And the environment, our businesses perform well on both an absolute and relative basis. One reason I remain confident in our ability to generate growth over the moderate to long term is because the solid business foundation we have in place, a foundation that was substantially strengthened both during and after the 2,008, 2009 financial crisis. As a result of our actions across a number of important parameters, we are a stronger company now than we were 5 years ago. The changes we implemented since 2007 have led to individual outcomes that we've covered with you before. But I want to take a step back today and show you the extent which our overall position has improved.
I believe you'll see that these changes set a strong foundation for future growth opportunities as well as for our ability to navigate through a weaker economic cycle. A number of our near term and moderate term opportunities will be covered today by Ed Gilligan. Ed will focus on our unique growth potential across payments and services along with the assets, capabilities and partnerships that provide advantages to our business model. We'll then end as always with time and answers. So let's get right to our performance.
Year to date through June, I believe we generated strong results. Despite a grow over challenge against last year in a weaker economy in Europe, we generated another record for revenues in the most recent quarter with growth rates on an FX adjusted basis of 9% and 7%, respectively for the 1st and second quarters. We continue to generate strong earnings from our growing businesses and reported record EPS while also achieving a return on average equity of 27%. Our financial results were the outcome of our strong business performance and our metrics remained positive across the board. Adjusted for FX, billings grew by 9% in the second quarter, down from the double digit levels of earlier quarters, but still quite strong considering our 15% grow over hurdle from a year ago.
Cards in force grew by 6%. Our franchise now exceeds 100,000,000 global cards, a benchmark that reflects the continued strength of our brand and our increasing relevance in countries around the world. We also continue to see positive growth in card member loans, which were up 4% in contrast to most of our large card issuer competitors. Finally, our credit performance continues to be exceptional and the best overall performance starting with billings. When you look at billings growth on an FX adjusted basis, growth rates did trend down across all regions in the 2nd quarter.
Asia and Latin America, however, continued to see double digit growth. As you would expect, Europe saw the weakest growth up 4% in total with Spain and Italy slightly down, Germany and the U. K. Continued to drive positive growth performance for Europe overall. Mexico, Argentina and Brazil have held up very well over the last several quarters as have Australia, Japan, China and Korea in Asia.
Looking at our relative performance in U. S. Billings, we continue to have higher growth rates than Mastercard and Visa combined, whether looking at credit and charge or also including debit. Debit spending as you can see was down significantly in the quarter. Based on this information, we seen over the last several years.
Globally, our billings growth has slowed a bit more than the credit charge growth of Visa and Mastercard given their higher proportion of international spend, though the results of Visa Europe are not counted here due to Visa's operating structure. Against large card issuers, we continue to do well. On a billings base that is almost 2.5 times that of our nearest competitor, we continue to grow at 1 of the highest rates in the While these are year to date results, a split of billings growth by quarter would show that adjusting for acquisitions, all major issuers saw a trend of slightly slower growth in the 2nd quarter versus the first. For card member balances, our peer situation is reversed because of our spend centric business model. In terms of loans, we have one of the smaller portfolios among major issuers.
For example, Citi's portfolio is approximately 2.5 times our size. Through the Q2, our 4% growth rate along with that of Discover stood out from other peers, all of which continue to see a pullback in organic balances. Now this pullback has led to negative revenue growth from most of our large issuer competitors. In times of significant delevering by consumers and businesses, a reliance on spread revenue is clearly a drag on top line revenues. And given the size of the portfolios of these issuers, I don't expect this dynamic to change over the short to moderate term.
Within our lending portfolio, our credit performance has been best in class over the last several years and is currently at historically low levels, a situation that's also true for our much larger charge card spending base. Delinquency and bankruptcy trends across our U. S. Lending and charge portfolios also suggest that all else being equal, we'd expect flat or a slight decline in write off rates for the remainder of the year. As our objective, however, is not to minimize losses, but to sustainably grow our business, we'll continue to balance our risk profile against our overall strategic growth objectives.
All major card issuers had substantial bottom line benefit from reserve turns in 2011. And this trend continued into 2012 though at a slower pace for some of us. To me, I'm proud of how we're able to stand out from the pack here. Even without the Visa and Mastercard settlement payments we received last year and with a relatively smaller takedown of credit reserves, we were able to generate positive earnings growth in the 2nd quarter. This is in stark contrast to Lend Centric competitors who even with sizable help from their balance sheet were unable to grow card segment earnings year over year.
Along with positive revenue growth, our bottom line was also helped by our control of ongoing expenses. While still at healthy levels, our marketing and promotion expense as a percentage managed revenue remained below last year's double digit levels and significantly below the levels of 2010. Now as I mentioned to you in February, going forward on average and over time, we're targeting M and P spending to hold at a rate of approximately 9% of total revenue, net of interest expense. Marketing and promotion remains one of our largest expense categories. And as we've shown in the past, does provide us with flexibility should we face weaker economic conditions in the future.
Card member rewards is another major cost category for us and is an expense area that continues to receive a great deal focus. Rewards expense is driven by a number of factors. For example, volumes, card member behavior and the cost of our offerings. As we've mentioned previously, we intend to keep our programs as efficient as we can, while also retaining the high value our card members place on rewards. As Steve Squirey took you through in February, we're also focused on containing our operating expense growth.
Now just as a reminder, operating expenses include salaries and benefits, professional services and other OpEx. Excluding the contra effect of our Visa and Mastercard settlement proceeds, operating expenses in the 2nd quarter grew by 2%. This is below our rate of revenue growth, which is our objective over the next 2 to 3 years. As we've discussed, the sizable credit benefits we generated in the latter half of twenty ten and throughout 2011 were reinvested in a number of areas, including our sales forces, our digital capabilities such as registered card and our technology and servicing infrastructure, all of which served to increase our operating expense base. We believe we're currently at an operating expense level that will enable us to drive our business growth going forward.
Of course, as always, we continue to look for greater efficiencies across our base and for ongoing reengineering opportunities, a capability that has served us well in various economic cycles. Our adjusted expenses as a percentage of managed revenue continues to come down from the historical highs we generated in 2011 when we significantly ramped up investment spending. Over time, we expect this ratio to migrate back towards historical levels in 2 ways. First through top line revenue growth and second through expense flexibility, which includes our plans to contain our operating expense growth. Also within the 1st two quarters were several other business achievements.
Now Ed is going to talk to you about his businesses. So let me give you some updates in other key areas. Within corporate payments, for example, we saw growth in our B2B billings in excess of 30%. We signed new payment deals with SAP, Barnabas Health and Orbitz and we launched our new which allows companies to process all of their B2B payments whether paid by card, check or ACH. ACH.
Within enterprise growth, we continue to gain momentum and expand new business opportunities. Serve We plan to release this functionality in the near future. Our customer adoption across Our customer adoption across enterprise growth is ramping up, helped by our strategic partnerships with companies such as Zynga and Verizon, where we currently have our serve app preloaded onto our first Verizon phone with more models to come. And just last week, we deployed our serve platform into China in partnership with Lian Lian. We are now processing mobile top ups in 1 province and we'll work out rolling this out in more regions in the future.
Now as you'll hear from Ed, our reloadable prepaid products are gaining rapid customer adoption and we are well underway to combining our serve and prepaid platforms, which give us the opportunity to create new unique products. We're rapidly expanding our prepaid distribution footprint, which now includes Target, Office Depot and Barnes and Noble. We're also working closely with Walmart on our next steps for our Bluebird product. It's still relatively early days, but I'm encouraged by our progress. Overall, since the beginning of the year, we've added approximately 1,000,000 customers across the new products introduced by Enterprise Growth.
This brings us to a current total of 1,600,000 customers. Now you'll recall that our first priority in 2010 was to get our platforms and infrastructure in place. Last year, the focus was on lining up appropriate partners. This year, our emphasis is on building scale so that we're in a position to generate volumes and revenues. Here we're seeing signs of progress.
Our monthly load volumes across serve and prepaid have almost doubled since January. Our annualized run rate last month was over $1,000,000,000 of load, an initial sign that our new customers are beginning to engage with these recently introduced services. We also continue to see the results of our service and loyalty investments in a number of metrics and accomplishments related to the health of our franchise. For example, we've seen it in continued improvement to one of our major customer metrics recommend to a friend, which has improved by almost 30% in the U. S.
Over the 3 years we've used it as a primary indicator. Recommend to a friend has a high correlation to customer satisfaction and also to customer engagement, the outcomes of which are generally higher spend and greater loyalty. We've also shown continued improvement to our customer retention metrics. And as you can see here, we've improved customer retention by approximately 40% over the last 5 years. This outcome speaks to the high value and quality service we provide to our card members, but it also translates into hard dollar savings of marketing and customer acquisition investment funds.
I know that many U. S. Competitors claim to be making inroads into our customer franchise. But across the most meaningful metrics, profitable market share, average spending per card member, cards acquired, recommend to a friend, retention. Our franchise is stronger than ever.
Also in the quarter was the announcement of Visa and Mastercard's proposed class action settlement with retailers, a legal suit that was initiated in 2,005. The settlement includes substantial cash payments by the 2 networks along with proposed changes to Visa and Mastercard rules. Let me say first off that this agreement is quite complex and there is still some question as to whether it will be approved by a sufficient number of litigants or the court itself. And while I'm not going to comment on the legal aspects of the settlement, one issue that has been highlighted is the potential for surcharging to appear in the U. S.
Marketplace. We have stated in a number of forms that we believe surcharging is anti consumer and that it directly shifts costs from businesses to consumers. In fact, 10 states including New York, California, Texas and Florida prohibited outright. Given the fragile state of the economy, it's not surprising that a number of retailers appear to recognize the harmful effects of surcharging on consumers and have already said publicly that they would not impose a surcharge on their customers. For us, while we will obviously see what happens in the courts and the marketplace over the few months, our overall strategy in this highly competitive space will remain the same to provide more value to our merchants and create superior value propositions for our card members.
We work hard to do this in countries that allow surcharging and in those that don't. And we'll work hard to continue the success within the U. S. Our performance in the first half of the year has been relatively strong, particularly against a backdrop of somewhat slower economic growth. Now while we would all prefer an environment of robust growth, I believe that will take some time before we return to the levels we saw in the mid-2000s.
Customers, businesses and governments are more cautious and this cautiousness is likely to play out in a number of ways. Our leadership team is realistic about the environment because we were a team that's been tested. We faced economic and business challenges before, both in the recent past and over the last decade. And at no time has it stopped us from moving forward with our focus on growth. We may have had to modify our plans to navigate the challenges, but our commitment to the company's moderate to long term success, our commitment to our shareholders remains firm.
The financial crisis of 2,008 2,009 as we all know was unprecedented. It was a turning point for many companies and it was certainly so for our company. The severity of the crisis and the breadth and depth of its impact required both immediate action and a longer term vision. It required us to quickly change certain aspects of our business model and to reshape some of our strategies for the realities of a very different environment. We took action as needed.
We implemented important changes and I believe we're now a far stronger company as a result. Now I've talked to you about some of our outcomes before primarily on a one off basis. But today I want to step back and give you a broader view of the extent of the changes we've made over the last 5 years. I want to share this look back with you for two reasons. First, to show you the stronger foundation we can build upon for our moderate to long term growth.
And second, to show you how our changes have strengthened our ability to deal with the volatility and uncertainty of the short to moderate term environment. In looking at the current position of the company, clearly strengthened a number of critical areas since the onset of the financial crisis. One of the most fundamental changes we made was to diversify our funding mix. No one had ever envisioned the wholesale funding markets would almost completely freeze up the way they did. The extended reality of that event drove home the need to protect our business by broadening our sources of funds.
In 2,007 before the crisis, short term and unsecured term debt made up approximately 2 thirds of our funding Today, those sources are down to 40% replaced by a far more stable source of funds deposits. At the height of the crisis, when mistrust of financial institutions was pretty widespread, we ramped up our efforts to gather customer deposits and we succeeded, largely due to the core strength of our brand and its attributes of trust and security. We grew from $15,000,000,000 in deposits at the end of 2,008 to over $26,000,000,000 by the end of 2,009 to a total today of almost $36,000,000,000 These deposits which we've built organically have added flexibility and stability to our funding program at cost effective rates. They've served to lower our reliance on wholesale funding and have lowered our overall exposure to the capital markets ever face another major crisis. At the same time, we changed our funding mix.
We made another foundational change by improving our liquidity. Prior to the crisis, we had only a modest level of on balance sheet liquidity in the form of cash and readily marketable securities. We look to the asset backed markets and bank lines as our principal sources of backup liquidity. By the end of last year, we had strengthened our position to the point where our cash and marketable securities could sustain our businesses for over 12 months. We certainly hope we never face a situation where that level of liquidity is required.
But having that strength is a critical insurance policy for the sustainability of our businesses. Since 2007, we've also lowered our reliance on spread revenue to generate our growth and profitability. Our loan balances have declined by approximately $15,000,000,000 since 2,007 and net interest income now makes up 15% of our revenues down from 19% in 2,007. The financial crisis caused businesses and consumers to lower their debt levels, while at the same time we reshaped our strategy to focus on more premium lending segments such as those within our co brand and rewards portfolios. Now I want to be clear here, lending remains a growth opportunity for us.
As you'll hear from Ed, we're investing in premium lending and we believe the economics and potential in this segment are strong. Our focus, however, has been to pursue the opportunity within the context of our successful spend centric model and by building profitable relationships, not chasing balances. As I showed you earlier, our lower reliance on spread revenue separates us from other major card issuers. It's the primary reason we've been able to maintain positive revenue growth even in times of deleveraging. I don't see consumers significantly ramping up their appetite for debt over the foreseeable future.
And I believe we're a far stronger company because we're not reliant on rising debt levels to generate our revenue growth. Tied to our lower reliance on lending are the significant improvements we've made to our risk profile. Across a number of parameters, we're in a far better position today than we were before the crisis. You've of course seen the improvement in our write off rates in both the U. S.
And international. We're currently below the rates we reported back in 2,007 significantly so for our international lending and are currently below our historical averages and U. S. Industry averages as well. The strength of our portfolio is also evident in 2 other notable metrics.
The first relates to loan tenure. In the beginning of 2,008 approximately 25% of our loan balances were generated by card members who had been in our franchise less than 2 years. Today that number has fallen to 10% with 90% of our balances held by card members who've been with us for 2 years or more. As a result, we know these card members better. We know their payment and spending practices and they in turn have a stronger relationship with us.
All in all, this is a far better position to be in particularly in times of economic uncertainty. A second metric that shows the improvement in our portfolio is our mix of transactors versus revolvers. In 2,007, 84% of our lending balances were comprised of revolvers, while today that number has fallen to 70 Another key improvement since the financial crisis has been the strengthening of our billing space. As you know, we opted to invest a significant portion of our credit benefit over the last few years instead of putting it to the bottom line. This allowed us to make sizable investments in customer and merchant acquisition, both of which have driven positive outcomes across our spend base.
For example, these investments help us gain over 2 50 basis points of general purpose charge and credit billing share in the U. S. From 2,009 to 2011. Given the year to date numbers I showed you earlier for both our billings and those of Visa and Mastercard, we expect to also gain billings share in the first half of twenty twelve. Our investments also allowed us to not just grow share, but to further diversify our billing space.
Investments within our global network services and international businesses have lifted their billings contributions over the last 5 years, investments in merchant acquisition and capabilities such as Pay With Points and Amazon have served to expand our base of online billings. Our merchant investments, a number of which were focused on the acquisition of everyday spend and smaller merchants have also raised our proportion of non T and E billings. T and E spend has dropped from 34 percent of our billings base in 2,007 to 31% in 2011. This serves to increase our relevance to a broader base of card members, while also lowering our exposure to discretionary spend categories, which tend to feel the first negative impacts in times of a weaker economy. It should also be noted that even as we shifted the proportion of T and E spend within our base, we've been able to generally maintain our global merchant discount rate.
Even as we've materially grown our proportion of lower priced non T and E spend, our reported discount rate has declined by only 2 basis points over the last 4 years. This reflects the substantial investment in improving our value proposition for merchants and in our network capabilities. Another indicator of our stronger position since the crisis has been our capital ratios. Our Tier 1 common risk based ratio stood at 9.7% at the end of 2,008 compared to 12 point 8% today, an exceptionally strong level. Looking at the capital ratios of financial peers under the Fed stress scenario, the strengths of both our business model and balance sheet become even more evident.
We are the only major issuer who remains in double digits under the stress scenario. Our capital position is simply more capable of withstanding a significant downturn, whether looking at our ratios on an absolute or relative basis. Our balance sheet is strong. Our businesses generate sufficient capital to meet both our investment needs and the needs of investors. And the strength gives us flexibility and options should opportunities arise in the marketplace economic conditions weaken.
The final reason I believe we're a stronger company is because of the increased breadth of our growth opportunities. When I considered our potential back in 2007, I was confident that we had several strong areas of growth within payments, including the continued expansion of plastic and replacing cash and checks and continued opportunities in international and GNS. Despite the significant progress we've made in those areas since 2007, I continue to believe we have some sizable potential in both the penetration of payment products and in international, including such as digital, prepaid and fee services. Our growth options have expanded over the last 5 years as we consciously move from being a pure payments player to a broader services company. Digital capabilities have broadened the types and numbers of customers we can profitably serve, whether it be through our core charge and credit products or with prepaid or digital products.
We view assets such as our closed loop or rewards platform as revenue generators, which has opened up a further range of business opportunities. Now Ed is going to be taking you through a number of these opportunities as part of his presentation. And I think you'll see why we believe we have core advantages within each area and why we'll continue to invest in and pursue these growth opportunities for the long term benefit of our company and shareholders. The financial crisis impacted many companies in different ways. Some failed, some managed to hang on hoping for better times and some took deliberate actions to adapt, to invest, to reshape strategies and tactics and to learn.
Those are the companies that ultimately came out of the crisis stronger than they went in. And I certainly count our company in that group. American Express has gotten stronger. We have a stronger capital position, a lower risk profile, a more stable funding base, greater liquidity and a more diversified billings base, while at the same time having even more growth options than we did just 5 years ago. This is a very strong foundation to build upon.
While this foundation is important for our future growth, it is also as I said earlier, an advantage in dealing with the volatility and uncertainty of the short term environment. We came out of the financial crisis stronger as I said, but we also came out of it with a very cautious view of the global economy. Our operating assumption was that we would likely face a slow, shallow recovery and that it would take some time for the economic environment to get back on to a steady upward growth track. We built our plans and chose our actions accordingly. We focused on credit quality.
We focused on our core affluent spend centric segment of the market. We strengthened our loyalty and rewards programs. We continue to reengineer our expense base and improve our efficiency and we've built a strong liquid balance sheet. Because we came back from the recession, a step ahead of many competitors and because our business model provided some unique advantages, we identified competitive opportunities and moved to capitalize on them by upping our level of investment. And as we've shared with you in earlier meetings, we've seen good returns We remain focused on growth and made these investments even as we We remain focused on growth and made these investments even as we faced both an uneven economic environment and a much more complicated regulatory structure.
Consumer confidence has remained fragile over this time and economic challenges have continued both here and abroad. And against this backdrop, we've shown the strength, flexibility and potential of our franchise. We've grown our revenues, generated quality earnings, strengthened our competitive position, up the value we provide to card members, merchants and partners and made those relationships even stronger. Our billings continue to grow, but at a somewhat slower pace than in the Q2. In July, global billings were up 6% on an FX adjusted basis.
When you also adjust for days mix, the growth rate was 7%. And as we've talked about before, the exact days of the week falling in any given month can distort our rates positively or negatively. And looking at the days mix numbers for a specific month adjusts for this distortion. And as you know, the strong recent performance of the dollar suggests that the FX adjusted growth for the quarter will come in above the reported levels. Now there's no one specific driver of the recent trend.
It appears to reflect a weak overall economic environment, which shows up in a number of areas including small business and corporate spending. The July numbers also seem to be part of the broader pattern that you've seen elsewhere in the industry and we'll obviously keep a close watch to make sure that we're reacting appropriately. I'm not going to offer a forecast today, but I continue to believe that cautious assumptions about the economy are correct. As I just took you through, we've strengthened our ability to navigate in times of economic challenge. And I believe we have the flexibility to manage successfully through this current cycle.
I say this because of the flexibility of our core business model the levers available to us should economic conditions change. And these levers include our ability to prioritize our marketing and promotion expenses as needed our exceptional risk capabilities, credit performance and customer profile our reengineering experience and overall on operating expense control our strong capital position, which has allowed us to generate value to our shareholders through share buybacks and dividends as appropriate A management team that has led through challenging economic cycles. And finally, profitable growth potential that is real, sustainable and which leverages the unique advantages of our business model. So to take you through some of these growth opportunities and share our views of their potential, let me now turn things over to Ed Gilligan. Thank you, Ken.
Good Afternoon, everyone. Delighted to be here to share with you how we're thinking about how we're going to grow over the next few years. So I'd like to spend about 30 minutes or so talking in more detail about our business, how we plan to continue our growth and our momentum. First, I'll start with a quick review of our current performance. Then I'll talk about how we're sustaining our merchant value proposition and the ongoing expansion of our merchant network.
Next, I'll go through the breadth of growth opportunities we have for the midterm. And finally, I'll discuss our longer term vision for continuing to increase our relevance for both consumers and merchants. Let's start with a quick review of our performance. We believe we have a business model that has become stronger and more resilient over the past few years. This is an asset that has enabled us to deliver a strong performance to our shareholders.
Ken gave you a lot of the details on our performance since 2007, I'd like to highlight just a few points over the past few years in which we laid the groundwork for our mid and longer term growth opportunities that I will discuss. Our spend centric model has delivered strong double digit growth in bill business over the last 2 years. During this period, our global growth rates are comparable to Visa and higher than Mastercards, while in the U. S. We have outperformed both networks.
During the past 2 years, our share of credit and charge purchase volume in the U. S. Grew to over 26%. Despite the recent moderation in billings growth, we believe we've continued to gain share in the U. S.
In the first half of this year. What's important to note here is that we grew in an environment that many people have called the most intensely competitive period for the card industry. And at the same time, our international businesses grew and became more profitable. We believe this positions us more effectively for future growth in international. This is a story of premium customers that you know well and we like to update you from time to time.
Globally, our average spend per basic card member remains well above the average spend on the Visa and Mastercard networks. This has been one of our strengths and it's a core value we bring to our merchants. One of the key spending metrics we watch closely is build business acquired. This is a measurement of the amount of spending on an account in the 1st 12 months of membership. You can see that this metric has grown well over the past 3 years in an increasingly competitive environment.
And we're acquiring this new spending more efficiently in terms of dollars invested versus spending acquired and we are pleased with this performance. Over the past several years, we strengthened the risk profile of the company as you've heard. Our net write off improved as did 30 day past due rates and tracking well below those of our major competitors on both measures. We continue to enrich our network by adding co brand and network partners. This created deeper relationships with our customers and planted the seed for further growth.
Since 2,007, we've added 21 co brand partners bringing our global total to 50. When you include GNS co brands, the total is more than 100 around the world. On the network side, we've added 29 partners, which gives us 146 globally. We've also launched some new partnerships to offer innovative products and services that create value for card members and merchants alike. For example, we launched Pay with Points with Amazon and recently introduced merchant offers through leading digital platforms like Twitter, Facebook and Foursquare.
These new partnerships are examples of how we can bring our closed loop to life and make it relevant to both consumers and merchants. So to sum up this first section, our spend centric premium model is stronger as evidenced by spending growth. Build business acquired has grown. We've improved our risk profile and the network is stronger. Over the past 2 years, we said that expanding the network and increasing merchant value would be a key driver of growth for the company.
And I want to take a moment now to talk about our progress. To expand merchant acceptance among smaller merchants, we have opened up new channels. Through our one point program in the U. S, we form partnerships that acquire and service smaller merchants across the country. This program has been in place now for several years and is working very well for us.
Outside the U. S, we have similar partnerships. Two examples are La Caixa in Spain and Cielo in Brazil. I'll explain how this works in a moment. Through these channels as well as through GNS partners and our own internal channels, we've added more than 4,000,000 merchant locations in the last 2 years alone.
Some of you have asked me whether non traditional players like merchant aggregators, Square as an example, are they presenting a challenge to our traditional business model. In fact, while these players may compete with us, I can tell you that we actually see an opportunity here and have already begun to work closely with them on expanding American Express acceptance. There is a potential risk that working through aggregators could disrupt the flow of information we need to serve customers, but we're working with the aggregators to mitigate that risk. So we've been aggressively opportunistic in opening up new channels where companies like PayPal Square, iZettle in Europe and Stripe, which now are bringing us 100 of thousands to small merchants, most of which previously had not accepted plastic before. While it's early days, these new partners with these partners, the initial signs are very promising.
On the right side of the slide are some examples of larger merchants that our own sales force has recently added including Costco in the U. K. We'll continue to invest in our long standing strategy of signing merchants where our card members want to shop. Here's the Cielo example I just mentioned. Cielo is a large Brazilian acquiring business that has reached across entire country.
Working with Bradesco, our GNS partner in Brazil, Cielo now gives merchants access to American Express. In effect, every merchant in Brazil with the Cielo terminal now accepts Amex. The results speak for themselves. The American Express merchant network in Brazil is now over 4 times as large as it was when we started the partnership with Cielo in 2010. In addition to adding new merchants to the network, we continue to build value for all our merchants.
In the last 2 years, we've launched several initiatives and products many of which are generating fee revenue for us. We have designed performance marketing programs to help merchants find new customers and generate new business. We've launched financing services to help merchants manage their cash flow and we've rolled out a certified to assist merchants in managing risk and controlling fraud in their online business. Since we know that Amex acceptance is a merchant's choice, it's important that we maintain our focus on providing value. These products, services and marketing programs are all designed to help merchants grow their business profitably and are powered by our closed loop model.
This is an advantage we give our merchants. And importantly, this has changed the conversations with merchants who increasingly see us as a business partner. I also want to mention Small Business Saturday. You're probably familiar with this successful initiative launched 2 years ago in the U. S.
In which consumers were encouraged to shop small on the Saturday after Thanksgiving. In addition to raising awareness of the value small businesses bring to the U. S. Economy, we used our closed loop model to drive business into small merchants by creating digital offers for American Express card members. This is not about one day.
Small Business Saturday is symbolic of our new relationship with small merchants. We stand with them and are creating ongoing programs and tools to help them build their business throughout the year. Helping small businesses market on Facebook and Twitter and win business from the federal government are examples of things we do every day to help them. That's a brief snapshot of our merchant strategy. Obviously, continuing to strengthen and bring new value to the merchant franchise is a critical piece of our plans for growth.
So let me take you through the opportunities that we see in the midterm. But first, I want to acknowledge some of the environmental challenges we face today. Some of this is stating the obvious, but I'd like to place our growth plans in context. The economic environment is in a slow growth mode and unemployment remains high in many places. The level of competition is high.
Some of our traditional competitors have been aggressively targeting affluent consumers and small businesses. On the regulatory and legal front, we're continuing to see increased activism by governments in regulating aspects of the payment industry and litigation, particularly in the U. S. Is forcing some changes in the way major players do business. To be sure these are challenges, yet we're still very excited about the opportunities we have to grow and make American Express an even stronger company over the next few years.
We have a large and diverse range opportunities in our core businesses. Our investment focus aligns with large faster growing segments of the industry and we believe that our unique business model places us in a very good position to take advantage of these opportunities. Today, I'd like to touch on 6 areas of investments. Even in today's environment, there are clearly large pockets of spend that have potential to show strong growth. These industry forecasts could of course change if economic environment changes.
But as Ken said, we believe that our cautious assumptions about the economy are reasonable. First, premium consumers have the heart and soul of our business. We have a proven track record in attracting and engaging them with rewards, experiences and outstanding service. We'll continue to invest heavily in this opportunity. U.
S. Small businesses spent $275,000,000,000 on credit and charge cards last year. There is an enormous amount of spending that is still on cash and checks that we could capture. We are a leading issuer of cards that serve small businesses in the U. S.
And already have strong business franchises in other places like Australia, Japan and Canada. B2B is another large opportunity. B2B payments represents $2,000,000,000,000 in potential plastic global spend, which is forecast to grow at 8% through 2015. We have innovative platforms designed for B2B Commerce that can capture plastic and non plastic payments. Emerging markets have strong growth potential.
Credit spend in these markets is expected to grow 20% each year through 2015. Prepaid cards are another fast growing area of payments that's estimated to be a $340,000,000,000 opportunity. Demand for prepaid products is forecast to grow at 13% globally over the next 3 years. To capture that growth, we have a diverse set of prepaid products targeted at a broad range of customers. Finally, there is online and mobile spend, which is growing at 10% in the U.
S. And 18% internationally. We'll continue to form new partnerships and deploy our closed loop model so that we can play an important role in global online and mobile. We remain confident in our ability to grow. In many of these areas, we have already grown faster than the industry because of our strong value proposition.
Now I'd like to take you through some specific examples of how we're investing for growth. Let's look first at premium spending consumers who are part of the total U. S. General purpose credit charge and debit spenders. For the purpose of this analysis, we're defining premium spend consumer as any individual who meets our credit criteria and who we believe spends more than $60,000 a year on plastic.
So people do ask me whether there are any more opportunities to grow here. And here's the answer. While we already have a large number of premium spending consumers in the U. S, it's clear there is an opportunity to expand. Bringing in new premium consumers and increasing our share of wallet among current customers are important and highly promising areas of growth for us.
And we have many strategies for capturing more premium spend and I'll give you a few examples. This is a new twist on partnerships that we've launched in the U. S. It's a niche approach that leverages partnership channels to capture high spending customers. In this case Mercedes Benz and Morgan Stanley are integrating American Express cards into their distribution channels.
Along with the co brand credit card, they are also offering a platinum charge card and their customers can choose which one they want. Both of these partnerships have proven successful in bringing new high spending customers into the American Express franchise and you can expect to see more of these types of partnerships. Another way we found to capture more spend is to offer customers an upgrade to a more premium product where appropriate. We found that this generates more spending on American Express since we're better able to meet the customers' needs. Measured over a 12 month period, the average spend on upgraded cards is 25% higher than it was on the previous product.
This is one of our most successful initiatives to increase engagement among premium customers and capture a higher share of their wallet. A clear measure of the relevance we offer is the ability to add value and get people to put more of their spend on us. The program is proof that it's working. Capturing more premium lending is another way we can grow while maintaining This chart shows us a large amount of premium lending in the U. S.
That is not currently on American Express products. It's clearly another big opportunity for growth. Growing loans has never been our primary strategy. Instead, we have said that we want to capture as much of our customers' premium spending as possible by offering them products that meet their needs. Naturally, some of them will revolve And we're making good progress in growing loans compared to other large players.
We and only one of our large issuer competitors actually grew loan portfolios organically in the 2nd quarter. So what was at one time a headwind for revenue growth has now become a driver. We are doing some innovative things that are working well and let me give you one example. Blue Cash Preferred is an interesting product we launched in April of last year. It has an attractive rewards program with multiple redemption options.
We are particularly pleased with the performance of this new product. 34% of Blue Cash Preferred card members are new to our franchise and the average annual spend per card member is $25,000 21 percent revolve, their average revolve balance is $11,000 and their credit is strong. These are premium customers. Now let's take a look at how we're attracting premium consumers outside the U. S.
We have a broad array of the airline co brands in our international markets. We have relationships with many major airlines around the world either through our proprietary business or through GNS. As in the U. S, we have other opportunities to grow in international. Here are some examples.
We have relaunched premium charge cards in 7 markets with additional services and reprice fees. This initiative has been successful in increasing customer engagement and building more revenue. Our premium lending products continue to be among our most successful cards in international markets. They capture an engaged high spending base with the right risk profile. Now let me turn to small business customers who are another growth opportunity.
In the U. S, our open business is demonstrating strong growth in an environment where competition is intense. With a renewed focus on small business owners, we grew faster from 2,009 to 2011 than did our competitors. Overall spend on small business cards in the U. S.
Grew at 8% per annum since 2,009. Nielsen estimates that Visa and Mastercard's combined small business volume grew at 5%, while we grew at 12% over that same time. Our growth in the first half of twenty twelve was even a stronger 14%. Our average spending per account is also stronger than that of our competitors more than double and average spending per account grew 16% a year from 2,009 to 20 11. Increasing our share of wallet among these small business owners is a key element of our strategy.
One product that's doing very well is Business Gold Rewards Card. Based on the successful Gold Rewards product we have for consumers, this card is tailored for small business owners with business oriented rewards, unlimited additional cards and employee spend tracking. It has a point accelerator and has been our primary small business acquisition vehicle. This recently redesigned product is performing strongly. We're seeing a 41% boost in spend per account and a 40% increase in new card acquisition.
And we're continuing to expand our small business footprint outside the U. S. Small business is already a big driver of our results in international markets with a 12% per year growth rate since 2009. We're also seeing increased spend by card member by around 20% a year and there's a potential for even more growth. You might be interested to know that despite the challenging economic conditions in Europe, 2 of our fastest growing small business markets are France and Germany, which both experienced solid double digit small business spending growth for us in the last year.
Our success with small business is an example of one of the benefits of being a global company. We have diversified geographic markets in which we can operate and we have the ability to replicate success with a short time to market. B2B payments presents another important growth opportunity for us. This business reports up to Steve Squeri. We're a leader in this field, but the upside potential for even more revenue is very attractive, particularly given the opportunity to convert B2P spend from check to plastic.
As you can see on this growth, our B2B payments business has been growing at a healthy rate in both the U. S. And international markets through the first half of this year. You've been hearing a lot about digital wallets in the consumer world and we've talked to you about Serv, our global platform digital platform for consumer commerce. This is Pave, our digital wallet for corporate payments.
It's an innovative product that facilitates corporate payments across multiple channels, including buyer initiated payments, which is our own product, but also includes ACH, international wires and checks. In addition, Pave offers an analytics service to help business manage cash flow and provides a consulting service to guide suppliers through the process of migrating to e payments. B2B is certainly an area of focus for us as we expand our capabilities even further. We believe we're strongly positioned to capture the B2B opportunity by leveraging our closed loop model and by building on our reputation for demonstrated success in this area. To address international markets, we've deployed 2 principal models, a network model.
In a few markets, we operate both models side by side. In the proprietary model, which operates in 22 mostly large This model relies on partners to acquire merchants and or issue cards. Here's a look at our growth in international over the past 3 years. As you would expect, emerging markets are growing faster than the developed markets. To take advantage of that growth, we have a clear emerging market strategy.
You might be surprised that our footprint in emerging markets is as extensive as it is. Here are the largest emerging markets where we offer cards directly or through GNS partners. In several of these markets, we are growing fast and we have plans to improve our position in each of them. Another area of investment focus is prepaid, which reports to Dan Shulman. This is a fast growing business, albeit off a smaller base.
Importantly, it gives us an opportunity to grow by expanding beyond our customer base and capturing payments traditionally made by cash and checks. We've already begun to tap into the opportunity for prepaid products in several countries, including the U. S. Where we began by introducing gift cards over 5 years ago. In several markets, we have launched prepaid cards that are performing well.
Our gift card is now available in the U. S, Canada and India. Our Global Travel Card offers 24 hour customer service with fraud protection, free card replacement replacement and emergency cash access. We've launched this product in 4 markets, Australia, Brazil, Africa. And finally in the U.
S, we launched a general purpose reloadable card. This product is bringing in new customers to the franchise, including many who are younger than our traditional base, more than 45% of them are under 35 years old. Prepaid is an area that we will be expanding both into new markets and in new product and service innovations. Our investments in online continue to pay off both in the U. S.
And international. Our growth in online build business has been strong, 23% annually since 2,009. As you can see, it's growing even faster internationally. Through June, our worldwide online spend is more than $70,000,000,000 which is up approximately 13% over the first half of last year. It's growing at 11% in the U.
S. And even faster in international at 19%. And while growth in the U. S. Has moderated, compScore data indicates we're continuing to gain share in this segment.
Our growth in online travel spend is holding steady and we're also gaining traction in the retail sector, is where we have been focusing. So we're pleased with the progress we're making in online spend. We have some clear strength that are the foundation of this progress. We have a strong consumer value proposition based on privacy, security and service. Our coverage of online merchants is very good.
We have acceptance at over 95% of the top U. S. Sites. And our innovative capabilities like Paywood Points and our digital closed loop ecosystem bring value to consumers and merchants. As in other parts of the business, we have metrics to measure our success and let's look at some of them.
As of June, there have been 3,700,000 cumulative downloads of our mobile app, which is more than double the downloads we had at this time last year. In 2011, consumers redeemed a total of $138,000,000,000 pay with points. And in the first half of this year, we're already ahead of that pace with 77,000,000,000 points redeemed. We've had almost 2,000,000 registered card enrollments for our digital offers in the last four quarters and the portion of U. S.
Card applicants approved online has now reached 50 percent. This is a very quick run through of what we see as some of our primary growth opportunities over the midterm. My conversations with many of you have centered on our premium customers. I hope I've demonstrated we're capturing opportunities to grow this business, But there's more to our story. Our investments are generating double digit growth across a range of areas.
This gives us confidence that we're putting our money in the right places. We think we're in a great position to continue to grow despite the economic environment. In the face of an uncertain economy, we're concentrating our investments in attractive areas. We've also strengthened both our capital position and our risk profile. To meet the challenges of competition, we're going after more premium spend and lend with refreshed products.
We're deepening our engagement with small businesses. We're adding more merchants. We're developing our merchant relationships, forming digital partnerships and using our closed loop to create value for consumers through savings and value for merchants through business building initiatives. And finally, we're intensely focused on ensuring that our internal processes and compliance meet the high standards expected of us and what we expect of ourselves. Now, we're focused on digit growth across a range of areas.
This gives us confidence that we're putting our money in the right places. We think we're in a great position to continue to grow despite the economic environment. In the face of an uncertain economy, we're concentrating our investments in attractive areas. We've also strengthened both our capital position and our risk profile. To meet the challenges of competition, we're going after more premium spend and lend with refreshed products.
We're deepening our engagement with small businesses. We're adding more Mercedigit Croke across a range of areas. This gives us confidence that we're putting our money in the right places. We think we're in a great position to continue to grow despite the economic environment. In the face of an uncertain economy, we're concentrating our investments in attractive areas.
We've also strengthened both our capital position and our risk profile. To meet the challenges of competition, we're going after more premium spend and lend with refreshed products. We're deepening our engagement with small businesses. We're adding more merchants. We're developing our merchant relationships, forming digital partnerships and using our closed loop to create value for consumers through savings and value for merchants through business expected of us and what we expect of ourselves.
Now I'd like to share with you some of our longer term vision to increase our relevance to both consumers and merchants. We have a strong track record of delivering relevant value. Our products and services we deliver through our history speak to that membership rewards, find hotels and resorts, open forum to name just a few. In parallel to expanding through our core payment services, we're building innovative capabilities to increase our relevance in the lives of consumers and merchants. Over the last several years, we've gone beyond adding value only when a card is swiped.
We have built products and programs that add value early in the commerce chain ranging from Open Savings to Small Business Saturday and Link Like Love on Facebook. Now we've increased the range of value we add to consumers. We're also creating demand and driving volume to merchants. You've heard us talk about the closed loop advantage for quite some time. Historically, we've used closed loop information to reduce fraud, to improve marketing, provide management information to commercial card customers.
These are just a few of those examples. Now we're bringing the closed loop to life in a new way in a digital world. This has proved to be an elegant and authentic way to reach customers in a manner we haven't been able to do before. Card members sync their cards on platforms like Facebook, Foursquare and Twitter. Then they receive offers from key merchants that they can redeem merely by swiping their card.
There's no need for coupons. Card members get an instant message from us confirming that they got the deal and they get a statement credit for the value of the offer. We have embedded our unique technology in these platforms and use our information to drive performance. You'll hear a lot of talking a lot of people talking about the power of big data. We're putting it to use in new and creative ways that also safeguard our customers personally identifiable information.
Believe the value of data is only going to be realized by those companies that handle it responsibly and use it in ways to benefit customers. That thinking guides our approach. Our closed loop model in which we have direct relationships with merchants and card members enables this frictionless digital ecosystem that has proven to be hard for others to replicate. Let me give you some examples of some recent offers and experiences. We're currently running a program in the U.
S. Called Sync, Explore, Save. By syncing your Amex card to Facebook, Foursquare or Twitter, you can take advantage of some great limited time offers. Now I know what's on your mind. What do Jay Z and Justin Bieber have in common?
Well, the answer is American Express. Through our digital marketing campaigns, our card members got early access to Jay Z and Justin Bieber's concerts in the U. S. Another example of increasing our relevance is about loyalty partner, a closed loop network business, which is a model we know well. Loyalty partner links consumers with merchants.
At its base are 40,000,000 consumers and hundreds of merchants. Loyalty Partner provides SKU level data that enables merchants to target offers to consumers. This is a performance marketing business in which merchants pay us fees based on participation and on the effectiveness of our marketing programs with them. The concept of charging fees for performance is one that we have brought to other areas of our business. Loyalty Partner is an adjacency to our current business, but it's also integral part of the transformation of our company.
Let me give you a quick update on Loyalty Partners' progress. Payback is the brand name that now operates in all loyalty partner markets. Germany was the first and is still the largest. Loyalty partner has penetrated almost half of Germany's households and we expect the business to continue to grow. Historically, merchants use paper coupons to make offers.
Increasingly, we're moving more German merchant offers onto mobile phones, the web and Facebook. And cross sell of American Express card based products is also underway. In India, we had 9,000,000 consumers a year ago. Since we signed a new partner, Future Group, 6 months ago, we've added 6,000,000 consumers. We're very pleased with the progress in this important market.
And our newest market is Mexico, which just launched and which has good potential. This market is fully digital and is the first time loyalty partner has launched with an integrated American Express card product. Over the next 4 years, our intent is to add at least 3 new markets to our current roster of Germany, India, Poland and Mexico. When we closed this deal in March 2011, we had 32,000,000 consumers. We now have 40,000,000.
By this time next year, we plan to have over 50,000,000 consumers on the loyalty partner platform. I don't have to convince you that the economic environment is challenging and that the competition in our industry is intense. We've been through economic cycles before and we have a lot of experience growing our business in the face of tough competition. We are proud of our track record in setting the standard for premium products and premium service and diversifying our business and making international a bigger part of our growth and strengthening our merchant base, building leading products for businesses both large and small and transforming our business through innovative digital capabilities. Ken said that we came out of the last recession a stronger company than we went in.
We still have the focus, the experience, the momentum and the strategies to continue on that trajectory despite the external challenges. So thank you very much. And I think we'll start the Q and A section now. Thanks, Ed. Yes.
So I got 2 questions. One's on the international segment. I was just wondering how we should think about its size over the next 3 to 5 years. Is it going to become a larger part of the story at American Express? And I guess secondarily, just I think this one is for Dan, but Ed, you mentioned like aggregators could disrupt the flow of information.
Is Google Wallet's recent change as an example of that? And how do you guys plan to respond to that?
Thanks. Well, I think the trend, Sanjay, has been international continues to make good progress. Even despite what's going on in Europe now, we're still growing and you can see the other parts of the world, particularly the emerging markets are growing. So we're not going to make a projection, but we're continuing to invest in this wide array of opportunities that I went through. We're not walking away from the U.
S, but it certainly feels like there's lots of opportunities to grow, both in our card businesses, in emerging businesses, mobile and online, in loyalty partner. So I think we have many more opportunities to grow now than we had a few years ago. Yes. I would just add, Ed, before you get into Google, that the strategy we've taken, if you look at the last few years, we've both increased the level of investment and we've added to our relevance in international. So you might remember the presentation that Doug Buckminster gave where he went through all of our businesses international.
So you can't just focus on the consumer card business alone. You've got to look at the merchant services business, the corporate payments business, loyalty partner, which we didn't have 5 years ago, the joint venture that we have with Lianne Lianne. So what you're seeing is we're taking the assets of the company and we really are ramping up prepaid. So we're doing a lot more. So I would say the last few last few years and we've put our money where our mouth is.
We've also invested organically and from the acquisitions that we've done, they've really been focused on the international opportunities.
Just add one quick thing before we get to Google Wallet. If you think about the rest of the emerging market right now, there's about 28 $1,000,000,000,000 or so of cash, primarily cash payments that go in check-in there. And credit, as Ed mentioned, is growing. But for the first time, we really now have an opportunity to address other parts of those emerging markets. Most of those emerging markets or many of them are going to not go from cash to checks to plastic to mobile like we are doing here in the U.
S, but could very well jump from cash right to mobile. We think there's opportunities in countries like China for that. And as Ken mentioned in his remarks, we've got a great joint venture partner with Lianne Lianne and we just started to actually implement in one province right now where people come into retail shops and give cash and that cash now goes into the serve infrastructure, where they can now top up their phones. Eventually that will go into cash to mobile payments trend?
So with Google, I mean, first, it's a Google Wallet is not an aggregator. The aggregators, particularly the ones we talked about Square, PayPal, Izettle in Europe are examples of that. And what an aggregator does is provide services to merchants to accept payments. PayPal has been doing it for over 10 years, basically focusing on very small merchants and enabling them to accept payments for online commerce. And they're providing a service that make it easier for small merchants to accept.
And they also they acquire for American Express as well as for Visa and Mastercard in addition for PayPal itself. Square is an example, a more recent example, roughly 2 years old focusing on getting small merchants in the offline world to accept payments turning their iPad or iPhone or Android phone into a POS device by putting a dongle in the phone. So they have brought 100 of 1,000. I believe Square's own number that they quoted recently was 2,000,000 merchants now using the Square device device as of early in Q1. When they get a merchant to accept plastic, they accept American Express.
They could disrupt disrupt information and we work with each one of them. Each one of them are different in collecting information so that the merchant of record, in this case, a Square would prevent us from seeing who the real merchant is and they need to give us that information so we can connect that to the card member. And we work with each one of them in different ways to make sure we have that information. Google Wallet started as what they've had a wallet for online commerce for a number of years. And they've announced over the last year to go into to be a mobile wallet.
Last week, they announced that they were moving forward and that they have deals with Visa, Mastercard and American Express. They don't have a deal with American Express as we pointed out to them and to some of the press that was following this. We're in discussions with them. There are some concerns there, a little bit on information, but a lot about clarity and transparency to our card members. It's a little more complicated, but it's we have to work that out with Google before we would allow the Amex card to be accepted in their wallet and we're still talking to them.
Great. Right over here and then I'll go back. Hi. I wanted to ask for a clarification on Sanjay's question because I did shop with my Amex card through Google Wallet last week. It's an arb on interchange.
Basically, it's a Mastercard transaction at the point of sale then funded by American Express. And I guess the question is basically does this eliminate the need to deal directly with American Express? How does American Express manage this because you're not providing You're not I'm not getting the points I normally would on that. You're not I'm not getting the points I normally would on that. So there are a lot of concerns that aren't being properly communicated to your cardholders and this could create a cardholder experience issue for you if someone like Verizon picks this up and does it with ISIS on a broad scale?
So ISIS is very different and we have an agreement with ISIS that deals with all our concerns about transparency and clarity. Google is using a Mastercard prepaid account that had an acceptance agreement with has an acceptance agreement with American Express. And it was originally designed for online commerce. As they move to offline and to mobile, as we pointed out to them, they don't have an agreement to take it offline. We have set a timeframe established a timeframe to either resolve this issue, predominantly the one you just mentioned, clarity and transparency to our customers.
So they know when they're using their AmEx card, it's funding a prepaid wallet, not actually conducting a transaction, which happens as a second step. Unless we get this right, customers will be confused and we cannot allow that to happen. It will cause customer service issues. I suspect that same could be true for Visa and Mastercard, but I won't speak for them. Sizable number of customers.
And what's critical in this product is what's the value proposition? You got to have everyone playing for it to work well. So our position is as we've done, as we've made very clear is we want to preserve the advantages of the closed loop. That's what we're doing with all of our partnerships. But as far as this dynamic of Google Wallet, it is at a very early stage with very few customers.
Just a follow-up on a different topic. You had mentioned earlier, Ken, that July saw 6% FX adjusted business growth and you said 7% based on equivalent mix days. Could you clarify what you mean by that first of all? And second, Dan, is 2% about the right spread still as it was in Q2 between FX adjusted and reported? Thanks.
Okay. So the number of in a quarter rarely does days mix matter because you have 90 days. But in a month, we get different volumes on different products. So what days are in the month can underlying growth, you want to do it on a days mix adjusted basis that gives you the 7%. In terms of where we go with FX rates, it's going to depend on what happens over the balance of the year.
If they stayed where they are today, that difference would diminish over time, but it's going to depend on where rates go from here.
Hi, thanks. A couple of questions of some of the topics that came up in your presentation today that I think get a lot of focus from investors and some concerns out there. The first one on your Slide 72 that had the share of the premium consumer segment, really nice to see that slide in the pie chart there. But the question is any sense of how that share has changed? I mean, is there a perception
out there that a
lot of the domestic Visa and Mastercard issuers are targeting your high spending customers and having some success, but we're not sure given your growth and your tremendous track record if that's actually translating into share gains, share losses or about the same?
So that's not a specific segment. So we don't measure share of that. That's just giving our definition of we believe those customers spend $60,000 or more on plastic and they pass our credit criteria. The point of that was to show you because I do get that question, can we grow any more with premium consumers? To answer your question about share, go back to the total share numbers that showed particularly in the last few years that we've accelerated the rate at which we've gained share in the U.
S. From over 26%. So that tells you how we're performing because the vast majority of our growth is premium consumers, small business, corporate accounts. The other point I would make is you have that overall growth and then in fact you have the increase that we showed average card member spending. So at the end of the day, we're not getting our share because we're bringing in non premium customers.
We're focused on our core customer and our share growth over those years, the last 3 years has accelerated rather than slowed down. And the other points I made relative to the retention of our customers has been very strong. So we believe we really do believe that our franchise is stronger than ever in the premium segment.
Prioriternation of the data and confidentiality in the index charts and stuff like that. But it would be nice to see that that would be a great chart to have in February where you have the share the premium segment in Sur La those concerns.
It's hard to do the apples to apples, but I do think the storyline of how things fit is it would be it's hard to argue that we've accelerated our share gain, average spend has gone up, but yet competitors are taking share from us in the premium segment.
One quick follow-up, let me
answer quick, on surcharging. The thinking out there seems to be I
think I sort of agree
with you, it's very anti consumer and it probably won't be very widespread. But one place where it could be widespread is in airlines and I think it's about 10% of your domestic billings are on airlines. So it's a pretty big number for you. Any experience prevalent? Have the surcharges actually moved your share of airline spending?
Are you actually losing some share to debit cards? Or is it really not having much of an impact? Thanks.
No, I mean, we're not going to give out share numbers for airlines in Europe. But I would say there is very few places where surcharging has taken hold other than maybe a market like Australia where the regulations changed 6, 7 years ago and airlines like Qantas have done parity surcharging immediately across all card products. There's different variations of the theme. All of them are pretty much anti consumer, but we have maintained our strong like we have been. Yes.
In that market, we perform well in Australia.
Yes, in
the middle. Thank you.
Just a question on your thinking on M and A. Today, you have a lot of growth opportunities internationally, U. S, I mean payments is pretty dynamic. You've made some smaller acquisitions, loyalty partners, I mean, Revolution Money, which is you've been investing in. But is there something are you returning a lot of capital to shareholders.
Are you just not seeing opportunities that can leverage your assets globally to accelerate growth in international markets, international prepaid mobile wallets? What are you seeing in because you're returning a lot of capital to shareholders, so you're obviously not seeing something attractive on the M and A front?
Yes. I think at the end of the day, we're going to look at opportunities just as we've done with the Certify and loyalty partner. And I think we've been pretty clear that we are looking at adjacent opportunities, but we're not just going to make an acquisition to do a deal. We want to make sure it fits with our overall strategy. And so we're looking in the international markets and that's something we'll continue to look at across a range of businesses.
We also did introduce $100,000,000 digital initiative that we're basing out of Silicon Valley take a look at a number of emerging companies there. In the 1st 6 months that we established that we've talked to some 300 companies already to take a look at that. We've made an initial investment in a company. There are several others that we're looking at. So it doesn't have to be a full acquisition.
It can be a been active in a lot.
And there are also marketing partnerships that we evaluate.
Just a quick follow-up prepaid and serve and trying to use prepaid maybe to accelerate the growth of serve. And you talked about Walmart and Walmart has a big financial services center. You're testing in Walmart. But are you looking at using some of the big retailers in the U. S.
Like a Walmart or Target as a way to accelerate the growth in a bigger way than you have in the past, not only of prepaid but of serve?
Yes. So the first thing that we're doing is we are taking our prepaid platform and our serve platform and we're merging those together. Because we think as we merge that together, we can create new capabilities that a lot of the existing prepaid players out there don't have right now. And so we can invent new products, new services to address different segments of the market and really create almost think of it as next generation banking types of products going forward. And so we're working hard on doing that.
And we hope by the end of this year that you'll see the results of that. We are working with a number of retailers. In fact, I'm really pleased to be able to say that starting tomorrow, we'll actually roll out into about 7,002 100 Walgreens stores with our prepaid product, some major retail working relationship with Walmart. We're in a number of trials with them currently. And so you'll start to see us continue to expand our retail footprint on prepaid.
You'll start to see the benefits of the serve platform and the prepaid platform merging together into differentiated innovative products. And the other thing Ed mentioned this in his presentation, but we're beginning to put out a number of prepaid products in a lot of international markets. In fact, with enterprise growth right now, we're in about 19 different markets. So you start to see us continue to not only build on those markets, but expand as well.
We'll go over to this end right here and then we'll go up there.
Hi. It's Sonia Parachanian from S&P Capital IQ. So this is kind of a tag on to the serve question. I was wondering if you could give a little bit more insight into your strategy and overall strategy and progress on rolling out serve. Also, do you eventually plan to integrate it with the Amex for iPad app?
And also, why did you choose to use the word serve and leave the word Amex out of the name?
Yes. So let me first, I guess you want me to take that
one. Yes, exactly.
So let me first start with the serve and the Amex branding. Part of the reason we started off with serve as kind of the product name for that is that it is a digital wallet And as a digital wallet, we wanted to note that there was multiple funding sources that you could put into that wallet, that you didn't just need to fund it with an Amex card, you could fund it with cash, which we're seeing quite a number of the funding sources coming from cash. You can do it with a debit card, you can do it with any credit card, and we'll expand the ways that you can fund into that. But one of the things that we've done over the course of the last year is we found that the attributes of the American Express brand, sort of the trust, the security, of that are extraordinarily important for consumers when they're picking a wallet. And so we've put a lot more of branding of American Express around that serve brand.
We want to connote it's open funding, but we want to imbue the attributes of American Express into our serve platform. And when you look at the benefits of that versus a lot of the emerging technology companies that are trying to move into digital wallets, we have a tremendous trust advantage there and that's very important in the digital kind of kind of says AmEx in the middle of it with serve underneath it. So it's much more bringing those 2 together. The second thing that we're doing on serve obviously is that we have a tremendous amount of capabilities that we've been building into the platform. The platform is really a little over a year old right now.
We start off with very basic capabilities. As Ken mentioned, we're putting out a whole new release coming out there. It will be the first time that we move beyond just digital payments into digital commerce with the deals and offers module on that. And those deals and offers will be differentiated. They'll be customized to your specific interest and taste.
You'll be able to calendarize your offers right on your calendar inherent. So that's an advantage that nobody else has right now. And when you look at things like Google Wallet, for instance, Google Wallet really in many ways is doing what we've been doing with serve, right? They're trying to open up their funding source. But we also have P2P on top of that.
We have sub accounts that you can put into place and now we have deals and offers. And as Ed mentioned, we've also done a deal with ISIS in which basically ISIS will not only NFC enable our traditional cards, but serve platform is it enables both NFC payments and we can do that in partnerships or a loan, but also cloud based payments as well. And so this combination of prepaid platforms coming together, distribution, have very high expectations, but I'm quite pleased with the trends we're seeing right now.
Several acquisitions in the enterprise growth area, which in aggregate are not insignificant amount of money. How can we be confident that we're earning an adequate return on that? And can we look forward to more disclosure financially or otherwise surrounding serve and enterprise growth in particular? Thanks.
Yes. I would say one is we are we will do periodic updates on the progress that we're making in enterprise growth and in Certainly, what I tried to do was give a sense when I talked about the 1,600,000 customers that have come on in enterprise growth and the load factor that we have over 1,000,000,000 of loads to give a sense of the momentum. I think what's important though, if you look at other newer businesses, PayPal has done very well. But the reality is they've been in business for 12 years. And so if you go over the 1st 2 to 3 years,
I don't know if they had
a 1,000,000 customers, they could have. But the reality is, as we said, the 1st year, what we were focused on is getting the infrastructure in place, getting the getting the deals done. The acquisitions, which Dan can talk about a little bit of the capabilities, we're really bringing in capabilities to serve were relatively very small capabilities that we were integrating in to serve. They weren't very big deals at all. Integrating in to serve.
They weren't very big deals at all. But I think as you look at the program, I mean literally we've been on this for 2 years. So the fact that I think we've got a infrastructure in place, there have been a lot of people talking about wallets and few of those wallets have been introduced into the marketplace. Ours is in, we're adding functionality, we're bringing in customers and we're moving forward. But it is not going to be a situation that in 36 months, we're going to come back and say we got 90,000,000 customers.
This is the build. There are certain trigger points that you have, but I think we're off to a pretty good start and I'm pleased with the progress.
Yes. I'll just build on those comments. First of all, to your specific question about acquisitions, obviously, service
built on the Revmo
acquisition that is sort of the Symmetrix. Acquisition Symetrix. Symetrix was $25,000,000 $30,000,000 deal. I think we announced on And Symmetrix basically gave us the capability of immediately moving into virtual currencies and loyalty. And what we were able to do within 6 months of that is actually do our Zynga deal.
And the Zynga deal we could not have done without being able to link the API sets of Symetric right into the server platform. The key thing on Zynga deal is that you basically have customers of Zynga earning virtual currency as a reward for actions that they take. And we did all that right through the Symmetrix acquisition. So I actually couldn't be more pleased with that acquisition. It was the perfect sort of tuck in in terms of capabilities.
We immediately deployed it with a major partner and we immediately saw scale as a result of that. And we also were able to hire a number of engineers right away that have been spectacular in terms of
was critical. If we had to build
that on us
was critical. If we had to build that on our own, it would have been quite difficult for us. Your adjusted expense to manage revenue numbers, the old numbers 5 years ago, wouldn't that be a relatively easy bogey to achieve given that the productivity gains that one should expect to gain from your increased revenues over the last few years plus the shift from offline to online and mobile payments, which I would guess would be much cheaper to process? I wouldn't say it's an easy bogey. Dan, why don't you
There's lots of moving parts within that. Certainly, you're right. To the extent we can achieve scale, that should be a benefit for many of the things that we've done digitally in servicing are enabled us to achieve efficiencies in are enabled us to achieve efficiencies in cost. Also within that number is rewards cost, which as you know is a higher percentage of revenues than it was back in 'seven. So based on the environment and constantly innovating what we offer customers.
There's lots of moving parts between both efficiency, value to the customer and we're balancing all of those to achieve our financial targets and put a value proposition into the marketplace. So there's lots of moving parts and we're very focused on that. And as we said, over time we believe we need to move back towards where we were before in terms of percentage and I think we're making good progress against that.
I think what's important is the innovation that's taking place, the platforms that we're creating. So it's not like we're in a static situation. We're constantly evolving and innovating. And so what we talked about relative to serve, that's an expense. Obviously, we hope to get the scale.
We hope to get the margins that we're driving for. But in a point in time, what we factored in is the investment that we're going to place and So I actually think it is a target that is a target that we believe we can achieve. Steve, you made the presentation in February and why don't you talk a little bit about it? Couple of points. I think when I made the presentation in February, we talked about how we created Global Services Organization to really put all our transaction processing capabilities together.
And the chart that I showed was basically in a 2 year period of time absorbing almost 20% more transactions and actually lowering the cost. What that does for the company is create the leverage opportunity so that we can invest in new capabilities, new sales people, GNS, loyalty partner, certified, so forth and so on. And so you're right, we we do have we do get efficiencies and productivity, but it allows us to take those efficiencies and productivities and really try and drive more growth for the company. Can you talk a little more about GNS as a growth driver? I think you said 159 countries.
Is there much more to do there in terms of new countries or new banks to partner with? And also talk about how things have gone in the U. S. It's been a long time since we've had a new partner announced domestically. It's been since 2004.
Where are things working well? Where are they not working well? We have a very good pipeline of deals for G and F. So I think the big opportunity for G and obviously are going to look to add new partners where it makes sense and we will. The pipeline of new deals that we look at, I feel very good about.
And Brad, the new partner we signed last year in the U. S, it was really it was part of Citi, but it was a separate deal from Macy's. And we put on a lot of volume in the U. S. Last year just by converting the Macy's and Bloomingdale portfolios from Visa on to American Express.
And that was very good. In fact, one of the reasons why GNS growth rates are moderating is to grow over of the implementation of Macy's portfolio a year ago. So, it seems like G and S though still growing faster than overall. So it's growing as a proportion of overall build business. And the thing about G and S is that it's more profitable.
You may generate less revenue per transaction, but it's more profitable on an ROE basis. So should we continue to expect as you grow that then that will help boost returns relative to build business elsewhere? Yes. I mean, it's a great complement to our existing business. And when you look at the slide I put up on emerging markets, virtually all of them with the exception of Mexico and India are G and S markets.
So we look at emerging markets, we would expect them to grow faster than the average for American Express. As I showed there, S markets, we deploy very little capital. The amount of revenue we earn is less as we've pointed out. That's one of the reasons why you see divergence between our discount rate and discount revenue because G and S is growing faster and we share revenue with G and S partners as we've talked to many of you about over the years. But we believe it's a great complement.
It certainly has a high return on tangible equity in that segment. And it's given us a great footprint in some of the fastest growing markets in the world without risking a lot of capital. And I think just the earlier question that Sanjay has fitting with yours of the focus on international, We just think G and S fits in incredibly well. And when we look at the growth rates of emerging markets, we think we've got a terrific model that fits in there and that doesn't also layer in what we believe we can do with enterprise growth. So I think what's important is that we've got a range of models and really a range of growth options that we think can be very attractive for growth in international.
Yes. And then we'll come to you in a second. We're just going to You mentioned that net interest income can kind of turn from being a headwind to a tailwind now that you have some of the loan balances growing. So Dan, I guess it kind of implies that your net interest yield or margin is flat ish to up a little bit. Can you talk about some of the puts and takes that enable you to keep that flat or maybe grow that net interest yield amid low rates and competitors coming your way?
Yes. So I think our rate before the Card Act was about 9% our yield. And we made some pricing changes to our products with the intent of keeping it at about that 9 approximately where it was proximate where it was last year. So to the extent we get loan growth and we had 4% loan growth in the 2nd quarter, we also had 4% growth in net spread and that's our objective. As Ed said, we don't have a target for loan growth.
What we really want to do is put products out there that are spend centric. Lots of customers want to who are very creditworthy want to have the ability to evolve periodically. And so we certainly want to enable that. And I think it is a positive for a while. We had negative loan growth as everybody did.
We've bounced back much faster than many of the competitors. So it's not the type of headwind that we saw a year ago and it's contributing to our revenue growth.
Yes. Thanks. Ken, apropos of Slide 15, I think the language you used was that you were studying card member rewards expense. Could you elaborate on that? We periodically review what our expenses are.
I think Dan you talked about that.
Yes. So if you looked at the chart that was up there, it was looking at rewards expense as a percentage of billings. And what you saw in the last 3 months, it was a percentage that was similar to what you saw in the last three quarters of 2010. Now rewards expense is driven by volumes. It's driven by what the ultimate redemption rate is.
And the ultimate redemption rate is really based on the redemption behaviors as customers. And historically, we've seen customers be engaged and the redemptions increase, so that increases the ultimate redemption rate. In the 3 quarters of 2011, it was at an elevated level because our customers were redeeming at higher levels. And so we saw the ultimate redemption rate go up at amounts greater than we had historically seen. But in the last three quarters, it's kind of moved back to the historical levels.
I'd also point out that in the Q1 of 2011, we revised our estimation process and that had an impact in that quarter. But I would say the type of growth in ultimate redemption rate over the last few quarters is more similar to what we saw prior to 2011.
Okay. And then an unrelated question, Ed, you had alluded to the success of loyalty partners and the prospects of bringing it to 4 new markets. Mexico is very close. So is the U. S.
One of those next 4? That's accurate. That's a good call. So I think you're asking me would it make sense in the U. S?
Is that what your question is? I mean, it certainly would be a market we would look at and consider. I mean, we'll look it's not just an international play. It certainly could work in the U. S.
There have been attempts in the past decade or 2 to launch coalitions in the U. S. That really haven't worked. So we're very conscious of that. And the U.
S. Is certainly a place we would consider over time if the market conditions are right. Meaning you have to have a critical mass of merchants who want to who will make this their loyalty currency and work with other merchants to do it. So you need that critical mass. And when you do that, if you get the right merchants that brings the consumers, the collectors with it.
As we saw in India, 6 months ago, we signed a new partner called the Future Group, which is a high end retail business in India. And within 6 months of signing Future Group, we brought on 6,000,000 more collectors, more consumers into the Indian loyalty business. And that just proves the power of when you get the right partners and they commit to making this their loyalty currency. So if we had we will launch in markets where we feel the opportunity is large and where we have the right critical mass of partners to make a move. And the U.
S. Certainly could be one of them. Yes. I think not addressing the U. S.
Specifically, but I think what's important is what has changed see the use of analytics and performance marketing and the ability in a range of ways bringing together buyers and sellers. And so what I think is important about loyalty partner is don't just look at it as Ed said as a coalition rewards program alone. Really look at it as a marketing performance organization. And so performance marketing, I think over a range of things of what we're trying to do with enterprise growth, what we're trying to do with loyalty partner, that's going to be a major focus. And that's also where this ecosystem, this digital closed loop that we've talked about of having that information on the merchant side and the issuing side becomes even more So loyalty partner on one level, we talk about it as both an adjacent opportunity, but also it's becoming more in line with the core focus, which in our existing business as well as these newer businesses, we're increasingly customer value.
Yes. So I think you're discussing it now, but it's just the monetization of your data and the advertising economics. What contribution could we see to revenue from that over time? Yes, I'm not ready to give a number or a target, but what I would simply say on one level that we've created a model that fits a range of businesses that has very attractive economics. If in fact we come up and we believe we're coming up with some of those value propositions that are meaningful, we think we have some pricing flexibility there where because of existing relationships that we have both with the customer and the merchant, we actually could offer some very attractive economics to a range of partners.
I think it's too early, even if I was inclined, which I wouldn't be to give you a number to throw a number out there because we got to prove it. We have examples of where we have done this in other areas. Our fine resorts and dining program has been one where we have clearly delivered value for hotels in a major way. And we have pockets of examples of that. But I think what's happening is with the digital closed loop ecosystem, with loyalty partner, with what we're doing in enterprise growth, I think we have a portfolio of opportunities that we think are very important and this organization is very, very focused on how we can monetize that in a much greater way.
Monetization comes in a variety of forms. Certainly comes in creating new revenue streams by creating more value, being more relevant in commerce and we were trying to give some examples of that. But when you look at what we've been able to do because we have unique information, a unique business model, a closed loop and we can bring our business model to life on Facebook, Foursquare and Twitter, the way we're monetizing the closed loop is first by driving net promoter scores of card members and merchants by becoming more relevant to them and reaching them on their digital journey in ways they never expected before, right? We also create we also can monetize the closed loop by changing the way prospects think about us when they see us now doing unique things in places they never expect us to see us. So we believe monetization of data could mean improving efficiency of acquisition by making us more relevant to prospects.
And certainly it includes getting paid for performance, which is we use loyalty partners as an example, but there's as Ken said, there's many pockets of this where we can deliver more volume to merchants and create new revenue streams by doing it. But the point is we look at this holistically, look at our business, remember we're here to compete with our traditional competitors, but the new ones coming in and we're digging a deeper moat around our business by using information and our business models in ways that are hard to replicate by others who are following us. At the end of the day, when we talk about the digital transformation, that's why the digital transformation is just not enterprise growth. It's across the entire company. And so what your question really addresses is an aspect of it.
But what we're doing is transforming the existing business as well as getting into new businesses. And that's we believe will give us enhanced economic flexibility going forward.
The great things about digital platforms is that they enable us to take what is really the ethos of our company, which is providing tremendous value, kind of in the space between consumers and businesses. And digital platforms to allow us to take that to a whole different level. The amount of money that businesses and brands used to try to enable commerce is anywhere maybe to 3x to 4x that of the payments business. It can be a $300,000,000,000 to $400,000,000,000 that's spent on advertising and promotions, couponing, market research. And as Ed just mentioned, if we can make that more effective because it's tremendously inefficient today.
You look at couponing, only 1% of all coupons are redeemed. Click through rates today are 0.1% that goes TV advertising. The latest study I saw when you talk to CMOs about it, over 80% think they have a negative ROI on it. If we can make that much more efficient by marrying kind of consumers and merchants together through digital platforms and the data we have, make it much more efficient. We think that's a great opportunity for value for our consumers, for our merchants and for ourselves.
But that's also off of a base business that has some very attractive characteristics. So that's the other point to remember. This is not we're starting this from scratch. It's off a very success potential conflict of interest coming at some point with someone like ISIS where American Express wants to be the targeted marketing partner of a merchant as does ISIS. One could argue I appreciate the statement based crediting and as a cardholder, but at the same time is there a potential fight coming with those types of entities that want to step in where you've traditionally been?
Ed and Dan have obviously a deal with ISIS and it'd be useful Ed why don't you comment and Dan comment on that? Well, I think one of the elegant parts about the way we set up our digital ecosystem is it doesn't matter whether you're swiping a card, clicking a mouse or in the future waving your phone at a POS device or keying in your mobile phone number in order to us to control the customer experience. When we say closed loop, which means we own relationships with customers and merchants, we can control the customer experience. We can send you an offer that's relevant to you based on where you are. We can get you on Twitter, Facebook, Foursquare today.
We can get you on our mobile app. You like the offer because it's relevant to you or it's relevant to your friends. You load it to your card just by clicking on it once you've synced your card. Then it doesn't matter what the form factor is as long as you have that AmEx card and you're conducting that transaction. That gives us independence.
So whether there's a fight or not, I don't know what the future will bring, but I know we have direct relationships with millions of merchants. We have 100,000,000 card members now as Ken said and we can control the experience to both of them being relevant to both. When we do that, we get more volume on the network some strong advantages. And I do believe you're seeing us putting those advantages to work now regardless of what the POS infrastructure will be 3 years from now.
I'd just add on top of that. I mean, obviously, we're at the very beginning innings of this transition that's going on. And one of the things that we're trying very much to do right now is create optionality going forward. It's hard to know and who might there be a combination and who might there be a combination in between there. And so we're trying to make sure that we keep our optionality open.
But we think very carefully about what it is that we need to protect that we think is part of our core assets, and who might we want to partner with. And where you see us partner with somebody that means that today we believe that we're protecting the core assets of the business model that we have today as well as where we think it might evolve going forward. I think one other thing that we're finding right now increasingly is that the battleground that things are moving towards is this commerce enablement piece of it. The actual payments piece, that core piece, that is a very, very difficult thing for others to replicate. It's very expensive.
All of the things that we have had in place for the last 50 or 60 years from our risk management, our fraud management, our authorization systems, all very, very difficult. And so the payments piece of that is being kind of duplicate that per se. Some are, but not many are doing that. What duplicate that per se. Some are, but not many are doing that.
What we're really trying to battle over is that commerce enabling piece because it's such a large potential opportunity to create value for everybody on that. And so where we partner, we think that we'll be able to help provide that value and where we think about it and where we might not is where we think it might interrupt our business model.
Here's the key though. I think at the end of the day, as we're talking about that feeds its way through is we want to preserve the attributes of the closed loop. So follow the bouncing ball. If we start giving away information, then that means we're going to compromise the closed loop. I mean that's so that's why we're very focused and we've been able to operate very well.
2nd point that I would make is on one level, we're competing with share of mind with all of our partners. Part of our job is to add value. So whether you're a hotel, anybody who's focused on a brand wants to have a share of mind to the customer. And if they felt that we weren't adding value, they would say we don't need to do business with these folks. And our job, that's why we're not reliant on a form factor is our job is really to provide that value for the customer.
And what's critical for us is we have the value and we have the closed loop. To groups that really don't have much care about business since the regulators, You have made a disclosure about the CFPB in your recent Q. The EC has been talking about potentially looking at 3rd party systems. So I just wanted to get your general view of what you're thinking from a regulatory perspective. How much harder is it going to get to proliferate your business in the way you have over the last 20 years over the next 10 years?
Here's what I would say overall is, obviously as I said in my remarks, I think the regulatory environment has gotten more complex. But as I really look at our growth opportunities and the issues, we do not believe that our opportunities have been reduced as a result of the regulatory environment. Has it become more complicated? Absolutely. Are there ranges of issues that we have to deal with?
Absolutely. But as we look at the global regulatory landscape, the strategic objectives that I've set, the approaches that we're taking to grow our business. We clearly where it's appropriate, we'll make adjustments to our strategies and tactics. But against the overall objectives and the business opportunities that we've gone through today and over the last several years, we're going to continue to pursue those business opportunities. I'll ask for one second.
I mean, you mentioned what's going on in the EC is EC is very different than what's been happening in Australia and what's happening in the U. S. The CFPB is now over a year old. But I would make a critical point the way we think about it. There's nothing the CFPB or our regulators are asking for us.
So here in the U. S, that is something that we don't want to do. They want us to be clear and transparent and fair with customers. That's what our brand stands for. We are continuing they set high standards, we set high standards.
We continue to work hard to meet their requirements and our own requirements to be fair, transparent, clear with our customers. This is making us a better company and we already are best in class. We've won JD Power award for customer satisfaction in the U. S. 5 years in a row.
When the CFPB published its complaints log a few weeks ago, we had by far the lowest number of complaints, but we're not satisfied with that. So there's nothing they're asking us to do that's in conflict with our mission to add value to consumers and merchants alike. And we have to embrace that and we have. And we're working hard to turn that into a competitive advantage. So when you say you might be confused if you're using a Google Wallet and your card in that because you may not get your points, that's a major flag for us.
And while you might have been able to use your AmEx card and Google Wallet a week ago, if we don't deal with that issue effectively from a customer point of view, that will not be true 30 days from now that you'll be able to use your AmEx card. So we take this seriously and we're looking at everything we do and raising the bar on ourselves. Yes. Let me just have this and then I'll get back to you because he hasn't had a chance to answer
the question. Thank you. First, I have a follow-up on rewards costs. On new accounts you're acquiring, what's the incremental cost to acquire and also the incremental cost to retain those accounts. And what I'm trying to get at here is once we kind of strip out the noise of changes in redemption rates, what's kind of the longer term trajectory of rewards costs?
So we design products. We want to put a product in the marketplace that we think will enable us to retain customers or attract customers. But within that, we do a financial calculation and it considers what's the spending of the customer. It assumes what the loss rates, credit loss rates will be for that customer group. It looks at the cost of acquiring to acquire somebody who's going to spend at a higher level, costs more than someone who spends at a lower level.
We look at all those economics, we look at the return we want and then you can calculate the reward that you're able to give that customer. So all the products that we design, we're looking for a return that's in line with our long term financial objectives. So it's really a mix of all those things that really drive. So we have lower spending or higher credit losses, so that group of customers will offer a lower reward and the higher spenders they are and the better credits, the more we'll offer. And I think that's the right balance in terms of winning in the marketplace.
Okay. But nothing you're seeing is kind of driving those return hurdles down? We have not adjusted our financial targets in terms of what we want to achieve. Okay. And then The
point is that we've shown that we are growing and gaining share in the U. S. We've I've showed you the slide that build business acquired, map a range of opportunities, obviously not just a U. S. Consumer play.
We talk a lot about the U. S. Consumer business. One of the key points that I was trying to stress today is that we have many different ways we can pivot and grow our business. And if one of them, the margins are deteriorating, we pivot to another.
Now luckily, if you looked at those 6 categories I talked about, we're making progress in every one of them. One other point I'd make, there's a lot of focus appropriately on features of the product. But at the end of the day, one of the things that we feel very strongly about have a range of opportunities, obviously not just a U. S. Consumer play.
We talk a lot about the U. S. Consumer business. One of the key points that I was trying to stress today is that we have many different ways we can pivot and grow our business. And if one of them, the margins are deteriorating, we pivot to another.
Now luckily, if you looked at those 6 categories I talked about, we're making progress in every one of them. One of the point I'd make is there's a lot of focus appropriately on One other point I'd make, there's a lot of focus appropriately on features of the product. But at the end of the day, one of the things that we feel very strongly about and I've said this publicly, is our competitors are not focused enough on service. And we have put in a number of analytics that give us a clear understanding of when we have a positive service interaction. So when I went through recommend to a friend, we don't just believe that stuff.
We have the facts to support it. And that's why our retention levels have been high. That's why we know when we have certain service interactions that in fact the spin goes up. And I think frankly from a competitive standpoint, they look and say, well, if we just simply match the features, we're going to be fine. And sort of scratching their head saying, what's going on?
Well, what's going on is that we really do believe in the commitment and the investment and the return that we're getting by providing a high level of service to our customers. That you've got to integrate into what we do on rewards and the other features because we've seen the returns that we get from providing that service.
Okay. And a separate question, when do you expect serve to be NSC enabled for point of sale?
So the serve platform can right now today could either go with NFC or cloud based because if you ask people which direction point of sale is going, you'll get a different answer depending on what day of the week it is. So we still believe that NFC may very well be the dominant form that comes out there. And so we've built our platform to be able to go either way or both. The agreement that we have with ISIS enables the serve platform to be NFC enabled through ISIS. And so that in effect means that phones that are with T Mo, AT and T or Verizon, when they start to deploy their trial out there, which they'll do according to them later this year, we'll start to be a part of those trials and that will start to enable NFC enable both serve and our traditional cards.
You spoke before about a concept of the battleground being in what you described as commerce enablement. And you distinguish that from what you call the payments piece. Two questions in relation to PayPal. 1, to what extent do you see PayPal as being in what you described as commerce enablement versus being in the payment piece or they are in both? That's the first question.
The second question is a more general one in relation to PayPal and that goes to the concepts you spoke about in relation to allies or not allies. It seems from your presentation that you see them more as an ally, particularly in an aggregation sense, but it would be helpful to understand your perspectives on PayPal in that context as well.
So Ed, people that was a great example of a frenemy. They bring on tens of thousands of merchants for us through their aggregator model where they are putting up the blue box welcome acceptance on small merchants in the U. S. And they've been doing so for a number of years. Our customers also use PayPal and they use it rationally.
Generally, they're using PayPal for online commerce at small merchants. So our customers vote because they have that option. Where the friction is, is that PayPal can and do try to steer from credit to ACH and perhaps debit. They used to be even more aggressive because the profit margin for them varies wildly based on how it's being funded, but they've also upset customers when they steer too aggressively. So there we know where the friction points are and we know where the points of value are.
And it's kind of typical of the times we're in that on some aspects they're really helping us grow our business and on others there is definitely friction. But we've had a long standing relationship with them and we're looking to expand those parts of our relationship that are good for both of us. And I suspect that will continue.
Look, if the world moves more and more towards digital platforms and transactions. It's no secret, we all sort of see the same thing that's evolving right now. And we're each leveraging off of our own capabilities and assets of which we think we have a tremendous set of those assets to leverage off of. What PayPal is trying to do now is move into the offline environment of which we have a tremendous advantage right now with relationships with millions upon millions of merchants. As Ed mentioned, we already have a significant presence in the online market.
We now have a platform to be able to bridge between online and offline through our serve platform. And so in some places, I agree completely with what Ed just said. In some places, we're complete partners with them. And in other places, as we look towards the future, we can see where we might have a conflict going forward. But I think all of us are trying to figure out what are the assets we have, how do we leverage them and we think we come to this game with some very strong assets to win in the future.
I would just say that we still have more online volume than PayPal. Last year as we put the slide, we had over $130,000,000,000 of online volume out of our $818,000,000,000 So we're bigger than online and we also have about $680,000,000,000 last year offline. Their number last year offline was about 0. So I mean, they are an important player and have been around a long time and there are places where we work well together and places where there is friction. Our goal in all these situations is to maximize where we can help each other.
And I think PayPal is a good example of that, our goals do overlap with theirs in positive ways and in places where we don't, we try to mitigate the friction to our customers. That's been the case throughout all of our businesses. There are merchants that compete with us in some areas and we work with very closely. Our whole bank partnerships, We've got one side of the company and the proprietary side that's driving in the card market and we have our G and S partners and we manage through because of the ultimate strategic objective. What's very, very clear and the dynamic that we're all dealing with in commerce and in business is this convergence of onlineoffline.
So I think we've got a lot of experience in dealing with partners that compete with us in some areas. What is essential is that we be totally clear about what our strategy is and objectives are. And I think we're clear about that. Yes. Can you talk about any discussions with Apple?
And can you compare the mobile operators with the operating system owners? Who would you in your mind, who do you think would have more leverage in terms of offline? Well, I have to say that Apple is we have a long standing relationship with them because they're a big merchant. And as you might imagine, our customers love Apple. And I think their best customers are our best customers.
So again, there's big overlaps between our businesses. They own their own ecosystem, control customer experience, obsess over that and so do we. I think there's a lot in common, but we have not done a big deal with them because they have not yet played their hand on what they're going to do with their assets. I mean, they are marching in a very methodical way towards figuring out more functionality on their new phone or on the iPad. And we are marching with them.
On the mobile operator versus OS or OEM, who's got what strength and what power. I think some of that depends on market. Here in the U. S, where you subsidize the phones or where the carriers subsidize the phones, they have more power on that in terms of the OEM, because they are taking those phones and subsidizing them. And as a result of that, they demand certain feature functionality that various OS or OEMs would put into place.
In other places where it's SIM cards and it's just a consumer buying the phone and that there's just a SIM card that somebody is using from a carrier, then the OEM may have some more power in that. And all of that is sort of trumped by Apple, that really actually even within the U. S. Market has quite a bit of influence and power because they've created a relatively beautiful curated ecosystem in there and there's tremendous consumer demand for that.
Over here. Two quick ones. One quick follow-up on PayPal and Serve is there's rich initiatives by Visa and Mastercard to join PayPal with offering sort of one click checkout. And I'm just wondering if American Express has any designs on making the checkout process easier for their customers online. And the second question, which I recognize may go nowhere, but any update on the DOJ steering case?
It's been almost 2 years now. I just wanted to know if we have anything to talk about any update there. And just remind us how critical that case is to your thinking about the domestic payment market? Thanks.
Louise, why don't you answer the second one first because there's really not a lot to say. And then we'll go to the first one.
So as you know, the case was brought 2 years ago and it's a large case. It's a complex case. The wheels of justice move slowly as I know you know, but we continue to believe that we have a very, very strong case. We do not have market power. The courts have found that we do not have market power.
No merchant needs to accept the American Express brand. They do so because of the value that we bring to them. It's been clearly demonstrated by the other than that, the trial date is who knows when, but we feel very confident that we will prevail because we have a very strong case. We absolutely expect to go to trial and we expect that we would win.
Okay. So we are looking for ways to take friction out of the checkout process. And there's a variety of ways do that. So building your own button for one click checkout is one way to do it. In fact, we have a couple of things we're doing right now with merchants.
We haven't announced yet that we're testing it. So we have more to say about that in the future. Going to expensive laborious process to go merchant by merchant to convince them to reprogram. So we also are looking at other ways of taking friction out. And again, I would just say categorized owning your own ecosystem gives us advantages there.
And we know even when you have one click checkout, we know our customers who use PayPal, but are not using PayPal on sites where they want to use AmEx directly. So understanding the customers' need, how to make it simpler, faster, better, whether you're swiping a card, clicking a mouse or eventually using your phone. That's all the things we're looking at. Dan said, maintaining optionality, but controlling our own ecosystem is how we think about it. But you'll see us do a number of tests and pilots learning from how to make it simpler for customers to conduct business.
Yes, in the middle and then we'll go back. Okay.
Just I guess would appreciate your thoughts on the growth of Square and if that has any effect on your business besides maybe accelerating the ability to for you to attain small merchants, but do you view them as a threat at all, obviously, in the news today with their signing of Starbucks? Yes,
I view it and certainly I can hear from Ed or Dan. I think our partnership with Square is a really good one. I like the number of merchants that they're bringing in for us. They're bringing in a set of merchants that have not really accepted plastic and I think that's terrific. I think Jack Dorsey is a smart guy.
So I think it's a good move. So I'm very happy with it. Yes. I mean, before today, where today they announced Starbucks becoming the processor of that. They've always been on small merchants and that's really their sweet spot because they're not really connected into inventory systems of retailers or anything complex like They have a very simple elegant solution of turning your iPad into your cash register or your iPhone into a point of sale device.
And their own numbers that they quoted, as I mentioned, is they've signed over 2,000,000 merchants since their inception and they're growing fast. All those merchants, once they have a dongle are equipped to accept American Express. We only count a merchant as active when a card is used at them. So the other fact I gave is aggregators have brought on 100 of 1000 of merchants for us, right. So we're only counting active merchants when we look at and we have a very good relationship with them.
I think they're and we have a very good relationship with them. I think they're very respectful of our brand. They're also they're building an alternative to NFC. So part of the Starbucks announcement wasn't just that, they're doing the processing that you could use their pay with Square app, which you can use your Amex card in and you're paying by giving your name, paying with your name, but you have your Amex card on file in the app. So I think this is it's just an example of good innovation.
I think that they are certainly expanding our network and it's one of these things that are an alternative to NFC right now that they've come up with and signing Starbucks I think is a big win for them. Yes, I think to Dan's earlier point, I mean, you add to the Valley, you get a number of people who don't believe NFC is going to take off. And one of the reasons that they'll cite is you got alternatives like Square. Yes.
I was going to say, you
had the great pie chart showing your estimated share of U. S. Premium card spend. How would that share look if you were to only focus on emerging markets? Obviously, the premium customer definition is different, but do you think your share is any different for emerging markets?
Yes, that chart is the U. S, where in total, said we have 26% share of the general purpose credit and charge card market. We don't have share like that in the emerging markets and we're relying on bank partners. But we they so said another way, we have a great growth runway here by having the right partners in diverse set of emerging markets. We're not deploying capital in most of those markets.
And our goal is to win a higher share of our partners' business by bringing value to that GNS partner. So we have made progress in all those markets. Many of them were growing faster than the market. We have plans for each one of them. We have strong partnerships in place and it's a low capital high return business with the exception of Mexico as a proprietary market and India is a proprietary market.
All the other markets on that list are GNS markets where we're operating with our partners. We like that model a lot. The only other point I'd make Ed is that in those emerging markets, just from a customer profile standpoint, those institutions like the brand and the premium type customers that are attracted to the brand. So in those emerging markets, we're bringing in premium customers, different definition than the U. S, but it clearly would be viewed as highly affluent premium customers.
And then we have the broader.
Right. And then in the emerging markets, even here in the States, because we've got new product sets that we're introducing that are differentiated and unique, whether it be on the prepaid side or serve or this combination of the 2, we can go after new segments of the market that we've never been able to go out after before that for whatever reason aren't going to move into credit or charge or using cash or checks or debit today and we can now attract those segments of the market. That's a tremendous opportunity for us from both a segment perspective as well as a geographic perspective.
Good. There's one more question in the back.
Just a follow-up on that. So in the prepaid market, you've got one of the most sense as to how you decided down on that pricing route? And what kind of other benefits you're getting that led you to that decision?
So the prepaid market as Ed talked about and others have seen is growing at quite a rapid growth rate right now. In our view as we looked at the prepaid market and we look at even outside studies like consumer action and others, when they look at 28 different prepaid providers out there, it's just laden with fees right now. And as a result of that, you have a very high churn rate associated with these prepaid cards. And our thought process was, could we leverage the unique environment that we have? We issue cards, we acquire merchants, we have the networks, we don't have to we don't have a lot of the incremental costs that some of these other prepaid players have and try to eliminate as many of the nuisance fees as possible, so that we would provide clearly the most competitive value proposition out there.
As a result of that, not have to pay high acquisition costs, maintain customers for longer. And what we've seen and what you've seen from some of Ken's remarks in terms of the number of customers we've gotten, we're just beginning to see that trend extremely nicely and we're just beginning to go into all of these retail partnerships as a result. And we think as a result of that, we can move into new segments of the market. We can go into underserved, under bank segments of the market that have a tremendous need for this. I forget who the author was, but he said it's very expensive to be poor.
And in many ways, that's absolutely right. If you look at kind of the fees with these under banked customers, they get charged for payday loans of sometimes 20% interest month to go and do that. They get monthly fees that can be up as high as $14.95 fees on every transaction. And we looked very hard at how could we create the most competitive consumer friendly product that enables us to make a fair margin. And we feel really good about that product that we've come up with now.
Good. So I think we've hit the hour. Thank you very much.