Okay, we got a hot start here. We're gonna go right into it. This man doesn't need a big introduction, certainly not in this town. He's the Chairman and CEO of American Express. It'll be four years, hard to believe.
Four years, yeah.
In February.
Yeah.
Four years. Wow. They didn't think you'd make it.
No, they didn't. 37 years and, you know, they just ran out of candidates.
Exactly.
You know, what do you say?
That's awesome. No, he's a dear friend, but he's an even better business partner. When you think about companies that are on the leading edge of innovation in certainly in fintech and the platform that Steve and his team is driving around digital, around new forms of payment, about creating a premium experience coupled with that, Delta could not be aligned with a better partner. The values that we share and how we go to market. Steve and I, we got to know each other.
You could do my review for my board, actually.
I--
That was really good.
Okay.
I like that. Yeah.
Okay. Well, to that point, yesterday I spoke at Steve's leadership meeting. He interviewed me, so, you know, we've kinda returned the--
Well, what's interesting, and I was telling my wife this today, this is the fifth time I've seen Ed in 30 days. I haven't seen my wife that much in 30 days. She's a lot better looking than Ed.
That's fair. When you think about our companies, when you think about American Express, when you think about Delta, when you think about what we spoke on this morning about a premium experience, a trusted consumer brand, a brand that transcends the airline space, I could not imagine two better companies aligned on that purpose. A lot of the work we're doing to invest in brand, to invest in premium is because of the relationship with our good friends at American Express. Steve, thank you.
Oh, my pleasure.
Thank you for joining us.
To be here, and it's a different group of analysts that I would normally have an opportunity--
Well, they may wanna buy some Amex.
You don't know. We'll see.
You never know.
We'll see.
You never know. Well, I wanna start off talking about the partnership. One of the things we're very proud of is the unique nature of our partnership. All airlines have credit card partners. I think many times they're somewhat transactional. I will tell you personally, and I've been around this space for, you know, over 20 years working with American Express. At one point ours was very transactional. It's morphed over the last decade to be very strategic. Speak to the unique nature--
Yeah. I still--
Of what we create together.
Well, thanks. It's a pleasure to be here. I had a leadership meeting yesterday, and we're sort of reversing roles a little bit. I was interviewing Ed a little bit. You know, when you look back at American Express and at Delta relationship, it goes back 64 years. You know, it started from a merchant perspective. 25 years ago, we got involved from a co-brand perspective. You know, now it's co-brand, it's business travel, it's leisure travel, it's Membership Rewards, it's lounges that we share, and it continues to go on and on. When you look at the two companies, we share the same values.
You know, I was saying yesterday at my own leadership meeting, you know, values are an interesting thing, because a lot of people put those values on a plaque, and they put them on the wall. You know, when the chips are down, that's when you really look at values. Our values, the first thing for us is it's all about our colleagues, right? You know, the first thing is you gotta take care of your colleagues, 'cause you take care of your colleagues, they'll take care of your customers. There's no better example than during the pandemic, you know, with no layoffs, right? I mean, there were no layoffs. We had no layoffs. I mean, that is. Those are values to really value your employees.
When you look at customer, we put customer at the forefront of everything we do. We're all about experiences. You know, when you look again at the pandemic, that's what it was. When you look at this unique nature of this particular relationship, and Ed talked about it. You know, we're in the co-brand space with lots of different entities across the world. Some of them are transactional, and that becomes disappointing. But this is not transactional. This is really a strategic relationship. You know, you sign a contract. For us, we sort of put the contract in the drawer, and we look to do what's right for the customer. When you look at our customer base, boy, we overlap pretty nicely. You've got the number one airline, and you've got the number one credit card, and that's a pretty special place to be.
That's a one plus one equals three.
Yeah.
Or four.
That's why I didn't major in math. Yes. One plus one equals three in this case is really a good thing.
Yeah. Speak to the importance of the Delta relationship within American Express.
Yeah. You know, what's interesting is, you know, Ed said this. We have become dear friends. I took over four years ago, and I think I had met you once prior to that. I was purely the mister inside. They didn't wanna let me out in public.
You were in the basement.
I was in the basement.
I knew you existed, Ed.
You know, with the jet engines.
Exactly
and so forth that run American Express. You know, what happened was there was two phone calls I made, you know, the second day that I was named back in October of 2017. The first one was to Warren Buffett, because if that one didn't go well, there'd be no more phone calls to make. Then I called Ed. The first person that I went to see, and with my team, was Ed and his team because it is a critical relationship. It is the most important and the broadest relationship that we have, and it's one that we continue to nurture. It's one that, you know, drives tremendous value for us, not only with those cardholders who are Delta cardholders, but those cardholders who hold our Platinum Card and our Centurion Card.
It gets back to the fact that when you think about values and you think about the customer base, they are so intertwined and so special. You know, the American Express team and the Delta team, if you were in a room, you couldn't tell.
No.
Who was on, who was wearing what uniform? Especially now with everybody with jeans on all the time. You know, it doesn't make much of a difference. That, you know, that's the reality. The reality is that they look at this as we are here to drive this relationship forward. The other important thing, and this is very different than other relationships, it's not my customer, and it's not Ed's customer, it is our customer, and that's how we treat it. We make decisions based on what's best for our customer. Sometimes those decisions may not be the best at the moment for one of the partners, but in the aggregate it's best for the customer. If you treat the customer right, good things will happen overall for the partnership.
If you look at our relationship over time, again, I've been, you know, with Steve's various predecessors and teams over 20 years following this. You know, there was a good period of time, 10, 12 years, that we were just very focused on whose customer it was. It was unclear. Is it a Delta customer or is it an American Express customer? Both teams had that struggle. I would point Steve to your first trip, one of your very first trips down. I welcomed Steve down, and I was looking forward to spending some time. I said to Steve, "Steve, we have, you know, the two best card provider, we got the best airline.
Don't you think we should have the best co-brand, period?" Steve said, "Absolutely." I said, "Well, we don't.
Yeah.
We don't. At that point, it kind of dawned on everyone. We gotta go fix the economics to make that incentive so that we're truly aligned around that customer.
Yeah, and that's really important, right? I mean, you can sit here and you know, I always tell my team, because we always get asked about what the discount rate is in our business, you know, because that, people look at that as you guys don't care about discount rate. I'm talking to Dan over there in finance. Don't worry about it. You know, they talk about that, because they look at it as a measure of sort of marginal profit. The reality is, making 300 basis points on zero is not really a good answer.
Making 100 basis points on a lot is a much better answer. I think that this relationship, I mean, you know Glenn and Doug Buckminster, who runs my card business, and Dwight, who's in the back with the rest of the people on the team. The relationship that Ed and I have transcends throughout the organization, and I think that's really important because we win together in this. I think that's important. We fixed the economics. Look, one of the first things that we did, and I think this has played out brilliantly for us, especially during the pandemic, you know, we extended our deal, you know, in my first year.
We extended this out till the end of 2029. What's really interesting is if we hadn't done that, we would be sitting here now thinking about RFP, thinking about all those things and not thinking about the customer. Now we are sitting here thinking about the customer as opposed to slowing everything down, worrying about, you know, who's gonna get this basis point and that basis point. Ed and I developed a pretty good rapport just over that first 12 months, and we basically said to the team, "You got 90 days. Go out and do it." That's what we did. I met you in Detroit when you were on your way to China, and we finalized the whole thing and that was early 2019 and off we went.
That was fabulous. The last couple years, I know how stressful it was for you and company, our company. When you go inside your boardroom and you see your airline partner is on its knees, what was the board's response knowing that you had just signed this rich new deal with us? Was there ever a moment of doubt or was there ever--
No, I think, you know, we got a pretty savvy board, right? You know, you have one or two board members that'll always, you know, be an outlier, which is really good because you want contrarians in the room. You don't want everybody sort of, "Oh, well, he said it, so it must be so." Yeah, you had a few, but the reality is, and look, while I haven't been in charge for 37 years, I've been in this business for 37 years. You know, things happen, but people will return to travel. I mean, we saw that after 9/11, we saw that after the financial crisis when people, you know, didn't have maybe as much funding. We are a society that has become globally intertwined, and so basically not traveling is like ripping somebody's heart out.
You cannot imagine not traveling. You know, the reality is what I had said to the board is, you know, "Look, I don't know when we're gonna come out of this, but now because we've signed this deal, we can actually focus on coming out of this and being stronger." What's interesting is, you know, Warren Buffett owns 20% of American Express, which is a nice hedge, you know, against activist investors and other kinds of things, but we're like-minded. He's got a little bit more coin in his pocket, but we're like-minded, you know?
You know what we are like-minded around is exactly what Ed is like-minded around is too, which is we focus on making sure we take care of the brand and we also take care of our customers. During the pandemic, when it looked bad, we were talking to each other every week, and you know, I thought my situation was bad because I had a point in time where one day I was down 50%.
I remember.
Ed said to me, "I'll take it." You know, "I'll take it." You know, the reality is we both decided though, and this is why the values are so important. We're gonna invest in the customer. You know, he did that with extra safety, blocking the middle seats, and we did that with an extra value injection within the product, including the Delta product that we have. We put extra value in it because people were still using that product. We made sure we invested in brand. You know, you had a few board members that said, "Well, you know..." I said, "Look, the reality is we're a 176-year-old company. You don't remain a 176-year-old company by managing for the next nine months." That's what we did.
No, the reality is this was, as I look back, extending our relationship and, you know, in hindsight it looks good. It was probably the best decision that we made because it gave us the opportunity to really invest and grow this business right now versus let's do the kabuki dance, right?
Yeah.
I mean, let's see. We'll get the networks in, do this, do that, and I think we shocked everybody when we extended it.
Yeah.
I know we shocked our competitors, which was good.
We're working well together. I'm gonna talk about the recovery in a second. We shared with our owners, our investors here that we have a goal to get to $7 billion. In 2021 we're around four, a little over four. Pathway in the five-plus range next year in terms of this is the contribution remuneration, not necessarily the P&L, takes a little bit of time to come through to P&L. What's your confidence in us hitting that $7 billion number in the next couple years?
Yeah, look, I'm very confident that we're gonna hit that number. You know, what's interesting is I say we're very confident in hitting that number, and that's a good thing for me, because this is a good deal for both of us. I am happy to pay, you know, the remuneration of $7 billion. I look forward to doing that.
Would you go more?
No. Well, yeah. Listen, the nice thing is I'd love to pay more because what happens is so much of this is built on volume.
Yeah.
So much is built on getting more cards. If you look, I think you showed a slide today, in November we're up 22% over 2019. When you look at our results, year- to- date we're over 2019. We're gonna end with the most volume that we've ever had, and we're on a really good glide path right now. The reason we're on that good glide path is because this product is not just used on Delta. In fact, less than 10% of the volume actually is on the airline. This is a product that is used broadly.
You see 70% of the spending is goods and services which is why the value injection that we did during the pandemic, whether it was some dining credits for takeout or grocery credits to put on there, the extension of the travel certificates, that's not in a contract anywhere. That's just good business between two good business partners, and that's what was really important. Yeah, I'm really confident that we're gonna make it because I believe we're gonna grow at a really good rate next year. Remember, in 2019, we were growing at 11%, which is a great growth rate.
Yeah.
We're on a glide path right now, and I think we'll definitely make that $7 billion number.
That's great. That leads me to. I showed a slide earlier today as part of my presentation that kind of dissected spending. We know the consumer has accumulated a tremendous amount of wealth. $2.5 trillion is the general estimate that people are using. But we know the spending rates have been high because of that wealth. But we know they've gone deeply into goods versus services because of the pandemic. Our expectation is that services are gonna start to catch up and then start to you know potentially even over time pass goods. Can you speak to that? You have good insight into the consumer wallet.
Yeah, we look at it, and typically our business is about 70% what we would call goods and services. We used to call it non-T&E, but it seems so defeatist. We changed it to goods and services. Took us 40 years to do it, but we changed it. Then you have travel and entertainment. Travel and entertainment, you know, hotel, airline, restaurant, car rental, that was about 30% overall. Right now we're probably running at about 80/20 or so. You're seeing travel spending down, and we've talked about this, approximately 20%. You know, we said by the end of the fourth quarter we'll get to about 80% of our traditional T&E spending. We're really seeing a boom in goods and services.
What's really interesting as we look at it, a lot of that goods and services spending was spending that we didn't have, okay? So, I'll give you an example. We didn't get maybe as much cell phone service. We didn't get as much, streaming on our card and things like that. We may not have had as much grocery. So a lot of the moves that we've made with the portfolio were to get people to shift their behavior. When we talk about shifting behavior, from one card to the other card. The reason for that, and this is why, you know, these cards are so important, is people love to accumulate for those trips that they wanna take. They wanna accumulate for status. They wanna--
Which I think is gonna become even more important in, you know, as we move forward. They want to accumulate for their rewards overall. I think that's a permanent shift. Having said that, you look and say, "Well, the travel's gonna come back." If you look at the profile of our customer, we are taking share, I believe, from other cards because we never have 100% of somebody's spend. If we can get to 50%-55%, I have 100% of my spend. It makes sense. We don't get 100% of everybody's spend. If we can get up to that 55-60% of share of wallet, you're now moving some goods and services. With travel coming back, it'll be a tailwind for us.
That's why we're confident that next year we'll actually be able to retain some of the growth rates that you're seeing right now in the portfolio.
When we're talking about the recovery, we spent a lot of time this morning talking about the shape of the recovery in terms of demand for our business, for the airline. I don't think there's a whole lot of pushback that consumer demand is pretty strong. There's pent up. There's new wealth. There's new opportunities, new categories, premium consumer that we've really haven't invested as much in, that we're investing in.
Right
We see good growth. The big source of debate, and there's a thousand different opinions, is around the business recovery in terms of business spend. What's your view on how the business recovery spend in our business will shape?
Yeah. You know, look, I think that's been slow, right? I mean, the business review is slow. Let me talk about it in the context of the card, and let me just talk about it in the context of sort of the macro. I'll go micro to macro. When you look at our card product. The majority of our cards, the Delta American Express cards, are consumer cards.
Right? They are consumer cards. We have small business cards, a very small percentage, but they do punch above their weight. They probably punch about 2-3 x more than- Than a consumer card does. We really don't have a lot of corporate. We don't have any corporate cards, Delta corporate cards. I think as you look at the portfolio, I think we have a huge opportunity, and we've talked about this at our meeting a couple weeks ago. We have a huge opportunity with small business because small business today represents a small percentage of the overall T&E spending, and it also represents an even smaller percentage of the travel spending.
In your portfolio.
In the American Express Delta--
Portfolio
Card portfolio.
Right. Right.
Huge opportunity for us, and I think that's gonna be a big tailwind for us 'cause we're gonna get focused on that.
The macro on that is pretty tough.
The macro on that is. Look, the macro on that from a small business perspective. Small business has been probably the most resilient segment that we have had. They're down a lot less than, you know, our corporate business from a T&E perspective. They are coming back, and it's been really good credit quality. Because when people think about small businesses, you tend to think about the restaurateur. You tend to think about the small retail shop in your neighborhood. It's the lawyer. It's the dentist. It's the architect. It's the engineer. It's the HVAC. And let me tell you, those guys were busy, and those gals were busy during this pandemic, right? Who didn't have something go wrong with their air conditioning, their heating, or what have you during the--
I saw more electricians and air conditioning people in my house than ever before. Which I questioned my wife on, but that's another story.
Sure.
You know, as you move along, corporations are still not back, right? They're not back in full force. Some of the banks are back, and I think that will come back. It's gonna come back different, and we've talked about this. I think you're gonna have a much more virtual world, but it's probably gonna mean different travel, and it's probably gonna mean even more connected. Just the reality is a more virtual world, I believe, will actually lead to more travel. Now, that may seem like something that is completely crazy, but the reality is because you're not seeing as many people. The people that were based in New York, the people that were based in Atlanta, the people that were based in Florida may now be based in Colorado, may now be based in California.
They're gonna have more reason to get together, okay? Because they're not seeing one another in the office. I think travel will change. The other thing that's not gonna change is customer travel. There is nothing like getting in front of a customer. I don't know how you close. You know, there's stories of heroic deals, and you closed over Zoom and so forth. I was at the Business Roundtable meeting in Washington last week or the week before, and you know, I saw 200 CEOs that I haven't seen in person, and it was energizing.
Yeah.
It was energizing. I think a lot of CEOs walked away saying, "You know what? We need to do more of this." It's not there yet. Our large and global business is down. We're probably at about 50% of where we were. I think it's gonna come back. Does it come back by the end of 2022? Does it come back by the end of 2023? I think that's anybody's guess, but the death of business travel is completely exaggerated.
Yeah. I completely share your view. I think anything that enables connectivity is gonna grow travel. It's gonna be good for our business, and that's whether it's video conferencing. We went back and we studied cell phone. That's kind of an interesting analog. Back in the mid-'90s when cell phones gained popularity and over that kind of 10-year period, what happened to travel during that period? Travel expanded because of cell phones, because people wanted to connect even more, because they had more opportunities to connect, and it's a supplement.
Yeah.
It's not a substitute for a lot of what we do.
No, as I say to my team, "Look, there are really good things about being in person. There are some really good things about being virtual. Let's take the both of them and put those things together." I think that's what will be interesting.
Last question, then we're gonna go to the floor for questions from our investors. What are some of the biggest lessons? You know, we all talked about lessons learned these last couple years, and when you think about American Express specifically, what are some of the lessons that you've learned as you've led through this crisis that could be instructive for this group?
Yeah. I mean, you know, well, the first thing that you know you learned is when you're making a decision here, really be open to change. I remember March 15th of 2020. In the morning we were sending out a memo that was talking about we're gonna go to red and blue teams, or green and blue, whatever it was. By the afternoon it was maybe come in once a week. By the end of the day it was stay home until further notice, you know? I think you really have to make sure you're not only listening to your customers, but you're listening to your colleagues, and you're really taking in the external environment in a full way. It's not a weakness to change a decision. It's not a sign of weakness.
It's actually a sign of strength. It shows confidence, and we've had to change course many times. Your colleagues and your customers are a lot more resilient than you actually think that they are. They are resilient. If you stick behind them, they will stick with you, and I think we both did that. We both said, "We're putting a stake in the ground about our customers," and that's what we did. You gotta be agile. You really have to be agile. You know, everybody will talk about being agile, but agility means, you know, going down a different path than you would've gone before. Again, being able to change your mind. The other thing is, I think we democratized a little bit more decision-making.
What I mean by that is, you know, it used to be. I'll give you a funny story because, well, it was funny to me, so I was yelling. We had to change some terms, and, you know, we deal with regulators like you deal with certain issues that you have to deal with. We had to change terms, so we had to send out two letters to a card member to change the terms. But they had to get there simultaneously. So that's easy. Put the two letters in the envelope. You know, and I said, "Well, get people, but you can't get people together 'cause it's, you know, COVID." So put it in. How long is it gonna take? Eight weeks. Eight freaking weeks to put two letters in?
We wound up getting the programmer in the room, and this was on a Tuesday. We had the letters out on Friday. You know, you play this game of telephone in an organization, right? Where the SVP tells the VP, who then tells the director, who tells the manager, who forgot what the SVP said, so you gotta go all the way back. We wound up having the programmer. When is the programmer ever in the meeting with the CEO? Now, this CEO happened to be the CIO at one particular point in time, but still, I said, "Bring me the person that has to code this." The democratization of this. What I mean by that is bringing the right people in the room. Stop with the hierarchy.
Stop with the nonsense, and we're doing that on an ongoing basis.
We're doing that with our teams collectively too. You know, we wanna hear from our teams at all levels, and I know--
Oh, yeah.
We both bring them to the.
Look at the meeting that we had. It was, you know, we had about 20 people there, and it was all levels.
That's right. All levels. Great. Okay. Well, let's turn it over to Q&A from this group.
Thanks very much. Hi, I'm Helane Becker with Cowen. Nice to have you here. Here's my question. You just talked a little bit about corporate, big corporate, and then you mentioned smaller companies like lawyers and so on. What's the opportunity set for SMEs over the next few years? How do you see that working through both your networks?
Yeah. I'll take the first shot at it. From an SME perspective, you know, American Express is the number one small business issuer in the United States. In fact, if you add it up, the next four issuers, we're still bigger. We know small businesses. The reason we know small business is because of the product that we have, and the product that we have is one that provides them with no preset spending limit, as opposed to a line of credit, which is really good if you're a small business from a working capital perspective. I think what we need to do, and we focused a lot from a consumer perspective, I think there's tremendous opportunity for the two brands to work even more closely together on penetrating more small businesses. You know, we talked about that at our last meeting.
Yeah. Helane, you know, we talk about corporate travel. Steve, you're back there, correct me if I'm wrong. I think the total number of corporations included in our corp is like 1,500, something like that.
Right.
1,500 companies. That's it. Everything else is SME. Right. I mean, think about the scale. In small and medium business, given where we're focusing a lot on the larger spend, 'cause you can capture it more cleanly. You could RFP it easier. There's a lot of work to do, and we haven't had the orientation. We've had some products out there. We've been kind of mindful of it, but didn't really understand it. Now, you know, we're deep in that space, and we're developing products together with Steve and his team, but also with our own loyalty.
We're working together on it.
I think the next 12 months, that's where the real opportunity is for. That's why I happen to be bullish that by the time, as I said earlier, we get to 2023, early year, midyear, I don't know when, that we're gonna have, you know, total business back to 2019 levels.
Hey, it's Conor Cunningham from MKM . Card spend's been incredibly resilient during the pandemic. Just seems like the driving factor in the outperformance is just the way that customers are engaging with it. Curious to see how Amex plans to position the co-brand card to continue to morph into this everyday use card rather than just a travel type of card.
Yeah. Well, I mean, I think that journey is well underway, and the train has kind of left that station. I mean, we're 70% of the volume is on goods and services and not travel. Now it's probably more 80%. I think we're gonna continue to do that, and what you do is you add more benefits, and you continue to prop up the value proposition, so that it has benefits that encourages spending in those particular categories. I think the other place that we'll be looking to hunt even more is with millennials.
You know, one of the things that we've had a lot of success in, and we've had a lot of success from an American Express perspective, and when you look at our and we talked about this in our third quarter results. 75% of our Gold and Platinum card acquisition were millennials. You know, 50%, quarter- to- date, millennials are spending 50% more than they did in 2019. That stat is not just an American Express overall. That's an American Express co-brand Delta stat as well. I think we, you know, as we talked about focusing on small businesses, and they use this card to run their businesses, and that's still an opportunity to get more.
I think we've done a really good job of positioning it to everyday spend. What the pandemic has done is accelerated the shift from cash and check to card. You're seeing, and so you see these card numbers going up, but the question is how much actual incremental spend and how much is being cannibalized from cash and check? Go to a ball game now, go to a stadium, go just about anywhere. Nobody takes cash anymore. Try and cash a check, I mean, forget about that. That's, you know, what we're gonna continue to focus on.
Hey, Savanthi Syth from Raymond James. Just, this is a bit more of a rudimentary question, and you actually partially answered it already. But we've been surprised by just how much, you know, the airlines have done a good job and Delta in just getting signups. You know, what was driving that trend in kind of the U.S. here to see that level of, you know, more and more people signing up for cards because it's a fairly mature industry and a penetrated market. You know, as you partially answered this before, like
Past the pandemic, you know, what are the factors that might change that? It sounds like it's gonna accelerate.
Yeah, I think it's gonna accelerate. Let me take a step back. The reason you do these partnerships for two reasons, right? You take two great brands and two great products, and you put it together, and you get a great experience. Now that's what we call value proposition, right? That value proposition of what American Express can bring and what Delta can bring, we think is better than other co-brand value propositions. What you do is the reason you do these particular deals is because it helps from a distribution perspective, right? Because you have a targeted audience and you have eyeballs that you can control through various outlets within the entire Delta network, whether that be at the airport, online, et cetera, et cetera.
Our view is that, and I think you mentioned this, that a third of the SkyMiles, probably the active SkyMiles participants have the card. We have a lot of area to hunt in. You know, when you look at our product line, the refresh product line, we have four products. We have an entry-level blue product. We have our gold product, which allows you to earn even some more miles. We have our platinum product, which gives you some more miles and gives you some lounge access at a reduced rate. We have our reserve product, top of the line, which, if you're a real frequent traveler, we can bring people along a journey from a fee-free card to a fee card.
You know, we're out there and modifying these value propositions. I believe, look, I'm biased, but I believe Delta is the best airline in the world, and all you have to do is look at the statistics. You have what I believe is the best credit card in the world. You put the two of them together, and we're gonna hit over. You know, we hit 1 million cards that we acquired over 1 million in 2019, and we'll be exceeding that number as we move into 2021, 2022, and beyond because we're really focused on it from a team perspective.
Good afternoon.
Oh, hey, sorry. It's a lot of hands, but I--
Yeah. No, that's fine. My name is Jamie Baker. I'm employed by one of your competitors. Delta knows where my wife and I are gonna be in July and, notwithstanding my employment, Amex knows where I'm gonna be, what I'm gonna spend, and what my spend patterns have been in the past because it is your card that I use primarily for travel. Is that knowledge? I mean this seems pretty valuable. You know exactly what I'm gonna be doing and how I like to spend. Is this knowledge?
It's a little creepy, Jamie.
Is this knowledge being fully leveraged, and if not, when will it be? Do those benefits accrue primarily to American Express or to Delta? What would this look like from an analytical--
Well, I would say, you know, look, we're still on a journey as everybody else is because what you're talking about is, you know, merging that data. So for example, if that trip that you're taking on Delta is bought with an American Express Delta card, then, you know, reality is we know when and where you're gonna be there. You know, when you think about offers that we could potentially make. Who benefits by that? Both of us benefit by that because I'm gonna get to spend, Ed's gonna get to spend, we're gonna get more loyalty. That's where the whole digital journey comes along, and that's where we really need to continue to do more work in the app because we're not gonna send you a coupon, right?
I mean, we really, what we wanna do is send that either to the Delta app or to the American Express app and integrate that in. The teams are looking at that right now because our next big journey is how do we technologically do that to make it easier to communicate? Because that's the Holy Grail, right? The Holy Grail is to know where you are, like Google or, you know, anybody else, and then give you an offer or a recommendation that you say, "You know what? I use the American Express. I went with Delta. I use the American Express Delta card, and I got an offer for a restaurant.
I got an offer, you know, for a retail shop or something like that." Look, you can go into the Amex offers today and look at all of those offers, which are, a lot of those are curated for individuals. But we can do the exact same thing with the Delta American Express card as well.
My question is more, is there a lot more to come or are you?
Yes. We're at the beginning of this journey.
Do you think--
Oh yeah. We're at the beginning of this journey. 'Cause I, you know, look, if there's not a lot more to come, I'm disappointed.
Obviously, we have a shared interest in this. We have a lot to learn from American Express. They're much further ahead of us in terms of overall experience management. We're investing heavily, and we've got some very interesting technologies that we're out deploying. We'll be talking about those next year as they come up with. It's beyond just making offers. It's about the experience itself, and yeah, the last time you flew, this happened. Sorry, Jamie. Let us do this for you real-time, right? We're already doing a lot. A lot of it's around having a singular view of that customer. Architecturally, we're not ready to pull it all together, but we're working with some very, very interesting technologies that we both share and--
Well, the interesting thing is with the deal that we have, which goes all the way almost to 2030, investment makes sense, right? I mean, you really, you're encouraged to invest together to do that. That's what happens when it's a strategic relationship versus a transactional relationship. That's what happens when you have relationships and culture at the top that merge because you don't mind. You know, it's not, "Oh my God, if I invest in this, is it a throwaway investment?
No.
That's not how we think about it.
That's why we talk about Delta long term as an airline. I mean, we're a travel company. We're a consumer brand. We're trusted. We're aligned with American Express and partners, and we bring value to you whatever you want to do.
Thanks. Duane Pfennigwerth.
How much do you have to pay Isaac to get the mic? I'm wondering. He walks very deliberately to certain people.
He was taken care of before.
Upside surprise. So in that basement with the jet engines that you were in, I assume you have some macro folks, and you have a good view into the consumer. So if you could, to what extent would you rank sort of categories that massively over-indexed through the pandemic? You know, categories where you're like, "Geez, I don't need to spend any time there 'cause it's obviously gonna come down relative to where it is today." Is there any category that you would be more excited about relative to travel from an upside perspective?
What's interesting, the obvious category that over-indexed during the pandemic is online, any kind of online spending, right? I mean, that's happened. Our customer over-indexes more than the bank card customer by a lot, maybe almost twice. You look at restaurants, we over-index from a restaurant perspective as well. Obviously, you know, we over-index from a hotel and we over-index from an airline perspective. I mean, that's what the American Express customer looks like. During the pandemic, we saw an increase in customers that were into streaming services, which have become even bigger. We got a big bump in that, and I think that will continue.
Same thing with wireless, which just didn't make a lot of sense, but it did bump up. Supermarkets, especially online delivery and then online delivery of restaurants. I mean, when you look at restaurants right now, restaurants right now are back. I mean, the ones that survived are completely back. We don't look at it individually from a restaurant perspective. I look at it from a category perspective. From a category perspective, takeout and online dining is through the roof and has sustained that. The in-person dining is also higher, okay? You know, their biggest problem right now is getting cooks and waiters and things like that. I think, you know, those are the categories that we have and that we'll continue to focus on.
You know, high-end retail has always been a big category for us as well. You know, that's pretty much what our consumers look at. Very different from a small business perspective. You'll see advertisers, service providers, Amazon Web Services is a big one as well. That's how we see it.
Hey, Steve. Kenny Dichter, Wheels Up.
Oh, Kenny.
It's good to see you, Steve.
How are you?
Last time I saw you was at the Masters.
Yes, that was true.
Yeah, it was great.
You were walking around.
Just a quick thought about the way you described that cell phones and how it was gonna affect travel and then Zoom. You know, one thing as the father of three daughters, you talked about millennials, and I would say even younger, Gen Z. Both of you have said the word experience a bunch of times, and I'm the biggest believer in the world that we're in the experience economy. When I think about Snapchat, and I think about TikTok, and I think about Instagram, and I think about Facebook. You know, to me, my daughters, when we travel somewhere, I'm not sure it's even about the travel as much as it is about the post that they're figuring out and what they wanna do.
What kind of insights does Amex have at the influencers and everybody that's moving around and traveling on this next generation, which I think is super bullish for where travel, Delta, and where Amex ends up?
Well, I have four girls, so I'm one up on you. Three are millennials and, you know, yeah, and one is a snowflake, I guess, but that's what we call her anyway. I guess she's Gen Z. You're right, it's all about the experience. You know, my two older ones, my 30-year-old and my 26-year-old, big huge platinum card holders. You know, it's all about the experience for them. It's all about checking into the hotel early, and having a late checkout and getting a free breakfast, and doing that. Then it's access. You know, it's not only experience, but it's access, whether it's access to a show or access to something that, you know, only we can provide.
I think when you think about these two brands and what we can do together from an experience perspective, it's gonna be huge, which is why I'm really encouraged, you know, as I look at the American Express card base, and I look at, you know, my proprietary business with 75% of my acquisition in Gold and Platinum being Millennial and Gen Z, and we continue to increase that. You know, with Delta as we continue to move on, that's where I think a lot of people thought that, you know, the American Express card was your father's card, right. It's not anymore. The American Express Delta card is not your father's card. It is your card to unleash a whole world of experiences, 'cause you're right.
I mean, nobody can eat a meal without taking a picture of it first. I mean, the food gets cold, right? 'Cause you're too busy taking angles of how you're gonna take those pictures. I think it's all about experiences, and that, I think, will serve our joint interests very, very well. You know, it's obviously served me on the other side as well.
Hi. Back here, it's Hunter Keay at Wolfe Research. Steve, nice to meet you. Thanks for doing this. Some people in on our side of the industry have suggested that the marketing component that you pay Delta is some crazy margin, like 90% margin, and Delta just, like, banks it to the bottom line, like free profit. The question is, does that bother you when you hear that? Do you believe that? The second part of the question is, what is your expectation that Delta does with this money, the marketing component of the money that you give to them?
What I would say is there are a lot of things that bother me when people say things. That's not one of the things that bother me.
Would you say it's true?
Look, the reality is, I'm not gonna get into the individual financials, but as the Delta co-brand card does well, I do well. That's really important to me. From a marketing perspective, what I expect from my partners at Delta is that they create the best experience, and they have the same joint incentive that I do to acquire more cards, and to drive more spending. What I would say is we are totally aligned in terms of the outcomes that we want, and where the investment comes from is kind of irrelevant. When we make investments, whether they be co-brand relationships, whether they be individual card relationships that we do, we have an ROI that we shoot for.
You know, you just look at our return on equity, and you can see we're getting it. Delta's the biggest partner that we have. If it wasn't a good relationship on both sides, I wouldn't be here, and I wouldn't be smiling.
All right. Thanks. Just another quick one. How many people sort of trade up? What's the sort of life ecosystem going from the Blue Card to the Reserve?
Yeah. It's a good question. We do a pretty good. I don't have the percentages off the top of my head, but it is part of the strategy. It is part of the marketing strategy to do that because that's where you look at how people use the card. That's why I introduced the zero fee card. Then you say, "Hey, look, this is. I'm not getting as many." Now every card we have you get 2x whatever you spend on Delta. But then as you move up, you can get on dining, you can get on hotel and so forth. If you start to travel more, it makes sense for you to get the Platinum Card, or it makes sense for you to get the Reserve Card.
That's where with information you could target people to say, "Look, you could, by upgrading this card, not only do you get, you might get a welcome offer, but what you're also gonna get is you're gonna get access to the lounge. You'll get access to the lounge with the Platinum Card. It's $39 to get in. However, if you get the Reserve Card, as we charge $450 for now, you can go to a lounge anytime you want, and you can bring two guests." How you use the product, which is exactly, you know, what Ed knows and what I know, is that's how we can really market. That's hopefully, that's some of the how to use and some of the marketing money as well.
Okay, we have time for one more question. Here we go, Ravi.
Thank you. Maybe we can end with a bit of a longer-term question. It's to both of you, so I'd love to get each of your views on this. You have a long-term contract that goes to almost 2030. My view is that both your industries are gonna see some significant technology disruption in the next decade. Obviously, we're already seeing that with payments with things like crypto and digitization and ESG in the airline space. How relevant is that for each of your respective businesses? How much do your card members care about ESG footprints of airlines? How much do your customers expect innovative new technology solutions from Amex and your partners? And how do you think that influences the relationship over the next decade?
Well, look, I'll start. I think from an ESG perspective, I think when you look at Millennials and Gen Z, they cared very, very deeply about it. I think you know, what Delta is doing and what it has committed to do, I think is right aligned. That bar is gonna keep getting raised over time. You know, this is where values come in, right? You know, we both talk about being you know, good citizens in our community. You know, it's one thing, as I said to my team yesterday, it's one thing to put that on a wall, it's one thing to put that on a placard, it's another thing to live it.
I'm confident in Ed and the management team and how and what Delta's mission is that they will continue to be good citizens in the community in which we live and work. They've demonstrated that, and I believe they will continue to demonstrate that. I, you know, I'm not concerned about that.
How was the question about crypto?
Yeah. You know, look, I'll give you a long answer. This is two minutes, so this could be a filibuster. Look, I get asked about crypto all the time. The reality is, I'll take it to a different level. You really gotta think about digital currencies, okay? It's just not about crypto. When you think about digital currencies, you got three types. You've got cryptocurrencies, your Ethereum, you know, Ripple, you know, obviously Bitcoin. If you look at the market value of all that, it's about $2.4-$2.5 trillion today. Maybe tomorrow it's $2.3 trillion, and it's $3 trillion after that. Then you look at gold, and gold is probably worth about $12 trillion. Then you look at the M2 money supply, and that's about $145 trillion.
It is really hard for anybody to see cryptocurrency actually becoming a fiat currency that is accepted as a medium of exchange. You cannot have a value of something on a Friday when you get your paycheck be $48,000, and then on Monday it's worth $36,000, and then Tuesday it's worth $60,000. I don't know how people can live like that. That's an asset class. The second one is stablecoins, okay? That's where you have people like Facebook with Diem. You've got JPMorgan Chase has a stablecoin, and so forth. The reality is those things will ultimately be surpassed by central bank digital currencies. There will be central bank digital currency. Why? It actually becomes a national security issue.
China is really moving very, very quickly to a centralized digital currency, and they'd like nothing better to have everything traded in the Chinese RMB, right? I mean, that's what they'd want. The U.S. government needs to come up with their own digital currency, and I think the Fed is thinking about that and working on that because you need the U.S. dollars, I think, to be the medium of exchange, the international medium of exchange. That's what'll ultimately take over. Why do we need a U.S.-backed digital currency? The reality is it's not gonna change all that much, but you need to be able to operate in the new world, and you'll get rid of a lot of the intermediaries in the banking system and so forth, and you'll be able to do more cross-border payments.
It's really just gonna be another form factor of how we transact today. How many of you use cash today? How many of you write checks today? The reality is all you do is ledger transfers today from your bank account to pay another bill, and you do debits and credits. My belief is digital cryptocurrency is here to stay. You will see cards that provide rewards in cryptocurrencies. You might even see us use Membership Rewards to buy cryptocurrency. In my opinion, it's not gonna take over from a currency that we will all use to transact. Having said that, and then I'll stop, but having said that, we're aware of everything that goes on. We look to play with everybody.
I got investments in digital, in cryptocurrency companies, in stablecoin companies because we wanna learn. The reality is that when you look at what's happened in fintech, there's been a lot of disruption in the space. With that disruption comes opportunity. When you look at a company like American Express, where we have a balance sheet, a brand, and we have scale, melding that with sort of fintech-type capabilities and fintech companies can give us an advantage, which is why last year we bought Kabbage during the pandemic. We look to partner with a lot of these guys, and if we can come up with something that, you know, again gives us a one plus one equals three for the relationship, we'll do it. That's my long-winded cryptocurrency.
It's a great filibuster. I'll give you 30 seconds on the back end. Our customers are the same customers. You know, they care about all the things you talked about. They care about sustainability. You didn't hear us talk a lot about ESG today because we wanted to be very focused on our recovery path. Don't let that, you know, kind of fool you to think that we're not all in. Candidly, we haven't talked this entire year much about ESG for that same reason. It's been about how do we survive, how do we get through it. There hasn't been a platform to really go after. 'Cause when we talk about sustainability, we're serious. It's not about sending press releases or latest flash in the pan, or I'm gonna do this, or I'm gonna do that.
We want to have real development and real initiatives that we can talk to our consumers about, that we can fulfill, and we can stand behind. Excited about bringing Pam Fletcher on board as she starts in February as our Chief Sustainability Officer, and all the learnings that we can garner from the autos. Amelia DeLuca is here. Amelia, where are you? She's in the back. She's doing a great job leading. She's also gonna be helping lead, continue to lead our sustainability efforts as well. Amelia DeLuca comes from the corporate sales team, and so she knows all the companies, your companies, and all the companies out there that we do business, how they're thinking about it too. We're all in. It's gonna be a big message and platform for us next year.
We wanted to get through the worst of the recovery first before we launch it, 'cause we don't think people could hear, and it was just noise at a certain point. Well, Steve, thank you.
Thanks, Ed .
You're a dear partner, and more importantly, a dear friend.
Oh, my pleasure.
Hopefully you got a chance to see inside the relationship and have a little confidence as to how we're working together, how we think, and what that future holds. I think we have a long way to go to continue to develop the opportunities together. You provide us great value and great insight, so I thank you.
As do you and your team. We're excited about what's to come.
Thank you, Steve.
Thank you. Thanks.