners under which we are required to make a certain level of minimum payments over the life of the agreement, generally ranging from five to ten years. Such commitments are designed to be satisfied by the payments we make to such cobrand partners primarily based on Card Members' spending and earning rewards on their cobrand cards and as we acquire new Card Members. In the event these payments do not fully satisfy the commitment, we generally pay the cobrand partner up to the amount of the commitment in exchange for an equivalent value of reward points. As of December 31, 2020, we had approximately $4 billion in such commitments outstanding and also had certain cobrand arrangements that include commitments based on variables, the values of which are not yet determinable and thus the amount is not quantifiable. Refer to Note 12 to the "Consolidated Financial Statements" for further information.

We also have off-balance sheet arrangements that include guarantees, indemnifications and certain other off-balance sheet arrangements.

GUARANTEES

As of December 31, 2020, we had guarantees and indemnifications totaling approximately $1 billion related primarily to real estate and business dispositions in the ordinary course of business. Refer to Note 15 to the “Consolidated Financial Statements” for further discussion regarding our guarantees.

CERTAIN OTHER OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2020, we had approximately $314 billion of unused credit available to Card Members as part of established lending product agreements. Total unused credit available to Card Members does not represent potential future cash requirements, as a significant portion of this unused credit will likely not be drawn. Our charge card products generally have no pre-set spending limit, and therefore are not reflected in unused credit available to Card Members.

We provide Card Member protection that covers losses associated with purchased goods and services. We have an accrual of $58 million related to this exposure as of December 31, 2020. To date, we have not experienced significant losses related to this exposure; however, our historical experience may not be representative in the current environment given the economic and financial disruption cause by the COVID-19 pandemic and resulting containment measures. See "Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners" under “Risk Factors” and Note 12 to the "Consolidated Financial Statements" for further information.

RISK MANAGEMENT

GOVERNANCE

We use our comprehensive Enterprise-wide Risk Management (ERM) program to identify, aggregate, monitor, and manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer.

Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit and Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of independent directors and provides regular reports to the full Board regarding matters reviewed at their committee. The committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance & Ethics Officer, the Chief Audit Executive and other senior management with regard to our risk management processes, controls, talent and capabilities. The Board monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks.

The Risk Committee of our Board of Directors provides oversight of our ERM framework, processes and methodologies. The Risk Committee approves our ERM policy. The ERM policy governs risk governance, risk oversight and risk appetite for risks, including individual credit risk, institutional credit risk, operational risk, compliance risk, reputational risk, market risk, funding and liquidity risk, model risk, strategic and business risk, and country risk. Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios. In addition, it establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for monitoring limits, escalation triggers and assessing control programs.

The Risk Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Risk Officer and receives regular updates from the Chief Risk Officer on key risks, transactions and exposures.

The Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including significant risk exposures, risk trends in our portfolios and major risk concentrations.

The Risk Committee also provides oversight of our compliance with Regulatory capital and liquidity standards, our Internal Capital Adequacy Assessment Process, including the CCAR submissions.

The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include our Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of our Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of our internal audit services function, and the integrity of our systems of internal controls.

The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Audit Executive, who reports to the Audit and Compliance Committee, and approves Internal Audit’s annual audit plan, charter, policies, budget and staffing levels, and overall risk assessment methodology. The Audit and Compliance Committee also receives regular updates on the audit plan’s status and results, including significant reports issued by Internal Audit and the status of our corrective actions.

The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our overall compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with business incentives and how business performance is achieved without taking imprudent or excessive risk. Our Chief Risk Officer is actively involved in setting risk goals for the Company. Our Chief Risk Officer also reviews the current and forward-looking risk profiles of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the Compensation and Benefits Committee and attests whether performance goals and results have been achieved without taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to decide on our bonus pools and the compensation of senior executives.

There are several internal management committees, including the Enterprise-wide Risk Management Committee (ERMC), chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and is responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies company-wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, and provides guidance on the steps to monitor, control and report major risks. In addition, the Asset Liability Committee, chaired by our Chief Financial Officer, is responsible for managing our capital, funding and liquidity, investment, market risk and asset/liability activities in accordance with our policies and in compliance with applicable regulatory requirements.

As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk taking. The Chief Executive Officer, business unit presidents and the Chief Financial Officer are part of the first line of defense. The second line comprises independent functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief Compliance & Ethics Officer, the Chief Operational Risk Officer and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The global risk oversight team oversees the policies, strategies, frameworks, models, processes and capabilities deployed by the first line teams and provides challenges and independent assessments on how the first line of defense is managing risks. Our Internal Audit Group constitutes the third line of defense and provides independent assessments and effective challenge of the first and second lines of defense.

CREDIT RISK MANAGEMENT PROCESS

Credit risk is defined as loss due to obligor or counterparty default or changes in the credit quality of a counterparty or security. Our credit risks are divided into two broad categories: individual and institutional. Each has distinct risk management capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures of significant importance are supported by dedicated risk management teams, each led by a Chief Credit Officer.

INDIVIDUAL CREDIT RISK

Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These portfolios consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk management capabilities, which span underwriting, customer management and collections. The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and GDP growth.

The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief Credit Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and enforcement of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and procedures and escalates to the ERMC as appropriate.

Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-date information on prospects and customers, such as spending and payment history and data feeds from credit bureaus. We have developed data-driven economic decision logic for customer interactions to better serve our customers.

INSTITUTIONAL CREDIT RISK

Institutional credit risk arises principally within our GCS and GMNS businesses, as well as investment and liquidity management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large losses in any given year or over several years is not necessarily representative of the level of risk of institutional portfolios, given the infrequency of loss events in such portfolios.

Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers. These officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for implementation and enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the credit officers of each business unit with substantial institutional credit risk exposures. The committee, along with the business unit Chief Credit Officers, makes investment decisions in core risk capabilities, ensures proper implementation of the underwriting standards and contractual rights for risk mitigation, monitors risk exposures, and determines risk mitigation actions. The IRMC formally reviews large institutional risk exposures to ensure compliance with ERMC guidelines and procedures and escalates them to the ERMC as appropriate. At the same time, the IRMC provides guidance to the business unit risk management teams to optimize risk-adjusted returns on capital. A centralized risk rating unit provides risk assessment of our institutional obligors.

Exposure to the Airline and Travel Industry

We have multiple important cobrand, rewards, merchant acceptance and corporate payments arrangements with airlines. The ERM program evaluates the risks posed by our airline partners and the overall airline strategy company-wide through comprehensive business analysis of global airlines, and the travel industry more broadly, including cruise lines, travel agencies and tour operators. Our largest airline partner is Delta, and this relationship includes an exclusive cobrand credit card partnership and other arrangements including Membership Rewards redemption, merchant acceptance, travel and corporate payments. See "We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations" and "Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners" under “Risk Factors” for additional information.

Debt Exposure

As part of our ongoing risk management process, we monitor our financial exposure to both sovereign and non-sovereign customers and counterparties, and measure and manage concentrations of risk by geographic regions, as well as by economic sectors and industries. A primary focus area for monitoring is credit deterioration due to weaknesses in economic and fiscal profiles. We evaluate countries based on the market assessment of the riskiness of their sovereign debt and our assessment of the economic and financial outlook and closely monitor those deemed high risk. As of December 31, 2020, we considered our gross credit exposures to government entities, financial institutions and corporations in those countries deemed high risk to be individually and collectively not material.

OPERATIONAL RISK MANAGEMENT PROCESS

We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment, including failures to comply with laws and regulations as well as impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory penalties.

To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the Risk Committee. The Operational Risk Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups on effective risk assessments and controls and oversees the preventive, responsive and mitigation efforts by Operational Excellence teams in the business units and staff groups.

We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks. This framework, supervised by the ORMC, consists of (a) operational risk event capture, (b) a project office to coordinate issue management and control enhancements, (c) key risk indicators, and (d) process and entity-level risk assessments.

The framework requires the assessment of operational risk events to determine root causes, impact to customers and/or us, and resolution plan accountability to correct any defect, remediate customers, and enhance controls and testing to mitigate future issues. The impact is assessed from an operational, financial, brand, regulatory compliance and legal perspective.

INFORMATION AND CYBER SECURITY

We define information and cyber security risk as the risk that a security incident could impact the confidentiality, integrity or availability of American Express customer, colleague or proprietary information.

Our information and cyber security program is designed to protect the confidentiality, integrity, and availability of information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction. The program is built upon a foundation of advanced security technology, a well-staffed and highly trained team of experts, and robust operations based on the National Institute of Standards and Technology Cybersecurity Framework. This consists of controls designed to identify, protect, detect, respond and recover from information and cyber security incidents. We continue to invest in enhancements to cyber security capabilities and engage in industry and government forums to promote advancements to the broader financial services cyber security ecosystem.

See “A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our cards” under “Risk Factors” for additional information.

INFORMATION TECHNOLOGY

We define information technology risk as the risk that events or circumstances could compromise the processing, stability, capacity, performance, or resilience of information technology and cause financial, reputational, and/or regulatory impacts.

We manage information technology risk through our policies, procedures, governance structure, and control framework to preserve the confidentiality, integrity, and availability of systems and processes across the Company.

See “The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations” under “Risk Factors” for additional information.

PRIVACY

We define privacy risk as the risk of financial loss, reputational damage, or regulatory or legal action resulting from decisions related to the violation of applicable laws, rules, regulations, contractual obligations, or the non-adherence to privacy policies, disclosures, or standards that apply to the processing of personal data.

The Global Privacy Policy establishes the privacy framework and defines the American Express Data Protection & Privacy Principles, which governs the way we collect, use, store, share, transmit, delete or otherwise process our customer and colleague personal data globally. Chaired by the Chief Privacy Officer, the Privacy Risk Management Committee, a sub-committee of the ORMC, provides oversight and governance for our privacy program.

DATA MANAGEMENT AND GOVERNANCE

We define data management and governance risk as the risk of inadequate data governance and/or data management practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data within or throughout its lifecycle.

Our Enterprise Data Governance Policy establishes the framework and requirements for defining in-scope critical data and outlining the elements for managing data as a critical corporate asset. This policy is approved by the ERMC.

Chaired by the Chief Data Officer, our Enterprise Data Committee, a sub-committee of the ERMC, provides governance and oversight for our enterprise-wide data governance and management activities. The committee is responsible for overseeing the standards and procedures, governance structure and oversight framework, which includes independent assessments and validations, monitoring and reporting of data governance and management-related issues and concerns.

COMPLIANCE RISK MANAGEMENT PROCESS

We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or other forms of sanction as a result of non-compliance with applicable laws and/or regulations, internal policies and procedures and related practices, or ethical standards.

We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance Risk Management Committee (CRMC), chaired by the Chief Compliance and Ethics Officer, is responsible for identifying, evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship directly to both the ERMC and the Audit and Compliance Committee.

We have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the appropriate government authorities. As part of that program, the Global Risk Oversight team provides independent risk assessment of the rules used by the Anti-Money Laundering team. In addition, the Internal Audit Group reviews the processes for practices consistent with regulatory guidance.

REPUTATIONAL RISK MANAGEMENT PROCESS

We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner relationships, business activities and policies, management and workplace culture, or our response to unexpected events, could cause sustained critical media coverage, a decline in revenue or investment, talent attrition, litigation, or government or regulatory scrutiny.

We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of providing the world’s best customer experience and fundamental to our long-term success.

Our business leaders are responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring reputational risk considerations are included in the scope of appropriate subordinate risk policies and committees and properly reflected in all decisions escalated to the ERMC.

MARKET RISK MANAGEMENT PROCESS

Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include interest rate risk and foreign exchange risk. Interest rate risk is driven by the relationship between interest rates on assets (such as loans, receivables and investment securities) and interest rates on liabilities (such as debt and deposits). Foreign exchange risk arises from transactions, funding, investments and earnings in currencies other than the U.S. dollar.

Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and escalation triggers. These policies are approved by the ERMC, Asset Liability Committee or Market Risk Management Committee.

Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an independent risk assessment and oversight over the policies and exposure management for market risk and Asset Liability Management activities, as well as overseeing compliance with associated regulatory requirements. Market risk management is also guided and governed by policies covering the use of derivative financial instruments, funding, liquidity and investments.

Interest Rate Risk

We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on earnings and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over time as a result of, among other things, the proportion of our total funding provided by variable and fixed-rate debt and deposits compared to our Card Member loans and receivables. Interest rate swaps are used from time to time to effectively convert debt issuances to variable-rate from fixed-rate, or vice versa. Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative financial instruments.

In 2020, the composition of our balance sheet shifted substantially. There was a substantial net reduction in total fixed-rate assets within Card Member loans and Card Member receivables and an increase in certain floating-rate assets such as Cash and cash equivalents. As of December 31, 2020, a hypothetical immediate 100 basis point increase in market interest rates would have a detrimental impact of approximately $113 million on our annual net interest income. A hypothetical immediate 100 basis point decrease in market interest rates, which are assumed to remain at or above zero percent, would have a smaller but still detrimental impact on our annual net interest income. This measure first projects net interest income over the following twelve-month time horizon considering forecasted business growth and anticipated future market interest rates. The detrimental impact from rate changes is then measured by instantaneously increasing or decreasing the anticipated future interest rates by 100 basis points. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities that reprice within the twelve-month horizon generally reprice by the same magnitude as benchmark rate changes. It is further assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate movements, and the magnitude of this repricing in turn depends on, among other factors, the direction of rate movements. These assumptions are consistent with historical deposit repricing experience in the industry and within our own portfolio. Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to changes in market interest rates.

LIBOR Transition

Due to uncertainty surrounding the suitability and sustainability of LIBOR, central banks and global regulators have called for financial market participants to prepare for the discontinuance of LIBOR and the establishment of alternative reference rates.

We have financial instruments and commercial agreements that will be impacted by the discontinuance of LIBOR, including floating rate debt and equity instruments, derivatives, borrowings and other contracts. We have established an enterprise-wide, cross-functional initiative to identify, assess and monitor risks associated with LIBOR, engage with the industry participants and regulators and to transition to new alternative reference rates. As part of this initiative, we are updating our operational processes, IT systems and models for a timely transition.

See “The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and commercial agreements” under “Risk Factors” for additional information.

Foreign Exchange Risk

Foreign exchange exposures arise in four principal ways: (1) Card Member spending in currencies that are not the billing currency, (2) cross-currency transactions and balances from our funding activities, (3) cross-currency investing activities, such as in the equity of foreign subsidiaries, and (4) revenues generated and expenses incurred in foreign currencies, which impact earnings.

These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2020, foreign currency derivative instruments with total notional amounts of approximately $26 billion were outstanding.

With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward contracts outstanding, the impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been immaterial to projected earnings as of December 31, 2020. With respect to translation exposure of foreign subsidiary equity balances, including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2020. With respect to anticipated earnings denominated in foreign currencies for the next twelve months, the adverse impact on pretax income of a hypothetical 10 percent strengthening of the U.S. dollar would be approximately $33 million as of December 31, 2020.

To a much lesser extent, we are also subject to market risk arising from activities conducted by our Foreign Exchange International Payments business. We aim to minimize market risk from these activities through hedging, where appropriate, and the establishment of limits.

The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses.

FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS

Funding and liquidity risk is defined as our inability to meet our ongoing financial and business obligations as they become due at a reasonable cost.

Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.

Funding and Liquidity risk is managed by the Funding and Liquidity Committee. In addition, the Market Risk Oversight Officer provides independent oversight of liquidity risk management. We manage liquidity risk by maintaining access to a diverse set of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business requirements and expected future financing obligations for at least a twelve-month period in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions. We consider the trade-offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having inadequate liquidity, which may result in financial distress during a liquidity event.

Funding and Liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure that sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy those requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity resources required and monitors positions and determines any actions to be taken.

MODEL RISK MANAGEMENT PROCESS

We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making, or damage to our reputation, from decisions based on incorrect or misused model outputs and reports.

We manage model risk through a comprehensive model governance framework, including policies and procedures for model development, independent model validation and change management capabilities that seek to minimize erroneous model methodology, outputs and misuse. We also assess model performance on an ongoing basis.

We utilize artificial intelligence and machine Learning (AI/ML) approaches for a variety of business use cases. We perform extensive reviews and testing to reduce the risk that these AI/ML techniques do not perform as intended.

STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESS

Strategic and business risk is the risk related to our inability to achieve our business objectives due to poor strategic decisions, including decisions related to mergers, acquisitions, and divestitures, poor implementation of strategic decisions or declining demand for our products and services.

Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by committees and business leaders. Mergers, acquisitions and divestitures can only be approved following Executive Committee due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the Chief Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new products and material changes in business processes are reviewed and approved by the New Products Committee and appropriate credit or risk committees.

COUNTRY RISK MANAGEMENT PROCESS

Country risk is defined as the risk that economic, social, and/or political conditions and events in a country might adversely impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate capital.

We manage country risk as part of the normal course of business. Policies and procedures establish country risk escalation thresholds to control and limit exposure, driven by processes that enable the monitoring of conditions in countries where we have exposure.

CRITICAL ACCOUNTING ESTIMATES

Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain of our accounting policies requiring significant management assumptions and judgments are as follows:

RESERVES FOR CARD MEMBER CREDIT LOSSES

Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience and current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.

In estimating expected credit losses, we use a combination of statistically based models and analysis of the results produced by these models to determine the quantitative and qualitative components of our total balance sheet reserves for credit losses. These quantitative and qualitative components entail a significant amount of judgment. The primary areas of judgment used in measuring the quantitative components of our reserves relate to the determination of the appropriate R&S Period, the modeling of the probability of and exposure at default, and the methodology to incorporate current and future economic conditions. We use these models and assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses for the R&S Period. The qualitative component is intended to capture expected losses that may not have been fully captured in the quantitative component. Through an established governance structure, we consider certain external and internal factors, including emerging portfolio characteristics and trends, which consequentially may increase or decrease the reserves for Card Member credit losses.

The R&S Period, which is approximately three years, represents the maximum time-period beyond the balance sheet date over which we can reasonably estimate expected credit losses, using all available portfolio information, current economic conditions and forecasts of future economic conditions. Card Member loan products do not have a contractual term and balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S Period. To determine expected credit losses beyond the R&S Period, we immediately revert to long-term average loss rates. Card Member receivable products are contractually required to be paid in full; therefore, we have assumed the balances will be either paid or written-off within the R&S Period.

Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default. A significant area of judgment relates to how we apply future Card Member payments to the reporting period balances when determining the exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any future spend. Any remaining portion of the future payment is then allocated to the remaining reporting period balance.

CECL requires that the R&S Period include an assumption about current and future economic conditions. We incorporate multiple macroeconomic scenarios obtained from an independent third party. The estimated credit losses calculated from each macroeconomic scenario are reviewed and weighted to reflect management's judgment about uncertainty around the scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real GDP, that are significant to our models.

Macroeconomic Sensitivity

To demonstrate the sensitivity of estimated credit losses to the macroeconomic scenarios, we compared our modeled estimates under a baseline scenario to that under a pessimistic downside scenario. For every 10 percentage points change in weighting from the baseline scenario to the pessimistic downside scenario, the estimated credit losses increased by approximately $200 million.

The modeled estimates under these scenarios were influenced by the duration, severity and timing of changes in economic variables within each scenario and these macroeconomic scenarios, under different conditions or using different assumptions, could result in significantly different estimated credit losses. It is difficult to estimate how potential changes in specific factors might affect the estimated credit losses, and current results may not be indicative of the potential future impact of macroeconomic forecast changes.

In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on downside scenarios at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve component or the impact of management judgment for the qualitative reserve component, which may have a positive or negative effect on the results. Thus, the results of this sensitivity analysis are hypothetical and are not intended to estimate or reflect our expectations of any changes in the overall reserves for credit losses due to changes in the macroeconomic environment.

The following table reflects the range of key variables in the macroeconomic scenarios utilized for the computation of Reserves for Card Member credit losses as of December 31, 2020:

			December 31, 2020
U.S. Unemployment Rate
Fourth quarter of 2020			7%
First quarter of 2021			7% - 8%
Fourth quarter of 2021			7% - 11%
Fourth quarter of 2022			6% - 12%
U.S. GDP Growth (Contraction) (a)
Fourth quarter of 2020			3%
First quarter of 2021			4% - (5%)
Fourth quarter of 2021			6% - (2%)
Fourth quarter of 2022			4% - 3%

(a)Real GDP quarter over quarter percentage change seasonally adjusted to annualized rates.

Refer to "Business Environment" and Table 3 in MD&A and Note 1 and Note 3 to the "Consolidated Financial Statements" for a further description of the impact of CECL, both at implementation and for the year ended December 31, 2020.

The process of estimating these reserves requires a high degree of judgment. To the extent our expected credit loss models are not indicative of future performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or lower future provisions for credit losses in any period.

LIABILITY FOR MEMBERSHIP REWARDS

The Membership Rewards program is our largest card-based rewards program. Card Members can earn points for purchases charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members to earn bonus points for purchases at merchants in particular industry categories. Membership Rewards points are redeemable for a broad variety of rewards, including travel, shopping, gift cards, and covering eligible charges. Points typically do not expire, and there is no limit on the number of points a Card Member may earn. Membership Rewards expense is driven by charge volume on enrolled cards, customer participation in the program and contractual arrangements with redemption partners.

We record a Membership Rewards liability that represents the estimated cost of points earned that are expected to be redeemed by Card Members in the future. The Membership Rewards liability is impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs. We estimate the Membership Rewards liability by determining the URR and the WAC per point, which are applied to the points of current enrollees. Refer to Note 9 to the “Consolidated Financial Statements” for additional information.

The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be redeemed in future periods. We use statistical and actuarial models to estimate the URR of points earned to date by current Card Members based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes. The WAC per point assumption is used to estimate future redemption costs and is primarily based on redemption choices made by Card Members, reward offerings by partners, and Membership Rewards program changes. The WAC per point assumption is derived from 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected developments in redemption patterns.

We periodically evaluate our liability estimation process and assumptions based on developments in redemption patterns, cost per point redeemed, partner contract changes and other factors.

The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership Rewards expense.

Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the liability through the current period Membership Rewards expense by an amount estimated to cover the cost of all points previously earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31, 2020, an increase in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards liability and corresponding rewards expense by approximately $128 million. Similarly, an increase in the WAC per point of 1 basis point would increase the Membership Rewards liability and corresponding rewards expense by approximately $141 million.

GOODWILL RECOVERABILITY

Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment testing contains both a qualitative and quantitative assessment.

We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using a more detailed quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit, bypassing the qualitative assessment.

Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the measurement of fair value for our reporting units, which inherently entails the use of significant management judgment. For valuation, we use a combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair value of our reporting units.

When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of current and expected future economic conditions. To discount these cash flows we use our expected cost of equity, determined using a capital asset pricing model. When using the market method under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’ actual results. The judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could materially affect the fair value of our reporting units.

We could be exposed to an increased risk of further goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions.

INCOME TAXES

We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. In establishing a provision for income tax expense, we must make judgments about the application of inherently complex tax laws.

Unrecognized Tax Benefits

We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements.

In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the extent to which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized is the largest benefit that we believe is more likely than not to be realized on ultimate settlement. As new information becomes available, we evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate.

Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax.

Deferred Tax Asset Realization

Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse.

Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies. These assessments are performed quarterly, taking into account any new information.

Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to uncertainties.

OTHER MATTERS

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to the Recently Issued and Adopted Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”

GLOSSARY OF SELECTED TERMINOLOGY

Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and interest income not attributable to our Card Member loans.

Airline-related volume — Represents spend at airlines as a merchant.

Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as asset-backed securities, that are secured by the transferred loans and receivables. The trust uses the proceeds from the sale of such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets.

Average discount rate — This calculation is generally designed to reflect the average pricing at all merchants accepting American Express cards and represents the percentage of proprietary and GNS billed business retained by us from merchants we acquire, or from merchants acquired by third parties on our behalf, net of amounts retained by such third parties. The average discount rate, together with billed business, drive our discount revenue.

Billed business — Represents transaction volumes (including cash advances) on cards and other payment products issued by American Express (proprietary billed business) and cards issued under network partnership agreements with banks and other institutions, including joint ventures (GNS billed business). In-store spending activity within GNS retail cobrand portfolios, from which we earn no revenue, is not included in billed business. Billed business is reported as inside the United States or outside the United States based on the location of the issuer. Billed business, together with the average discount rate, drive our discount revenue.

Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine whether the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual estimates. Refer to the Capital Strategy section under “Consolidated Capital Resources and Liquidity” for further related definitions under Basel III.

Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary cards-in-force) and cards issued and outstanding under network partnership agreements with banks and other institutions, including joint ventures (GNS cards-in-force), except for GNS retail cobrand cards that had no out-of-store spending activity during the prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer accounts. Cards-in-force is useful in understanding the size of our Card Member base.

Card Member — The individual holder of an issued American Express-branded card.

Card Member loans — Represents the outstanding amount due from Card Members for charges made on their American Express credit cards, as well as any interest charges and card-related fees. Card Member loans also include revolving balances on certain American Express charge card products.

Card Member receivables — Represents the outstanding amount due from Card Members for charges made on their American Express charge cards, as well as any card-related fees, other than revolving balances on certain American Express charge cards with Pay Over Time features. Such revolving balances are included within Card Member loans.

Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method of payment and not as a means of financing purchases. Charge Card Members generally must pay the full amount billed each month. No finance charges are assessed on charge cards. Each charge card transaction is authorized based on its likely economics reflecting a Card Member’s most recent credit information and spend patterns. Some charge cards have additional Pay Over Time feature(s) that allow revolving of certain charges.

Cobrand cards — Cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.

Credit cards — Represents cards that have a range of revolving payment terms, grace periods, and rate and fee structures.

Discount revenue — Primarily represents the amount earned on transactions occurring at merchants that have entered into a card acceptance agreement with us, a GNS partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members.

Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds purchased, bank overdrafts and other short-term borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt.

Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest income on deposits with banks and other.

Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the applicable account agreement until the outstanding balance is paid or written off.

Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest income is recognized using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so a constant rate of return is recognized on the outstanding balance of the related investment security throughout its term. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be made as scheduled.

Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term funding requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts.

Loyalty Coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally fund the consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the loyalty platform and by providing marketing support.

Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation and deferred acquisition costs.

Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net interest income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to uncollectible interest are recorded through provision for credit losses and are thus not included in the net interest yield calculation.

Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member loans or receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the average loan or receivable balance during the period.

Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.

Operating expenses — Represents salaries and employee benefits, professional services, occupancy and equipment, and other expenses.

Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provision for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for credit losses.

Return on average equity — Calculated by dividing one-year period net income by one-year average total shareholders’ equity.

T&E-related volume — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories. Non-T&E-related volume includes spend in all other merchant categories.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address our current expectations regarding business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:

• our ability to rebuild growth momentum and improve our financial performance to pre-pandemic levels, which will depend in part on a recovery in consumer travel and therefore on how soon lockdowns ease, travel restrictions lift and the general public begins to feel comfortable traveling again; discount revenue recovering broadly in-line with billed business; credit performance and reserve levels; identifying attractive investment opportunities that help rebuild growth momentum, product innovation and the pace at which we wind down our value injection efforts; our ability to control operating expenses and generate operating expense leverage; the effective tax rate remaining consistent with current expectations; and our ability to resume our share repurchase program; any of which could be impacted by, among other things, the factors identified in the subsequent paragraphs;

• our ability to grow billed business, revenues and EPS, which could be impacted by, among other things, uncertainty regarding the continued spread of COVID-19 (including new variants) and severity of the pandemic and the availability, distribution and use of effective treatments and vaccines; a further deterioration in global economic and business conditions; consumer and business spending not growing in line with expectations, including T&E spending not rebounding to 2019 levels by the end of 2021; an inability or unwillingness of Card Members to pay amounts owed to us; insufficient governmental stimulus and relief programs to address the ongoing impact of the pandemic; prolonged measures to contain the spread of COVID-19 (including travel restrictions) or premature easing of such containment measures, both of which could further exacerbate the effects on business activity and our Card Members, partners and merchants; health concerns associated with the pandemic continuing to affect consumer behavior, spending levels and preferences, and travel patterns and demand even after government restrictions are lifted and economies reopen; our inability to effectively manage risk in an uncertain environment; market volatility, changes in capital and credit market conditions and the availability and cost of capital; issues impacting brand perceptions and our reputation; the amount and efficacy of investments in share, scale and relevance; an inability of business partners to meet their obligations to us and our customers due to slowdowns or disruptions in their businesses, bankruptcy or liquidation, or otherwise; the impact of any future contingencies, including, but not limited to, restructurings, impairments, changes in reserves, legal costs, the imposition of fines or civil money penalties and increases in Card Member reimbursements; and the impact of regulation and litigation, which could affect the profitability of our business activities, limit our ability to pursue business opportunities, require changes to business practices or alter our relationships with partners, merchants and Card Members;

• future credit performance and the amount and timing of future credit reserve builds and releases, which will depend in part on changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates) and delinquency and write-off rates; macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; the impact of the CECL methodology; collections capabilities and recoveries of previously written-off loans and receivables; the enrollment in, and effectiveness of, hardship programs and troubled debt restructurings; the availability of government stimulus programs for borrowers; and governmental actions that provide forms of relief with respect to certain loans and fees, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance;

• net interest income and the growth rate of loans outstanding being higher or lower than current expectations, which will depend on the behavior of Card Members and their actual spending and borrowing patterns; our ability to effectively manage risk and enhance Card Member value propositions; changes in interest rates and our cost of funds; credit actions, including line size and other adjustments to credit availability; and the effectiveness of our strategies to capture a greater share of existing Card Members’ spending and borrowings, reduce Card Member attrition and attract new customers;

• the actual amount we spend on marketing in the future, which will be based in part on continued changes in macroeconomic conditions and business performance; management’s identification and assessment of attractive investment opportunities and the receptivity of Card Members and prospective customers to advertising and customer acquisition initiatives; the pace at which we wind down our value injections efforts; our ability to balance expense control and investments in the business; and management’s ability to realize efficiencies and optimize investment spending;

• the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by continued changes in macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of spend in bonus categories) and the redemption of rewards and offers (including travel redemptions); the costs related to reward point

redemptions; Card Members’ interest in the value propositions we offer; further enhancements to product benefits to make them attractive to Card Members, potentially in a manner that is not cost-effective; and new and renegotiated contractual obligations with business partners;

• our ability to control our operating expenses and the actual amount we spend on operating expenses in the future, which could be impacted by, among other things, management’s decision to increase or decrease spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities depending on overall business performance; our ability to innovate efficient channels of customer interactions, such as chat supported by artificial intelligence; restructuring activity; fraud costs; information security or compliance expenses or consulting, legal and other professional services fees, including as a result of litigation or internal and regulatory reviews; the level of M&A activity and related expenses; the payment of civil money penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; impairments of goodwill or other assets; the impact of changes in foreign currency exchange rates on costs; and higher-than-expected inflation;

• net card fees not growing consistent with current expectations, which could be impacted by, among other things, the further deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees; higher Card Member attrition rates; Card Members continuing to be attracted to our premium card products and the pace of Card Member acquisition activity; and our inability to address competitive pressures and implement our strategies and business initiatives, including introducing new and enhanced benefits and services that are designed for the current environment;

• a further decline of the average discount rate, including as a result of further changes in the mix of spending by location and industry (including the pace of recovery in T&E spending), merchant negotiations (including merchant incentives, concessions and volume-related pricing discounts), competition, pricing regulation (including regulation of competitors’ interchange rates) and other factors;

• our tax rate not remaining consistent with current expectations, which could be impacted by, among other things, our geographic mix of income, further changes in tax laws and regulation, unfavorable tax audits and other unanticipated tax items;

• changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may materially impact the prices charged to merchants that accept American Express cards, competition for new and existing cobrand relationships, competition from new and non-traditional competitors and the success of marketing, promotion and rewards programs;

• changes affecting our plans regarding the return of capital to shareholders, including resuming our share repurchases in the first quarter of 2021, which will depend on factors such as capital levels and regulatory capital ratios; changes in the stress testing and capital planning process; our results of operations and financial condition; our credit ratings and rating agency considerations; and the economic environment and market conditions in any given period;

• our ability to increase Card Member acquisition activities, provide additional value to Card Members and refresh our premium products, which will be impacted in part by competition, brand perceptions and reputation, and our ability to develop and market value propositions that appeal to Card Members and new customers and offer attractive services and rewards programs, which will depend in part on ongoing investments in Card Member acquisition efforts, addressing changing customer behaviors, new product innovation and development, and enrollment processes, including through digital channels, and infrastructure to support new products, services and benefits;

• our ability to grow commercial payments, including through cash flow and supplier payment solutions, which will depend in part on competition, the willingness and ability of companies to use such solutions for procurement and other business expenditures, our ability to offer attractive value propositions to potential customers, our ability to enhance and expand our payment and lending solutions, and our ability to integrate Kabbage and re-launch its suite of products;

• our ability to innovate and strengthen our global network, which will depend in part on our ability to update our systems and platforms, the amount we invests in the network and our ability to make funds available for such investments, and technological developments, including capabilities that allow greater digital integration;

• the possibility that we will not execute on our plans to expand merchant coverage and improve perceptions of coverage, which will depend in part on the success of the company, OptBlue merchant acquirers and GNS partners in signing merchants to accept American Express, which could be impacted by our value propositions offered to merchants and merchant acquirers for card acceptance, as well as the awareness and willingness of Card Members to use American Express cards at merchants and whether Card Members experience welcome acceptance for American Express cards;

• our ability to introduce new and expanded digital capabilities, which will depend on our success in evolving our products and processes for the digital environment, developing new features in the Amex app and enhancing our digital channels, building partnerships and executing programs with other companies, effectively utilizing artificial intelligence to address servicing and other customer needs, and supporting the use of our products as a means of payment through online and mobile channels, all of which will be impacted by investment levels, new product innovation and development and infrastructure to support new products, services and benefits;

• a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties, including as a result of cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of data, disrupt

our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;

• changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs and expectations regarding capital ratios; our access to capital and funding costs; the valuation of our assets; and our credit ratings or those of our subsidiaries;

• our deposit rates increasing faster or slower than current expectations and changes affecting our ability to grow retail direct deposits, including due to market demand, changes in benchmark interest rates, competition or regulatory restrictions on our ability to obtain deposit funding or offer competitive interest rates, which could affect our net interest yield and ability to fund our businesses;

• our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various factors such as future business growth, the impact of global economic, political and other events on market capacity, demand for securities we offer, regulatory changes, ability to securitize and sell receivables and the performance of receivables previously sold in securitization transactions;

• legal and regulatory developments, which could affect the profitability of our business activities; limit our ability to pursue business opportunities; require changes to business practices or alter our relationships with Card Members, partners, merchants and other third parties, including our ability to continue certain cobrand and agent relationships in the EU; exert further pressure on the average discount rate and GNS volumes; result in increased costs related to regulatory oversight, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or civil money penalties; materially affect capital or liquidity requirements, results of operations or ability to pay dividends; or result in harm to the American Express brand;

• changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, including of cobrand partners and merchants that represent a significant portion of our business, such as the airline industry, or partners in GNS or financial institutions that we rely on for routine funding and liquidity, which could materially affect our financial condition or results of operations; and

• factors beyond our control such as resurgences of COVID-19 cases, whether and when populations achieve herd immunity, severe weather conditions, natural disasters, power loss, disruptions in telecommunications, terrorism and other catastrophic events, any of which could significantly affect demand for and spending on American Express cards, delinquency rates, loan and receivable balances and other aspects of our business and results of operations or disrupt our global network systems and ability to process transactions.

A further description of these uncertainties and other risks can be found in “Risk Factors” above and our other reports filed with the SEC.

AXP - American Express Company