Everything good?
I'm all good.
Okay. We're gonna put the mic down?
Yeah, I guess the mic works.
The hot mic.
Good thing I didn't take any trips before this.
Well, thank you everyone for joining. We're delighted to have Steve Squeri from American Express. I don't think the company needs much of an introduction. I would have bet at least half of you have an American Express card in your wallet. For the other half, I would bet Steve would talk you into getting one by the end of the session.
We'll see if they qualify. I'm looking at this group. I'm not sure.
Well, you teased me last year about not having one. I'm an overachiever, so I got two.
Good. Very good. It's the only reason I came back.
The credit line's a little tight, though.
Well, we'll keep an eye on you.
Well, look, Steve, has had a great run going into his seventh year now as CEO, probably highlighted by a transformation of the growth ambitions and aspirations of the company, and delivery, frankly, of 10% plus revenue growth versus what historically in and of itself was a good revenue growth rate of 7% or so on average over time for American Express. I don't wanna front run the strategies and tactics that have gotten us there, but maybe Steve, I'll start. You know, you did an Investor Day. It was a great deck for anyone who hasn't seen it. 150 pages of really good stuff. You really kinda gave the meat of why you think that 10% revenue growth is correct, 10% +, the mid-teen EPS growth.
One of the big pieces is the product refresh cycle, which I know is near and dear to your heart. So maybe we could start in a twofold question. For those not as close to the story, you know, why is the product refresh cycle so core? Then for those of us who are living and breathe it, you're doing 40 this year? You know, what are one or two things you'd highlight, you know, things that are working or learnings that you're putting into place with the most recent rounds?
Yeah. Well, I think it's important to understand why we do it, right? And it really starts with a maniacal focus on the customer. I think when you look at our company, the customer is really king, and what you really need to do is to make sure you do not take the customer for granted, and that you're constantly looking to innovate your value proposition so that you can continue to engage the customer. And so, you know, this year it's 40. I think over the last five years, it's probably been about 150. And, you know, prior to that, we would probably go maybe 10 years without refreshing the value proposition and wonder why the growth would sort of, you know, level off.
But you have to understand, when you refresh a product, it does a couple things. It reengages the existing base. It gives you an opportunity to take some of the learnings that you've had over the last few years with that product and change the product around the edges or change the product, you know, significantly. It also gives you an opportunity to attract new customers, and it provides us as an opportunity. I mean, one of the things that, you know, we're really proud of is we've been able to grow double-digit card fees, you know, consistently all the way through prior to the pandemic and even through the pandemic. And part of that is really due to this refresh strategy. And when you look at refreshing a card...
You know, when we look at our card value proposition, there's a rational value, and you can think about rational value as I'm getting streaming credits and so forth. There is, you know, as an experiential value, whether that is dining or lounges or access, and there's an emotional value to the card as well. And, you know, that comes in the form of service. And so, you know, as we think about this, I think, you know, part and parcel of our success so far has been our ability to refresh these products. And it also, you know, what it also does for us is it drives marketing efficiency, too.
Because when you have a product that is loaded with benefits and you have a lot to talk about, you don't need to be as generous on the incentive side when you're trying to attract somebody. And, you know, I'll just give you a quick example of the Delta, Delta card that we just relaunched. We raised the fee $100, but put over $500 worth of value in. And that value is co-funded. It's co-funded with partners, it's co-funded with Delta, and, you know, it has really helped, especially from a premium perspective, engage our card members.
So, so maybe, you know, one of the other big changes is the resonance and market share with the younger generation of customers, now versus 10 or 20 years ago. You know, the thing about younger people is they always get older. So, A, when you think about the next generation or the younger end of Gen Z and even into Gen Alpha, how do you continue to stay relevant and gain share with them? And then, B, I thought one of the things that really stood out at the Investor Day was the discussion around lifetime value of these customers. So when you think about the lifetime value of the younger customers you acquired, what do you think the biggest upside and downside risk to that is?
Yeah. So when you know, as you start to think about this, you know, a lot of people had said, you know, a number of years ago, "Will your card base die out?" Right? I mean, "Is your card base getting too old?" And if you just go back to 2019, I'll go back to the fourth quarter of 2019, 19% of our spending was Gen Z and Millennial, and I think in the first quarter of this year, it was probably about 32%. And so that's a big switch in terms of, you know, in the composition of our overall billings, and we've grown quite a bit in that particular... from that time.
But I think the fundamental thing to take away from the focus on millennials and Gen Z, as you take a sort of 40,000-foot look at this, is that strategically, we said we want our value propositions to be relevant across a wide range of constituents, and we needed to make sure that the value proposition had enough stretch in it, that it would be attractive to millennials, it would be attractive to Gen Zs, and ultimately be attractive to the next generation and the generation after that. And so up until this point, we would wait for people to get old and then get them a card. Old, defined however you want to define old.
But what we realized is that, you know, Gen Z, Millennial, and so forth, really resonated to the value proposition, and they'd be willing to pay for a premium product. And, and so when you start to look at it, you know, if you get somebody early, we've gotten a higher share of their wallet. They spend a little bit less. They'll spend a little bit less than a Gen Xer or a Baby Boomer when we first get them. But and just go back to the Investor Day. We had a slide in Investor Day that basically said, from 2019 to 2023, every other group, Gen X or Boomers, grew 20% since that period of time. Millennials and Gen Z grew 40%.
And so you have built-in organic growth as they go through their life cycle, and, and that's really important. The other thing is, they're used to using their card everywhere. You know, with parity coverage in the United States, it's not a situation where, "Gee, I'm not sure if I can pull out the card." So that's why you get a higher share of their wallet as well. And look, we, we believe that, you know, we're gonna ask for 20 years of, you know, of lifetime value. You get 20 years more of lifetime value, and so the, the risk that we have is taking it for granted, right? So the risk that we have in this, in this, is that you take it for granted. That's why I'll go back to the first question.
That's why the value refreshes are so important, because people continue to want to be delighted, surprised, and they want you to adjust the value proposition as their lives adjust and as lifestyles adjust as well. And if you look at the value proposition today versus the value proposition seven years ago, it's very different, right? The core, the same, but we continue to expand it.
Let's talk about small business for a second. I mean, I think it's fair to call it a little bit of a sleeping giant right now. You've got 47% market share of U.S. small business credit card spend, but it's been stuck, you know, a little better than flat, 1%-2% growth in the recent quarters. You know, I know it's difficult to forecast, maybe impossible, but, like, when you think about what needs to change from an environment, from a macro standpoint, you know, what do you think needs to happen for small business spend to start growing again?
Yeah. So I think small business, not just for us, but for everybody, has been a little bit of a roller coaster, right? I mean, when you go back to 2019 in small business, we always would expect. You know, there's three components when you think about billings, right? You think about who you're acquiring, you think about the organic growth, think about same-store sales, and then you know, your attrition rate, right? And our acquisition is really good, and we showed that in a, in an Investor Day, and our retention rates are strong. And if you look at organic, organic traditionally would grow about 3%, and then COVID happened, 14% down. Then the year after COVID, 19% up, and then 13% up, and then, you know, we're down again.
You've had this roller coaster effect within small business, and I think part of it is small business confidence. I think the other part of it is, you know, interest rates have risen, and so it now costs you a lot more money to buy and hold more inventory than it did, you know, when we didn't have. You know, we were living in an environment where we had no interest rates, right? I mean, it was zero. Interest rates were as close to zero as you can get. So I think small businesses have been a little bit more circumspect about how they go out and purchase. Because, remember, from a small business perspective, it's very different in a corporate card. About 80% of our small business spending is goods and services, and those are usually goods and services to run your business.
I think people are watching inventory levels. You know, and I'd say 2023 was probably a little bit more about, "I had a backlog of stuff." I think as we're into 2024, it's almost, "I don't have supply chain issues anymore." So it's a little bit more just-in-time, just-in-time inventory. I think when you look at spending overall, you know, look, spending overall for the fourth quarter was about 6%. When you talk about our entire business, last quarter it was 7%, but when you days mix adjusted with the extra day for the leap year, it was probably about 6%, and we're probably expecting 6% for this quarter as well. So you're in an environment of stability, but not really high growth stability, right? And a lot of that is organic.
You're seeing from a T&E perspective, T&E in the first quarter was strong as well, which is about, you know, 8%, but you see a little bit of softness in lodging and entertainment spending as well. So I think, you know, we're at a stage right now where I would say spending is stable. You know, and small business has really been stable from an organic decline perspective, right? Which is at that 2%-3% decline. And we're just gonna have to see how this all plays out. I think as interest rates come down at some particular point in time, and I have no idea when that is, it doesn't look like it's anytime soon.
You know, you might see more organic growth, but, you know, the reality is, we're increasing our share from a small business perspective because we're still acquiring more and more customers, and we're not losing the customers we have any more than than we had in the past.
And I want to dig into small business a little more, but before I do, the comment that the stability and spend growth rate... Some of my colleagues who cover other sectors have pointed out some of the potholes out there for me in terms of American or Kohl's or whatever. Are there any big shifts by category you're seeing, or does the stability and growth rate kind of apply across the board?
No, I think it pretty much applies across the board. I think, you know, when you look at that 6%, I mean, you could break the 6% down. International is still killing it, right? International, we're 13% in international, and U.S. consumer, you know, is sort of that 7%-8% number. And so you then have small business at 1%. Even corporate was up almost 5% last quarter. So it really is, when you look at it, it's a little bit more of a small business phenomenon for us for that 6%. Everything else other than corporate. And we're very happy with corporate at 5%, because corporate was just not moving for a long, long time.
It's a very small piece, it's a much smaller piece of our business now than it ever has been in the past. But, you know, international is very, very strong, and, you know, both from a small business perspective and, and a consumer perspective, as well as, you know, consumer, we're, we're still very really happy with what's going on there.
Coming back to the broader small business discussion beyond the current, you know, the great thing about having almost 50% share is you dominate, the tough thing is, at some point, you become the market. So talk to us about that balancing act. How do you have 47% share, but continue to differentiate and to continue to acquire better than average, customers in that segment?
Yeah, I mean, look, we're still acquiring more customers, and we're growing our overall share. I think, you know, you're the hunted, right? I mean, that's what you are. When you have 47% share, you are the hunted, and everybody's coming after you, whether it's traditional competitors or whether it's fintechs and so forth. And it, you know, keeps you on your toes, obviously, and if you look just over the last few years, we've had to expand our product offering because, you know, what we're really trying to do is become much more relevant to small businesses, and that was part of the Kabbage acquisition. And you know, prior to that, we got into working capital loans.
You know, we have term loans, we have a business checking account now, we have cashflow analytic tools on the Kabbage platform, and we have that Kabbage platform, which is a place now where our small businesses can live, meaning they can sort out other products and, and what have you. So, you really have to continue to, I, I think, reinvent yourself. You have to make sure that, again, same thing as small business. We're, you know, we relaunched the Gold Card last year. You know, at some point, we'll relaunch, relaunch the other products. We've done Hilton, we've done Delta, from a small business perspective, and, and that's what you need to do to stay, to stay ahead of your competitors.
And what I think is really good for us is that not only are we gaining, we're still gaining share, which is a strong position. And it, and it, and, you know, when you look at it, it feels, you know, you say, "Well, you're only growing 1%, you're gaining share." But remember, everybody else has the same organic issues that we have, and we're taking business from other people, which is, which is good. So the value propositions at work.
And maybe to round this out, you know, there are a lot of fintechs going after B2B broadly, small business is part of that specifically. And I do sometimes hear from investors, you know, is somehow that part of the growth slowdown. So maybe talk to what you're seeing on the fintech side, and how you react to that concern for people who are worried it's chipping away at your position.
Yeah, I. Look, there's a lot of good fintechs out there, and some of them you learn a lot, a lot from as well. And, you know, and a lot of them we partner with too. I mean, you know, we launched this small business card with Square. So, you know, there's opportunities to partner with a number of the fintechs out there because so many of them are more interested from a software perspective than it is, you know, from using a balance sheet, because most of them don't have balance sheets, and they're really renting balance sheets. So I think there's opportunities for us to continue to partner with fintechs, not only on the B2B side, but on the expense management side.
You know, look, if fintechs were taking more and more of our share, our share wouldn't be going up. So, you know, they're certainly out there. They're, you know, doing well and they're growing, but the bases are a lot smaller. But look, we've always got our eyes out on not only the traditional competitors, but the fintech as well, and not only to be wary of them, but to learn from them and to potentially partner with them as well.
So maybe shifting gears, you know, one of the things you've talked about a lot is the flywheel for growth, and in some ways, the input to that in the P&L is the variable customer engagement expenses, VCE, as you term it. You know, those expenses were kind of high 30s, pre-pandemic. They got up as high as 42% or so. I guess now they're more like 40, 41. How do you think about setting the right level VCE as a percentage of revenue going forward?
Yeah, well, you know, look, it's only one component of our expense base, right? And not the largest component of our expense base by any means. And, you know, when you go back, if you're not refreshing products, your VCE is not necessarily gonna go up, and it's not gonna rise. And if you're not getting more premium cardholders, it's also not gonna rise. So I think the way to think about it is, I think it'll probably continue to grow a little bit more from a percent perspective than revenue grows, and we're okay with that.
And again, because you have to look at the entire expense base, and you have to look at what you're getting, and as you continue to invest in that value proposition, going back to the product refreshes, what you're doing is putting more value into the cards. You are now having an opportunity not only to upgrade card members, but you have an opportunity to attract new card members, and you're also retaining existing cardholders as well. And every time we do a refresh, acquisition goes up, and existing spending from our cardholders go up as we put in those categories to do that. And what's important is that you have to understand, is that it helps from a credit perspective, 'cause premium cards have a much better credit profile than some of the cash back cards that we have.
And what it also does is it makes your marketing dollars a lot more efficient as well. And so, again, I made that comment before, but it really is important because, you know, when you look at VCE and you look at marketing, as you are launching a new product, you may not have to be as aggressive. And I think that's really critical for us.
And maybe kind of sticking with that, and I think you referenced it earlier with the Delta refresh and some of that being partner funded. So you talked a little bit recently about partner-funded value within Amex Offers. I think you gave us the status, $200 million or so today, and it could be $1 billion over time, $1 billion plus. Maybe explain what Amex Offers are-
Yeah
and the broader opportunity for partner-funded value going forward.
Yeah. So there are two things that we do. So if you look at, for the 50% of you, and I would think the percentage is actually higher in the room that have a card. If you have a Gold Card, Platinum Card, or Centurion Card, you have value from other partners. If you have a Centurion Card, it's an Equinox value or it might be a Saks. Same thing with Platinum, it could be an Uber benefit, so forth and so on. And so those are usually co-funded in some way. And that's not part of the $200 that we were talking about. So that is where we're going out to partners and getting them to embed value into the product.
The other piece of it, the 200+ million that we have, that is where you go on. You can go onto the app. You'll see in the Amex Offers, you can clip an offer and attach it, and it might be 20% off, it might be $10 off, it might... whatever it might be. And, you know, from a high-end perspective, from a Centurion perspective, for example, you know, we had an offer a number of years ago from David Yurman, where it was $1,000 off, no minimum purchase for Centurion cardholders. And that worked for David Yurman because what we did is we targeted those particular customers that bought jewelry, but they hadn't bought David Yurman jewelry in over two years. So that worked, and they had a high ROI on that.
So, you know, a lot of people talking about the ad business now, and PayPal's in the ad business, and Chase is in the ad business, and so forth. And the way we're running this, and have been running this, is we are working with our merchant partners to provide more value, not only to them, but more value to our cardholders as well, and that's another component of that flywheel. And I think last year, we had close to 6 million card members that actually took advantage of an Amex offer in the United States, and our goal is to drive that to a—we said that in Investor Day—to over $1 billion. So, it's an important tool that we use. It drives value for our merchants, and it drives value for our cardholders as well.
So maybe shifting gears, you know, it's always tempting to ask U.S., U.S., U.S. questions. You mentioned international. I think you used the word "killing it." I think you've given us it's $13 billion of revenues now, growing faster than the overall company, and talked about a lot of runway and a lot of opportunity going forward. You know, what are the key things you want people to know? What's enabling the international growth so much faster, and why are you so confident in that future runway?
Yeah. I mean, so, you know, the reality is, and we showed this at Investor Day, too, the American Express brand plays really well outside the United States. And, in most markets, the card fees that we charge are higher than they are in the United States as well. And a couple other points about international. As I said, it's the fastest growing part that we have right now. It was the fastest growing part of our business pre-pandemic, both from a small business perspective and for a consumer perspective. It got hit a lot during... You know, there was a lot, there was a lot more even more lockdowns internationally than there were in the United States, and so it got hit really hard.
But if you look at the top five markets that we are in, we have less than 6% market share. Less than 6% market share, and small business is really nascent. You know, we are really creating that category in small business in those key markets, and so we're really excited about that. The other thing that we're excited about is, look, our international coverage is nowhere near as good as our U.S. coverage, but it continues to improve and improve every single year. We've talked about the city focus, we've talked about the vertical focus, and, you know, we put up a bunch of slides at Investor Day about where we want to be from an international perspective.
So when I look at the investment that we're making in international, the organizational changes that we've made about a year and a half ago, where we really combined our small business and consumer businesses, and so we're able to leverage our marketing dollars even more. You know, I get really excited about international and the prospects for growth, and I think it is accretive above where, you know, our aspirational 10%, 10% revenue goal is.
Favorite topic, regulation.
I love regulation.
Let's just go through every individual regulation out there. You know, there's a lot on the table. There's the stress test coming up. There's the late fee changes that may or may not come up. I don't even know what court it's in anymore. Liquidity rules coming through, Basel III Endgame. You know, when you look at all the stuff out there, maybe you could just highlight, you know, what are the ones that stand out to you as important for Amex, where are you well-positioned, and where might there be a little lifting to do?
Yeah. Well, give you context, that's just the U.S.... So if you think about operating in another 29 countries or so, and you think about data privacy, you think about AML, you think about data localization, which happens in, you know, India, Germany, and so forth, you got to deal with all that. And I think we deal with that pretty well. When you look at, you know, just pick a few of them. Look, the stress testing as we're moving now from a Category IV to a Category III, sooner on our way to Category II, coming to a theater near you soon.
And, you know, we haven't done stress testing in a long time, but just for, to remind people, when we do do stress testing, we come out, you know, much better than any other of the other, of the other banks. And just to remind people, not only during the financial crisis, but during COVID, we were profitable, paid the dividend, and so forth. You know, when you look at... And we'll see what happens with the CFPB, and now as a whole legal battle, it's less than 1% of our, you know, our overall sort of revenue. And so it won't be a big hit for us and, you know, we're not going to play around with interest rates and what have you, to, to sort of claw that back.
But, you know, when it does happen, you know, if it's, you know, you go from $29 to $8 or whatever it might be, you'll have a, you'll have a one-time step back and, and off you'll go. So I'm not, I'm not all that concerned with it. Whatever happens, happens. It'll be, I think, more daunting to some of the private label companies. It'll be more daunting to, you know, more of the players that played more to the lower tier. You know, look, Basel III Endgame, here's what I'd say: we have a 30% ROE, our CET1 ratio is anywhere between 10.5% and 11%. You know, our required capital that we have to hold is 7%. We hold more for the rating agencies.
I think as everybody did the math, you figure out with the rules, the way they were, we were hit disproportionately with that. But, you know, the reality is, you know, whatever's gonna happen is gonna happen, and we'll go through with it, and still be as successful as we are. The rules as they're written were written with the comment period, they're not gonna play out the way they play out. It's gonna be completely-- They're gonna be completely different. What they're gonna be? I don't know, but they will be completely different than what they are, because there were just so many fundamental flaws in this, from an operational risk perspective, from a gold plating of charge card of credit cards. It just didn't make any sense.
I think, you know, I think the industry did a good job of communicating that, and I think the Fed governors listened to that. I made many trips down to Washington to just talk about, you know, the inequity and what we were really trying to solve for. So we'll see how that all winds up playing out over, you know, over some period of time. You continue to deal with all this stuff, but, you know, look, we've been around forever, and there's always gonna be things that are gonna change.
You know, the biggest thing right now as we go through this is really going through, you know, this transition from a Category IV to a Category III on our way to Category II.
And maybe one I'll sneak in, and I should have mentioned at the top. Hopefully, everyone's used to this pigeonhole system by now. I think at some point, a QR code will pop up on the screen if you're not, and they show up here for me. Interchange rates and what it's applied to, you know, we had the Visa, Mastercard settlement earlier this year. There was the Illinois budget thing on taxes and tips, I guess two days ago, maybe it was last week, Friday. You know, is all this kind of in the normal noise around interchange rates in your mind or anything that's maybe bubbling up a little more concerning?
Yeah. Look, I mean, we'll see if the... Look, the Visa, Mastercard whole interchange thing's been going on for about 20, you know, 20 years now. This is a 20-year-old case. We'll see how it all plays out. It's, you know, it basically holds interchange for a period of five years. It reduces a couple of points here and there. Doesn't impact Visa, Mastercard at all because it really just impacts the issuers. And I think around the edges, I don't, I don't really see this as having any impact for us. I think the Illinois situation is, it, it's an operational nightmare. I'm not sure how you do it. You know, do you, do you pay with your card? Is it two transactions? Do you pay cash for tips and taxes? I'm not really sure.
But the way the POS systems are set up today, they're gonna have to be fundamentally changed, and theoretically, this will go into place in February of 2025. So, I don't think it's gonna be a really good consumer experience. I think the merchant lobby was one that took this on and was able to get this through, and I think, I guess the governor of Illinois will sign this in the next day or so. But operationally, it's gonna be challenging for, you know, the POS vendors to do this.
I think when you do, you know, what it may be is just we're gonna put in what the overall check is, and then we're gonna have to have another transaction for it, and that transaction is gonna have to be in either cash or another sort of credit card transaction type without a fee on it. I think, you know, we're gonna have to see how that plays out.
Maybe on credit, you know, you've got the best credit, both on an absolute level and relative to pre-pandemic, in the industry, by pretty decent margin. You know, no good deed goes unpunished. It leads to constant conversations about when will Amex's credit finally crack? You know, what makes your advantage versus the industry sustainable in your mind? And then B, there's always going to be risks out there. Any parts of the book right now that you're watching a little bit more closely?
Well, I think, I think you just got to look historically. I mean, we've always been best-in-class credit, right? I mean, and, you know, right now we're running at 1.3, so the delinquency rate, 2.1 from write-off perspective, and that, that's better than we were in 2019. You know, will it continue to be better than it was in 2019? Probably not. It's probably gonna creep up. But even if it creeped up 20%, we're, we're at 2.5 or 2.6. And, you know, when you look at the gap, I mean, you know, when you, when you look at this from a delinquency perspective, you took the average of the top of our top five competitors, we had an 88-90 basis point gap.
That gap's now 160 basis points from a delinquency perspective, and we have a huge, huge margin also from a write-off perspective. But I think the other thing that's happened, and the team has done a really good job. Our credit margin, you know, pre-pandemic was about 9%. It's now 10.7%. But this goes back to the quality of the customers, the fact that we're able to engage our customers on premium products, and they don't want to live without the card. You know, they really don't want to live without the card. And so I think, you know, ultimately, it's where we play in the ecosystem that has really helped us out, along with the reams and reams of data and the reams and reams of experience that we have.
We've always been better than everybody else. I think we're just widening the gap right now. But, you know, it will, it will climb up just because, you know, of sheer numbers. You know, the economy is not as strong even as it was, you know, probably in 2019.
I should know this, but when you say credit margin, are you saying NIM minus charge-offs, or what are you saying there?
That's exactly right.
NIM minus charge-offs. Okay. So, so you mentioned, you know, part of it's where you play in the ecosystem. I thought one of the most interesting slides in the Investor Day deck was the one where you also overlaid the delinquencies of customers on their Amex card versus those customers' delinquency—same customers' delinquency-
Right
... on non-Amex cards they might have, and you'd also widen the gap there.
Yeah.
So, even within your customers, you're doing-
Within our customers-
Something better.
Even our customers that are going delinquent on other cards, they're going less delinquent on our card. And, you know, it's kind of interesting, right? If you think about it, if you had... not to pick on people with private label cards, but if you had a private label card and you were struggling, okay, so you don't pay the card, you don't pay it, so you can't use that private label card at that one store. You use something else if you need to use it. It makes sense that private label cards would be the first ones not to be paid, which is why they tend to have higher write-offs and delinquencies and so forth.
But what happens is, people are using this card to, you know, engage in lots of aspects of their, of their lives, and so they don't want to go delinquent on the card. And I think that was a really telling statistic, and it shows how our card members think about our brand and our product versus our competitors.
So I've got a few teed up here from investors. Maybe before I go to that one, you know, when we talk about 10%+ revenue growth and mid-teens EPS, obviously it's more than just revenue growth driving the EPS. You know, it seems like you've talked about operating leverage on the non-VCE expenses, and you've talked about ongoing capital deployment. Maybe we could just talk about the latest thoughts on each of those two.
Yeah. So a little context, right? So, you know, when we set our growth plan out in January, we set it out before that, but when we revealed it in January of 2022, we really wanted to take the scale of the company to a different level. We really wanted to take it up because we realized that we play in a market where we had opportunities for more growth, and we realized that the more scale that we could get, you know, with, with positive EPS, the bigger this flywheel could be. And so what happened? It was 25% revenue growth first, which was more than we thought, and then it was around 15% FX, FX restated in, in last year.
And so, you know, we set the aspiration of 10% on an ongoing basis, and we set that aspiration for two reasons, maybe three reasons. Number one, we want the company and the people in the company to strive for greatness, right? You don't want to say, "Hey, let's go 4% and we'll, we'll figure out the EPS." 10% is not a number that financial services firms of this magnitude and scale shoot for. So we wanted that to be in everybody's aspirational goals. The second thing was, as we went through this, we realized that by doing this, we would send the message: We are a growth company. And, and obviously, the third one was, we get that scale.
As you go through this, there will be some years you'll hit 10, there'll be some years we're gonna hit 11, and there'll be some years we'll hit 9. You know, we looked at that, and that's why we set the guidance this year between 9% and 11%. We set it 9% and 11% for a couple reasons. Number one, that stability of spending, which is around, you know, sort of that 6%. Number two, when you think about, and people have said, "Well, you're growing your NIM a little too fast," right? Well, the reality is, our card members were just catching up with their leveraging. And you see it. Now, you'll see it every quarter now. You saw it quarter-over-quarter, it'll come down. You'll see it come down again this quarter.
When you look at NII, that will not have the same growth rate that it had the quarter before. And, you know, if you look at the quarter before, with 11% overall revenue growth, you know, it's amazing what one extra day can do for you, but it's almost a point of revenue growth for us. And so, you know, but you're gonna have a decreasing NII, which is okay. We're okay with that, but you'll still have good card fee growth. And so when you look at that revenue growth, and you look at going from a $37 billion company in revenue to a $67 billion company in revenue, it gives you so many more degrees of freedom and so much more scale to operate in.
And so you take that to EPS, and I said this at the Goldman conference back in December.
Oh, don't talk about that.
I'm sorry. I did say it.
At a competitor industry conference.
I'm sorry. I did say it. There were way more people at this conference than the other conference. I'm just, I'm just saying. So obviously, this is the ticket, okay? But what I said there was, and, and it took people a little bit of time to digest that, is the reality, whether it's 9, 10, or 11, we're still gonna be in that mid-teens EPS. And the reason we're gonna be in that mid-teens EPS is that whether it, again, whether it's 9, 10, or 11, our revenue, the, that revenue growth will contribute positive EPS. We're not growing revenue just to grow revenue. We're growing revenue to get positive EPS. The second point is operating leverage. From an operating expense perspective, if you go back to 2019, it was 30%. From operating expense, OpEx to revenue, it's now 25%.
We'll continue to get more and more, because the more you put on this system, you know, transactions just go through. You're able to leverage it. We're getting more operating leverage out of our marketing expenses, and we got great credit numbers. And so that'll add a piece of it. Then you get to capital deployment. And capital deployment, you know, I think we've reduced our share count by probably 40% or so over the last six years. And that helps to drive EPS. And we did that still, and we've doubled our, we've doubled our dividend over that same period of time. So we're still committed to, you know, returning capital to our shareholders in both share buybacks and in dividend.
But when you put together the revenue growth driving a component of our EPS growth, you put then that operating leverage that we have from both a marketing and OpEx perspective and our capital deployment, it gives me a lot of confidence that that mid-teen EPS growth in an environment where, you know, things are where we are today. I mean, I wouldn't say today is a high-growth environment. We have a lot of confidence in that. So that, that's how we think about it, and I think the decision to be bold and to grow the company faster, where we had that opportunity, I think pays off, not only for our cardholders, because we're able to attract even more merchant value funded and more co-funding, but I think it pays off for our shareholders.
Because ultimately, what you're looking at, is you're looking at really, really extraordinary, I believe, EPS growth from a financial services perspective, with a great credit profile. And, and that's the company that we, that we want.
Maybe to dig in one follow-up on each side. On the capital side, presumably once we someday get finalization of Basel III and clarity on everything, you know, as you move back to what do we do with the next round of capital, what are the priorities? Is M&A on the list at all?
Yeah, I mean, look, M&A, you know, is always on the list. I mean, traditionally, we've done more bolt-on M&A, and I think from just from a capital perspective with Basel, remember, we hold 10.5% for the rating agencies, not for the regulators today. And so the question that we'll have. And the rating agency has been silent so far, right? So the question will be, for the rating agencies, is it percentage or is it quantum? And the reality is, if it's quantum, we're gonna be fine where we are. And so I think we'll have to see how that all plays out. But look, you know, as we think about the capabilities we need, there's three things you do: you build, you buy or you partner.
You know, where it makes sense for us to buy, we will. You know, while we've had... Look, we've had acquisitions. I think Resy's been a tremendous acquisition for us. Kabbage has been good, LoungeBuddy, and there's a number of others that have helped out, but I would consider them much more bolt-on acquisitions for us.
And then back to operating leverage. You'll probably hate that I linked it to technology, but maybe you can give us one example, you know, how is technology enabling operating leverage at Amex? And then I'll give you a nod to what you'd probably prefer to talk about, how is technology enabling some of the top-line growth?
Yeah, I mean, look, I think, you know, when you look at how our technology has led to operating leverage for us, I mean, just take a look at, from a customer service perspective, just even using chat, more digital channels, more app, more customer interactions through app. That has, you know, really helped to drive, and I think Anré Williams showed these slides from a customer service perspective. More and more transactions, more and more customers, but better leverage from an OpEx perspective, and that has helped us tremendously, you know, from an operating expense leverage perspective. And look, from a growth perspective, just all the capabilities that we build, and so many of those capabilities are hidden behind.
I mean, you think about the investment in fraud, the investment in underwriting, the investment in credit. And, you know, the reality is, a lot of the value propositions that we have, there's so much technology that drives below them, too. And we continue to invest more and more in our technology and our technology stack, both from an infrastructure perspective and from a development perspective as well.
Maybe jumping around some of the investor topics. Back to small business, can you talk about the opportunity to do more with software invoicing, get deeper into the customer base to help take share on B2B transactions?
Yeah, I think, you know, I would say we're probably not an end user software company. And I think there, the opportunity is to really partner with- continue to partner with people, whether it's virtual cards, whether it's working capital loans and so forth, to, to really- to try and get access to that, that hidden treasure trove, basically.
You talked about the journey through regulatory category classifications. When you think about Category II, how much incremental costs could that create? How long would it take to digest the toughest requirements of being a Category II bank?
Yeah, I mean, look, when you think Category II , you just think Category I, what the hell? As I said to O'Grady, "We're coming to visit you." Northern Trust has been the only Category II bank for how long, right? And when I talked to him, he just said: Look, we just act like a Category I bank, so that's how we're thinking about it. Look, the reality is, there is investment, but this will not stop any of our growth plans, nor will it be a call-out to say, "Oh, you know, we missed EPS because we had to invest in control management." So, yeah, there's investment. But again, we're at that scale right now, where we have the ability to absorb these kinds of expenses. And here's the other thing I'd say about investing in control management.
Yes, some of it is reporting and, you know, a little bit of tediousness, but there's others that, you know, actually, because you focus even more on it, are able to make even more efficient, and to take errors out of the system as well.
You talked about the $200 going to $1 billion on the Amex Offers side. Can you touch a little bit more on how do you continue to drive higher, and can you continue to drive higher the proportion of the merchant-funded rewards on the other side?
Yeah, look, I think, you know, merchants want to do more and more with us, and I think that, you know, for us, it's a matter of not inundating our card members and also continuing to upgrade our technology to be able to not only absorb more and more offers, but to even target those offers even more discreetly and dynamically. And, you know, if you can envision a situation where you book with Amex Travel, you land in London, and you get a dynamic offer, right? That's where we want to get to. So, you know, you land, there's a 20% off in Harrods. Good luck with that one. There is, you know, here's the restaurant that you're near. That's where we want to get this to.
So we want to really get that to a point where those offers become even more dynamic as you're moving about town, as opposed to sort of static and not just display ads.
Going back to international coverage, is something you highlighted quite a bit at Investor Day as well. The question here is: As you move to greater coverage outside the U.S., is there a trade-off on your premium discount rate that you have to make? And if so, how do you find the sweet spot in that trade-off?
Yeah, I don't really think there is a trade-off. I think, you know, one of the things that has slowed a little bit of the international coverage, especially in Europe, was when, you know, the regulations came in for three-party and four-party networks. And now, I think we have a pretty good solution in terms of how we use others to go out and get coverage for us. And I think, as you know, we have a significant premium in Europe, and we have a significant premium in other markets.
I think, you know, it'll be pretty much the same as we did in the U.S. with our, you know, our ESA program and our One Point program and so forth, where, yeah, you'll give a wholesale rate to some of these, you know, aggregators and merchant acquirers and so forth, but I don't think it'll really significantly cut into our overall discount rate.
Partnership question. Partners are great in this business, but they sometimes drive a hard bargain, and make a lot of money themselves. Can you talk about any recent trends with large partners? Anything we need to watch out for, in terms of shifts in industry dynamics?
Now, I mean, you know, you look at our three of our largest partners, whether it's Delta, Hilton, or British Airways, are locked up all the way out for, you know, a long time. I mean, you know, we just redid the Hilton deal last year, an 11-year deal. We did an 11-year deal with Delta in 2019. Marriott, you know, goes out as well, and British Airways, we did an eight year deal with. So look, I think everybody's always looking for a little bit more. We're very happy with our co-brand deals. And yes, our partners make a lot of money, but we make what we feel we need to make on this. And, you know, as I've explained to people before, I think when you look at.
You know, to be effective in the co-brand business, you really need to have a strong proprietary business. Because it's a proprietary business that gives you sort of that solid foundation to go out and do that. And the advantages of being in the co-brand business are, A, your distribution costs are basically nothing, right? You're not signing up for big distribution costs, and your value propositions tend to, if you do it the right way, can be really screaming deals. And so that, that's the value of it. But doing co-brands without having that strong proprietary business is tough. So I haven't seen anything because we're not out there at this point, really negotiating or renegotiating, 'cause we have locked these things up.
But look, we redid the Hilton deal, and there's a couple of others that internationally, that we just redid without even going to RFP. That just tells you how happy the partners are.
So a couple of questions on competition. I'll combine in the interest of time. A, you know, given your success, a lot of people copy what you do, so how do you keep the competitive moat? And then, B, anywhere just in the broad competitive environment, you're seeing things get a little over their skis or chipping away at margins?
No, I think, look, I mean, you've had a lot of these people here come and talk, and, you know, Jamie was here, and they're a fantastic competitor, and, you know, Capital One's a great competitor and, you know, and the rest of them, Wells Fargo, so forth and so on. And Charlie's making a real push now. And, you know, I think it just makes us all better, and it keeps us on our toes. And again, going back to where we started, this is why you need to do these product refreshes, because your competitors are not sitting around, you know, just doing nothing.
They're out there being aggressive, and a lot of the people that are working at the competitors used to work right at Amex, and so they know the playbook, and so we have to get out on ahead of it. I think, you know, not only is that good for the industry, it's good for our customers, but it really keeps the team motivated to know that we're not just sitting pat. I mean, we're not sort of, you know, the old Maytag repairman waiting for somebody to call us to, you know, to fix something. We're out there innovating every single day. As far as things being chipped away, this has been a competitive space since I've been, you know, not in the company. It's been 40 years.
But I think this space has gotten so competitive right after the financial crisis. And I don't think that competition or the level of intensity has slowed down a lot at all. And so, you know, we're up for the challenge, and we're up to compete with them as well.
So as we wrap up, you know, I know you're a large shareholder, and you're passionate about both the company and the stock. You know, for the people in the room who might be looking at it as an investment, what's the main takeaway you want them to have?
Look, if you like a company that is growing, that has great value propositions, that has minimal credit risk, and is committed to, you know, mid-teens EPS growth and returning capital to shareholders, you may want to look at it. If you don't like a company like that, I'm sure there's a lot of other bad companies out there you can invest in. But you know, look, we've been, you know, successful, and we've been successful really because we have a great customer base, and we've got some great colleagues that have a lot of passion for it, and we're in a great space, right?
It is a growing space, and where we play, you know, not only in the premium end of it, which is growing faster than the rest of the industry, but also in small business and with Millennials and Gen Z getting more than our fair share. I think we have a long runway for growth.
Good. Thank you.
All right. It's good to be with you guys. Thanks for paying attention.
Thank you so much, Steve.