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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): August 4, 1999
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AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
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New York 1-7657 13-4922250
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Vesey Street, World Financial Center
New York, New York 10285
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
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(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events
On August 4, 1999, Harvey Golub, Chairman and Chief Executive Officer of
the Company, and several other officers of the Company, delivered
presentations to the financial analyst community relating to the
Company's internet strategy. Certain information contained in such
presentations is filed herein on Exhibit 99.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By /s/ Stephen P. Norman
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Name: Stephen P. Norman
Title: Secretary
DATE: August 4, 1999
EXHIBIT INDEX
Item No. Description
- --------- -----------
99.1 Certain information from presentations by Harvey Golub and
other officers of the Company on August 4, 1999.
Financial Community Meeting - August 4, 1999
- --------------------------------------------
Generally
- ---------
- We believe the internet will be a transforming event in our
lifetimes. It is causing a profound shift in the way people
communicate, the way companies conduct business and the very
businesses those companies engage in. The internet represents a
new playing field with a different set of rules.
- Some estimates project that $6.3 billion of U.S. travel sales
will be booked online in 1999; while still only a small
percentage of the total travel market, sales have doubled in each
of the last few years, and are expected to reach $25 billion
within the next 2 to 3 years. There are currently 11 million
internet brokerage accounts representing approximately 30% of all
retail trading. 18% of our merchants have websites of their own
and we expect that number to reach 50% within the next 3 years.
- We have begun steps to capitalize on the new business
environment, and have plans in place that are even more
far-reaching.
- We believe making this transition to an internet environment will
be critical for the long-term success of American Express Company
and the American Express brand name.
American Express Capabilities and Investments
- ---------------------------------------------
- We have made significant internet-related investments - both
internal and external -- and expect our investments to continue.
- Our annual spending on internal internet investments, such as
employees and contractors that develop website infrastructure
and technology to support those applications, as well as marketing,
has reached over $250 million.
- We have made external minority equity investments in emerging
internet companies -- approximately $71 million in 14 companies
to date - with positions ranging from 5-20% -- for a reasonable
investment return but primarily to create a strategic benefit for
our own internet plans and capabilities.
- We have broad strategic relationships with our investment
partners, ranging from marketing and supplier agreements,
creating exclusive offers to customers and targeting investment
dollars for marketing purposes.
- We have also invested externally in license fees for the right to
use internet applications, or partnership arrangements to
participate on another's website. For example, we have a
licensing agreement with Microsoft for the AXI online corporate
travel application. Our most significant sponsorship arrangement
is with Netscape's Small Business Channel where we signed on to
be the premier sponsor of the Business Finance area of
Netcenter's Small Business Channel. American Express Financial
Advisors has also become one of five sponsors of Microsoft's
Money Central webpage in MSN network, allowing us to promote up
to 5 links to our internet content such as 401(k) programs and
retirement planning.
American Express Approach to Internet Development
- -------------------------------------------------
- In the past, our approach to the internet has consisted of
one-off activities, implemented by individual business units;
although not developed with an overarching Company strategy, they
provided education, skills and a number of online successes, and
a foundation upon which to build our internet strategy.
- Initial successes included ExpressNet, which currently has almost
1.2 million registered users, with enrollees growing by an
average of 50,000 per month this year. AXI Travel, which is being
rolled out to almost 350 companies and has enrolled over 360,000
corporate travelers; and our Small Business Exchange, a content
site for small businesses.
- However, going forward, we realized we needed a more coordinated
approach under a single strategy and made several decisions in
this regard.
- We decided we would use a common architecture for our internet
activities.
- We decided we would develop internet utilities - for more efficient
use of our investment dollars.
- We decided we would make time to market a priority.
- We decided our internet efforts would be coordinated by a single group
at the Company responsible for overseeing our strategy, execution
and prioritization.
- We decided we would use the "my American Express" capability on
our website as the foundation for our internet content, providing
an internet destination for customers when they need payment, T&E
or financial services and products. The tools will be varied,
from transactional to informational, some with and without fees,
and developed internally, purchased or developed with partners.
American Express Internet Objectives
- ------------------------------------
- Be a leader in on-line payments.
- Use the internet to improve our operating structure.
- Provide appropriate online services to customers across all our
businesses and products.
- Have our website be the preferred destination for travel,
lifestyle and financial services.
Leader in On-line Payments
- --------------------------
- We will seek to be a leader in online payments, focussing on
merchant acceptance and providing security to customers. We want
our customers to be able to use their American Express Cards as
their payment vehicle for all their online transactions.
- We believe we have 92% spend coverage on the internet's top 300
sites, which represent almost 70% of the sales transacted on the
internet - and we have implemented an aggressive acquisition
effort to acquire more.
- We were cited in a Brittain Associates survey as the second most
used card on the internet.
- We have launched and promoted an online security guaranty. While
this policy is not unique to us, it provides consumers assurances
that they will not be held responsible for any unauthorized
charges when using the American Express Card to purchase online.
Early results are promising. Spending numbers indicate our
customers are more likely to buy online at those merchant sites
displaying the "Fraud Protection Guarantee" on their order page.
- We are developing a digital wallet capability to address consumer
concerns about security and convenience. The product is expected
to be launched in the near future, and we believe has the power
to transform our customers online shopping experience. This
product contains credit card and critical personal information;
it will fill out on-line forms and supply a consumer password for
sites requiring user ID. It makes it easier to shop online and
allows merchants to reduce the abandon rate at check-out.
- Compared to digital wallet, we believe smart cards offer a better
solution to online transaction concerns, and will find their way
into the market as an internet security tool. We have developed
plans to capitalize on this technology.
- The American Express Customer Privacy Principles are fully
applied to our internet businesses.
Improve Operating Structure
- ---------------------------
- We believe there is potential to use the internet to improve our
operating structure--both cost and revenue structures.
- This might be done through elimination or significant reduction
of costs such as those related to remittances, customer
statements, airline tickets and telephone service calls, and
creating revenue opportunities through reaching new customers and
doing so more efficiently, and cross-selling products to existing
customers.
- For example, Corporate Services is using an interactive
technology to develop an online sales proposal system where
prospective clients can come to our Website and design their own
expense management programs--including corporate card, purchasing
card or business travel services.
- We are also developing American Express @ Work, a
business-to-business desktop portal which will be a single source
for all applications, content and online services that program
administrators and employees in corporations need to perform
their daily tasks related to Travel and Entertainment and
purchasing. Four clients are now testing the service, although
many areas are still being developed. We will continue to test
American Express @ Work for the next several months in
preparation for the first commercial release in the fourth
quarter.
Provide Online Services to Customers Across All Our Businesses and Products
- ---------------------------------------------------------------------------
- We already provide online services to many of our cardmembers and
AEFA clients, and believe our customer base desiring online
service will continue to grow.
- In the month of May we had almost 3.5 million visits to our
Website, a number that has grown by 10% per month so far this
year and which has outpaced even the growth for overall web
traffic.
- Our 1.2 million ExpressNet customers have a number of servicing
options:
- 650,000 have checked their bills at least once in the last 6
months
- Almost 300,000 card payments have been processed on line this
year
- 400,000 enrollees have checked the balances of their
Membership Rewards points
- Over 150,000 people have looked into cardmember offers or looked
up their cardmember benefits
- Almost 30,000 prospects per month have applied for our card products
using an interactive Question and Answer model that helps them select
the card product most appropriate to their needs. While the card
application does not currently provide for real time approval, this
is a capability we expect to have available later on in the year.
- AEFA customers have also used online services, with over 600,000
visits to review 401(k) account transactions; online services are
also used by AEFA customers for financial planning tools, and
information on investment performance.
- In travel, consumers can book travel transactions, check the
weather, get point to point travel directions and get 360 degree
video views of hotels and cruise ships on the American Express
website.
- Merchants can also get up-to-date information on their
submissions and payments. Total Merchant Services website page
requests have increased by over 50% since the site launched in
February. Small businesses can apply for financing, access
Company card information and make international payments among
other services; 360,000 business travelers are registered to book
their corporate travel reservations using AXI Travel; corporate
program managers can perform online maintenance of their
corporate card and purchasing card programs.
- We intend to increase the functionality of our site with
appropriate servicing capabilities.
American Express as Preferred Destination
- -----------------------------------------
- Another goal is for americanexpress.com to be the preferred
destination for those customers and prospects looking for
content, products and services in our traditional business areas
- travel, lifestyle and financial services.
- We are developing the "My American Express" functionality on our
website as the foundation for our internet offerings. It now
allows customers to create and customize their own online
interaction with American Express based on their needs and
interests as a personal consumer, merchant, small business or
corporate travel manager.
- Currently, users can access, among other services, online offers,
American Express bill checking, Gold Card Events, membership
rewards balances, merchant activity, small business information
resources, online trading, financial planning tools and stock
quotes, online travel booking, mapping and driving directions and
locations of ATM's in various places.
- As our ultimate goal, or point of arrival, we expect to provide
six areas of content offerings - payments, travel and
entertainment, financial services, small business services,
business to business and merchant services--which the customer
can choose from in creating their own American Express website.
The content will be varied, from transactional, informational,
internally developed, externally licensed or cobranded.
- The offerings will be supported by a single technology
infrastructure.
- Since mid-April, 74,000 customers have set up their own My
American Express sites. As we expand our marketing and promotion
of this functionality, which we plan to do, we expect the number
of users taking advantage of this capability to increase
substantially. We also expect to have new releases for "My
American Express" on an ongoing basis, which will provide more
robust capabilities. Typically, we will start with a basic
capability, and then follow with added functionality.
- In areas important to our business strategy and to our name, such
as providing financial advice, we intend to develop identifiable
advantages relative to our competition.
- By adding new features to our Website, we expect to increase the time
people spend at americanexpress.com. We also want to increase their
return rate to the site.
- We also recently entered online retail banking with Membership
Banking. We believe Membership Banking takes a unique position in
the traditional and direct banking industry by providing superior
value through a highly attractive offer for customers ready to
take advantage of the internet, providing enhanced convenience
through multi-channel access to our service 7 days a week, 24
hours a day, and builds on our heritage of quality customer
service. We view the capability we launched on July 22 as Version
1.0. We are planning to constantly evolve and further develop the
offer "on Internet time."
- Through American Express Online Extras, we are also delivering
paperless offers to our Cardmembers that they can automatically
redeem with their American Express Card. This service is
primarily available in three markets--Atlanta, Washington, D.C.
and San Francisco. The service enables Cardmembers to enjoy
personalized savings. They can view offers online, and then use
their American Express card at the merchant and receive savings
on their American Express statement. The service also allows
merchants flexibility in how they make and change their offers.
This service is an example of the strength in our closed loop
network, and our ability to leverage our relationship with both
Cardmembers and merchants. In the coming months, we plan to
expand Online Extras by continuing to roll-out in key U.S.
markets, integrating offers into our high traffic areas and
enhancing the service features. We also intend to expand the
service by making offers within a network of partner sites, with
Ticketmaster Online--Citysearch being the first one.
Priorities for the Future
- -------------------------
- One of our priorities is to expand our international activities
and better serve our non-U.S. customers. We already have 11
international sites in 7 different languages. A number of the
sites are only informational at this time.
- We are ramping up our efforts outside the U.S. Transactional
applications such as Check Your Bill or Pay By Computer are
planned for launch next year in the U.K., Hong Kong, Australia
and Germany.
- With respect to our online capabilities internationally, we
expect a full range of applications and content to evolve over
time, perhaps at an even faster pace than in the U.S. as we take
advantage of our learnings.
- We are furthest along in our Corporate Services area
internationally. The AXI travel application has been or will be
rolled out to 9 countries by the end of the year. By next year we
expect many of our transactional and servicing capabilities, such
as those available as part of American Express @ Work, to be
available overseas.
- Our intention is to eventually get to full global capability
across all of our markets and products. We understand, however,
that we will have to shape our plans to fit local interests and
needs of customers.
- We also have a goal to provide full online travel planning and
booking capabilities - another area of our expertise and one part
of our company heritage. We expect to reach the point where
individuals log onto our website not just to book their travels,
but to customize travel planning information based on their own
specific needs and interests. This area is important to the
American Express name and we intend to excel at it.
- Another goal is to have both broad and deep financial service
products. A complete package, some of which we already have
today, would build off our Financial Direct brokerage and
Membership Banking foundation to handle a full range of basic
investment transactions.
- It would also include a selection of advice tools and services,
which could be utilized by a range of individuals including the
true "do it yourselfers", and those who prefer to use a financial
advisor, but also wish to conduct some of their business online
- We would also supply news, research, planning tools, portfolio
reporting and the like to individuals, as well as to advisors and
their clients.
- The focus of our financial services hub will be to provide not
just raw information and transactional capabilities but relevant
financial advice that can add value to a person's portfolio and
to their life.
- We will also look to leverage our closed loop network, linking
our merchants and customers with online offers and services. By
drawing on our relationships with our merchants, and then using
our own targeted marketing offers and the technology of the
internet, we can increase the business of our service
establishments while providing exceptional value to our
cardmembers.
Challenges Presented by the Internet Environment
- ------------------------------------------------
- Reaching our point of arrival will not be easy, and will clearly
present significant challenges that will test our resolve, our
tactics and our thinking.
- One great challenge will be the speed of the internet environment
and the need to learn and respond quickly - in "Web" years, which
may be equivalent to about two months--rather than calendar
years.
- Flexibility to meet the needs of customers will be another great
challenge. Customers will have the ability to immediately compare
alternatives. Superior product and delivery will be essential. To
succeed we will have to offer products and services on the
customers' terms - deliver not only what they want but when and
how they want it.
- The internet will also bring an increased level of competition
and decreased entry barriers. The economic models for internet
businesses will not be the same as those that exist today, but
what they will end up looking like is unclear.
- There are major unresolved issues relating to the economics of
the internet in terms of investment costs, revenue streams,
customer acquisition costs and methods, among other issues. It is
still unclear how to make money in the brave new internet world,
and for companies from the physical world like us, who are
"burdened" by the revenues and profits they generated in the past
and the requirement to continue delivering them, there will be a
great challenge for creative thinking around potential revenue
sources and cost structure to succeed on both the top line and
bottom line.
- Maintaining an open mind and accepting change brought on by the
internet will perhaps be the hardest challenge for businesses to
overcome - and the willingness to be the first to cannibalize
one's own existing business to succeed in the online world. This
will require clear communication, the elimination of internal
silos and exceptional organization discipline.
American Express Assets and Strengths
- -------------------------------------
- We believe American Express is one of the physical world
companies that can succeed in the internet world.
- The assets that we believe will be valuable in pursuing an
internet strategy include our brand; customer base;
infrastructure and relationships with both merchants and
consumers; a lack of infrastructure in certain areas, such as
bricks and mortar or a compensation structure for advisors
dependent on transaction commissions; and a global presence.
- The skills that we believe will be valuable in our internet
strategy include our partnership and outsourcing experience;
experience in brand management and marketing and information and
database management; and our commitment to the internet - our
goal is to have a profitable internet business that transforms
our Company.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Various forward-looking statements have been made in this Form 8-K
Report. These forward-looking statements are subject to risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from such statements. The words "believe",
"expect", "anticipate", "optimistic", "intend", "aim", "will" or similar
expressions are intended to identify forward-looking statements. 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. The
Company undertakes no obligation to update publicly or revise any
forward-looking statements. Important factors that could cause actual
results to differ materially from the Company's forward-looking statements,
include, but are not limited to, the following: the ability of the internet
to continue to expand consumer and commercial usage and evolve in a manner
that is attractive to the Company's current and prospective customers and
clients; the ability of the Company to: successfully leverage its assets
and skills in the internet environment, such as its brand, customer base,
international presence and marketing and data base management skills;
effectively realign its organization and culture to coordinate all internet
strategies company-wide; accelerate its time-to-market in developing new
products and services; maintain flexibility in its approach and use of
resources in order to meet its customers' needs in a quickly changing and
extremely competitive environment; view its businesses according to new
economic models not yet fully developed relating to investment costs,
revenue streams, customer acquisition costs and other financial
considerations, and effectively manage the Company's online strategy in
accordance with such models to generate profitable results; drive the
entire organization to accept the changes brought on by the internet as
inevitable and to seek to adjust existing businesses to take advantage of
such change; effectively use its resources to balance available investment
spending with the earnings and revenue goals of the Company and properly
trade off time-to-market considerations with the desire to provide full
service online capabilities; roll out an international online program in a
timely manner which accommodates the local needs, interests and
requirements in many different markets; attract and retain qualified
personnel necessary to develop and execute the Company's internet strategy;
and adjust to unforeseeable events that require changes in the Company's
strategy or development plan.
