Good afternoon. If we could just get everyone seated. Welcome to our Annual Investor Day. Let me start by sharing our agenda. I'm going to begin by putting into context the progress we've made our last Investor Day.
By executing the plans we laid out for you last year, our performance exceeded our guidance in 2016, and we're in a stronger position than we were a year ago. I'll provide a high level review of our progress, as well as share our current view of the sustainable growth scenario we discussed last year. Doug, Steve and Anre will then provide detail on the performance and potential within their areas of responsibility. Doug and Steve will cover our issuing businesses and Anre will discuss our merchant and loyalty businesses. They'll provide you with specific examples of how we're using the competitive advantages of our business model to generate growth in the near term, as well as how these advantages are opening growth opportunities for the moderate to longer term.
Now for planning purposes, we'll be taking a 15 minute break after Steve's presentation. After the break, Jeff will share greater detail on our financial outlook, including our assumptions on the environment, our revenue and expense expectations, and also cover the broad positives and negatives that could impact our performance. We'll then end with time for question and answers on any topic you would wish to discuss. I think it's safe to say that a lot has changed since we met together a year ago. At that time, we're facing a number of core questions about the viability of our business model and our ability to grow revenues and earnings.
The economic environment was challenging and we were approaching the end of our Costco relationship. Given these challenges, we initiated the 2 year game plan we discussed with you at length last year. As you'll remember, we identified 3 priorities for the organization accelerate revenue growth, optimize investments and reset our cost base. And as you'll hear, I'm pleased with our performance against each one. Based on our expectations of the progress we could make against each of these priorities, as well as the external environment we faced at the time.
Last January, we provided the financial guidance for 2016 and 2017 shown here. EPS of $5.40 to $5.70 for 20.16 and EPS of at least $5.60 for 20.17. So that was then. As I said earlier, a lot has changed since that time. Here's how we're viewing the current environment.
The outlook for global economic growth, while still not robust, has generally stabilized, though there continues to be considerable uncertainty. There are fewer headwinds from a stronger dollar, though it has been volatile. Fuel prices have stabilized. The regulatory environment, at least within the U. S.
Is evolving. And the Department of Justice case, the Court of Appeals has twice taken actions in our favor. Competition remains very aggressive, particularly in specific product segments and in specific countries. Interest rates are moving up, which will likely be a headwind for net interest income. We also see 2 likely positives both within the U.
S, improving consumer confidence, which should strengthen spending and the potential for lower U. S. Tax rates, although the timing and nature of any reductions is unclear. In combination, these factors present a more balanced environment for growth than we faced a year ago. The performance and growth we generated last year, along with these changes in the external environment, have shifted the types of questions we now hear from investors.
Instead of questions about the viability of our core model, there's now more of a focus on execution and growth potential. The most common questions we get from investors today are, how are you performing against the 2 year financial plan you provided last year? How can you maintain your revenue growth while reducing your marketing expenses in 2017? How does your business model provide a competitive advantage in the current environment? What is
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strengthened. There are still concerns, of course, which we'll try to address today. So let me start with our performance, which is covered by the first question. How are you performing against the 2 year financial plan you provided last year? Now I recognize that we are only 1 year into our 2 year plan and the environment and events can always change, but I'm pleased with our performance last year.
As you can see, we outperformed the full year 2016 guidance we provided last January and have also updated our guidance for 2017, 2 strong positive indicators. Now there have been a number of drivers behind these results. First is the customer focused organization we put in place in the latter part of 2015. I know that organizational structure usually isn't given much credit when it comes to evaluating a company's potential. But I believe it was an important driver of our performance.
Organizing our efforts by major customer groups, Global Consumer led by Doug, Global Commercial under Steve and Merchants led by Anre allowed us to focus our resources more effectively on the overall key driver of any customer's growth, meeting the needs of customers. While there are differences across countries, most consumers are looking for the same attributes when it comes to payment products and services, value, security, innovation and service. Our new global consumer organization allowed us to better leverage our assets and optimize our investments. The same is true for our commercial clients, whether it's the end user card member employee, the small business owner or the corporate executive managing a card program at a midsize or large company. Each has varying needs, but these needs are generally similar across geographies.
Within our merchant business, many companies participating in our Plenti and PayPal loyalty programs are also larger merchants. So shifting our loyalty business into our global merchant organization allowed us to consolidate these relationships. The changes we made weren't just changes to a chart. They generated synergies and truly reflect a strategic shift in how we prioritize our resources for generating growth. Our 3 main businesses, along with every other element of our organization from technology to world service to risk management, were focused on the 3 priorities identified last year, accelerating revenue growth, optimizing investments and resetting our cost base.
As a result of this focus, we were able to make tangible progress against each of these priorities. We brought a record number of new card numbers into our franchise. We expanded our merchant coverage in the U. S. And in key markets around the world, providing greater flexibility and utility for our card numbers.
We generated strong growth in billings outside of the U. S. Helped by targeted investment initiatives. We generated strong global loan growth while maintaining exceptional credit performance. We made excellent progress on our digital initiatives and have expanded or launched important partnerships with a number of digital leaders.
And finally, we made significant progress toward our $1,000,000,000 expense reduction target. Now I'll talk about a number of these accomplishments in a moment and you'll also get a deeper drill on our progress from Steve, Doug and Anre. So let me start with our first priority, accelerating our revenue growth. On an adjusted basis, you can see the good growth underlying our core revenue performance. Over the last few quarters, we've seen a general upswing in our adjusted revenue growth and we exited the year with a strong showing of 6% growth in the 4th quarter.
Now, I've always had confidence in the revenue generation ability of our businesses and you're seeing the basis for that confidence in our results. The substantial size of our revenue base, whether relative to other networks, other card issuers or digital payment companies, makes our growth hurdle higher and harder. But we're capitalizing on our opportunities and I continue to believe we can leverage our business model and competitive advantages to generate solid revenue growth going forward. This leads to the second question we'll address today. How can you maintain your revenue growth while reducing your marketing expenses in 2017?
I'm going to leave most of the heavy lifting here to my colleagues, but let me make a few broad points. We've consistently increased our marketing investments over the last several years. So even though we are reducing marketing and promotion, we do so from a base that is at an historic high. As you saw, one of our three priorities is to optimize our investments, and we've made good progress against that priority in the last 15 months. As I mentioned earlier, we've become more efficient at leveraging our global resources, including our marketing spend.
But it's also important to remember that marketing and promotion is not the only means through which we engage our card members. Investments in rewards and card member services are integral to our ability to retain and grow our card member spending and earn their loyalty. In certain segments, we also invest in engagement using operating expenses and contra revenues. So going forward, as we fully utilize these categories of spend, we believe we have the flexibility to reduce our marketing costs and still generate solid revenue performance. We recognize that this is a key question as we move into 2017.
And I believe you'll have a much better sense of our ability to achieve our plans once you hear the concrete examples that Steve, Doug and Anre will share. The next question has become more prominent as the competitive environment, particularly in the U. S. Has become even more active. How does your business model provide a competitive advantage in the current environment?
As just about everyone here knows, my confidence in our business model and our ability to compete successfully remains very strong. You'll recognize this as my go to visual whenever I talk about our model. I use it because it effectively shows a number of our key strengths. One strength is the payments industry itself, which continues to grow at relatively high rates, helped by the ongoing global shift away from cash and checks. Within this attractive industry, we're the only major player in payments that maintains and has responsibility for the full payments path.
We're a card issuer, a network and a merchant acquirer. Because we have both card member and merchant relationships, the data we generate from our closed loop is both broad and deep. We have assets and capabilities built over almost 60 years in the card business, including a trusted global brand, the largest rewards program in the industry, best in class risk and data management and a service ethic that defines our company culture. Applying this model against different customer segments in different countries has produced a business base that is very diverse. Our strength among small business and corporate clients has generated good growth in billings over the years to the point where our consumer and commercial proprietary billings are now approximately equal.
Also key to our profitability in the commercial segment is the fact that 90% of our billings are on charged products. Our diversity is also supported by our G and S partnerships, which have helped build our global scale and relevance. We also have the most diverse geographic mix among issuers with just over 1 third of our billings generated outside of the U. S. This global breadth allows us to leverage our assets and capabilities across geographies, including taking best practices from one country and exporting them to others and the ability to more quickly and efficiently launch new products and services on a global basis, such as for example, the launch of Apple Pay.
1 of our strongest competitive advantages continues to be our closed loop network of data and information, a capability that truly is unique given our relationships with both card members and merchants. The transaction level data we have is generated by our credit authorization system. This allows us to know which consumer small business or corporate card member spent at which merchant and use that information on a real time basis to provide greater value and services to all parties. We're using this incredible level of detail to provide personalized offers and experiences for our card members, maintain best in class credit levels and provide merchants with capabilities and data to minimize their fraud losses. Payment competitors and online players aspire to have these capabilities across their own businesses, but their models don't generate the data needed to fully close the loop.
Our closed loop along with other key assets such as our direct relationships, global reach and brand, create a global commerce platform that serves our customers, clients and merchants. Because of our unique assets and relationships, we're able to provide differentiated value and offers our customers, value that is very difficult for competitors to match. For example, because of our data and analytics, we're able to offer our small business and corporate customers greater spend capacity. Our charge products are not restricted by a traditional credit line. As a result, we can provide products and allow business owners greater flexibility to meet their spending and cash needs, needs that can often vary considerably month to month depending on the nature of their businesses.
Businesses also benefit from our detailed spend data to help them better manage specific categories of expenses, all on a global basis. Our travel and entertainment relationships allow us to offer our card members unique experiences, be it presale access to events, unmatched travel experiences or access to our global lounge collection, which we continue to expand. So we set up a demo of our lounge experience and other product innovations we've been working on outside of the reception area. And I hope you had a chance to try it out or will after the meeting. Our digital partnerships, which I'll expand on in a few minutes, also allows us to provide exclusive benefits to our customers, such as the $200 Uber Credit and VIP status we recently added to our Platinum card in the U.
S. By using the assets and relationships within our business model, we've been able to drive business outcomes that contribute to our financial performance. For example, our service network and the ethic of our service professionals have a direct benefit on our performance. We've been able to increase our customer satisfaction each year since 2011 and as a result of the causality of the service profit chain, we know that satisfied customers have greater loyalty and engagement. When comparing recommend to a friend promoters versus detractors, we see that we retain promoters at far higher levels and they are more engaged, which translates directly into stronger financial performance.
Using our full range of distribution channels, partnerships, online, mobile and member get member among others has allowed us to bring on significant numbers of new cards over the last 2 years. Now Doug and Steve will cover these channels in their sections, but as you can see, we've had good success. From 2011 through 2014, we bought an average of 2,100,000 new proprietary cards into our global base each quarter. During 2015 2016, that number grew significantly with acquisitions at record levels and in some quarters almost 50% above our 4 year quarterly average. Our performance from mid-twenty 15 through mid-twenty 16 reflected in part our efforts to put other American Express cards in the hands of former Costco customers, an outcome we feel very good about.
We had a window of opportunity here and we took full advantage of it. Beginning in the Q3 last year, as expected, our acquisitions trended somewhat lower, but they remain above our longer term average. These results demonstrate that we have now effectively replaced the new cards that we used to bring in through Costco. New customers expand our franchise and our relevance for merchants and they build a base upon which to generate sustainable revenue and earnings growth. Now given that many of these new customers opt for fee products, they also serve to increase our card fee revenues.
Net card fees grew by 7% for the full year and we're particularly pleased with the growth we're seeing in our domestic platinum, gold and delta portfolios, as well as in countries such as Japan and Mexico. Steady growth in card fees is a reminder of the strength of our value propositions and our ability to attract and retain fee paying customers even in the face of an intense competitive environment. The strength of our card base is also reflected in our average annual U. S. Card member spend, a number that has consistently been about 3 times higher than the average for Visa and Mastercard over many years.
Now the larger increase you see for 2016 is primarily due to math, given that Costco cards and their lower average spend are no longer in our base. Our overall advantage in spend reflects the diversity of our card base, which includes significant commercial billings, as well as a greater mix of higher spending premium consumers. These customers bring exceptional value to our merchants and are core to the sustainability of our growth. Another key asset for us, as I mentioned earlier, is a global diversity of our franchise. International billings represent about 1 third of our spend base and they have been growing strongly over the last 2 years on an FX adjusted basis as you can see here.
We've made significant targeted investments in both consumer and commercial in a number of countries outside of the U. S. And we're clearly seeing the benefit of that spending. As our investments have primarily been directed at higher margin proprietary products rather than our G and S partnerships, you can see a shift in our growth contribution. That said, each international business, consumer, commercial and G and S is currently doing well and growing in the low double digits.
G and S remains an important avenue for expanding our global scale and relevance. But this business faces an evolving regulatory environment in certain countries around the world. We believe our higher margin proprietary products offer an excellent pathway for growth in both revenues and earnings over time. As you'll hear in greater detail from Doug and Steve, we believe targeted lending is also a key growth opportunity over the short, moderate and long term. Given the diversification of our business model, expanding further into lending to the extent we are envisioning would not serve to significantly change the overall risk profile of the company.
I know there are questions as to whether this is the right time to grow balances, but I believe we have advantages here. Over our history, we've shown that we can manage through difficult cycles and do well on a relative basis. As I said earlier, we believe our data and risk management capabilities are excellent. And since a number of our initiatives involve lending more to existing customers, I'm very comfortable with our plans. The numbers shown here are just for the U.
S, but our lending opportunity is a global one. Over the last 4 years, our core lending growth adjusted for the co brand portfolios we sold has consistently outpaced the industry. At the same time, our write off rates continue to be significantly below the industry. The focus of a number of our initiatives is to gain lending share from within our existing customer base, which is one reason why we believe we can manage this growth appropriately. These are customers we know, customers for whom we have history and data and we can leverage in making our credit offerings.
Our penetration of our customers' lending needs is significantly lower than our penetration of their spending needs, which we believe gives us a good runway for sustainable growth. By using our differentiated assets, our existing customer base, our brand, our data, analytics, risk and marketing capabilities, we believe we have a competitive advantage to use in growing this business responsibly. We have a number of compelling value propositions to offer as you'll hear. And I firmly believe that by capitalizing on our advantages, lending represents an excellent growth avenue for us over the next several years. Our digital assets and capabilities are also advantages for us in the marketplace.
We have robust partnerships with key players such as Airbnb, Uber, Facebook and Amazon, as well as engaging with a wide number of merchants through our digital offers platform. Many aspects of our customer interactions can now be done digitally and large numbers of card members are taking advantage of these capabilities. And we have an active social media presence and strategy to reinforce and expand the digital engagement of our card members. Our digital assets are one means to which we have expanded our relevance with this very important group of millennials. These customers now represent 35% of global customer acquisitions and we grew card acquisitions in this segment by 16% in 2016.
Within our small business base, millennial business owners are also well represented and very engaged. Their spend averages 45% more than the average small business account, a great opportunity for future growth. Our digital strategy has advanced steadily over the last several years and I'm pleased with our position in the marketplace. We've invested substantially in our global assets and capabilities, including equity investments we've made in a number of startups. This segment of the marketplace moves fast, so we can never stand still, but our core platforms are strong and we have talented leaders in place making sure we stay at the forefront.
Our stronghold in the premium space has also continued. As you saw last week, we used a number of our core assets and relationships to improve the value proposition in our U. S. Platinum products. We believe our next generation platinum product is one example of how we're competing aggressively to advance our leadership position within the premium segment.
We've added tangible value to this flagship product across consumer and small business and we believe that customers and prospects recognize this value. But these customers also appreciate and value the experiential benefits we provide. Our exceptional level of service, our lounges, early access to events and unique experiences in travel, dining and entertainment. These assets are not as easy to work into a math equation of value, but for premium customers, these benefits are core to their lifestyle and are often the deciding factor in acquiring and keeping their platinum cards. We've used our business model and competitive advantages to drive growth and 2 important outcomes are shown here.
We continue to generate strong earnings and achieve superior returns on equity on both an absolute and relative basis. The income generation allows us to return substantial capital to our shareholders with our payout ratio among the highest of our peers. Our capital position and balance sheet have remained consistently strong and we expect this to continue as we strengthen and grow our businesses. So do I believe our business model provides competitive advantages in the current environment? I do.
We've been competing aggressively in both the consumer and commercial segments and countries around the world and we've been succeeding. We've added sizable numbers of new cards to our franchise, grown loans at a pace faster than the industry and exited the year with international FX adjusted billings growing at double digit rates. We do, of course, continue to face aggressive targeted competition across our product set, including in the co brand segment. But it's important to remember the diversity of our franchise. As I showed you earlier, our billings are diversified among consumer, commercial and international.
We're not overly dependent on one segment or one country to drive our growth. For example, while the co brand segment may be seeing aggressive competition, it's only a piece of our base. In fact, globally, co now represent only 15% of our billings. We have multiple products and businesses driving our revenues and earnings. We're well diversified and we're competing effectively and successfully across a wide range of products, customer segments and geographies.
So that brings us to the last question we want to address today. What is the sustainable level of earnings growth in 2018 and beyond, given the external environment? Our earnings growth, as you know, is driven by a number of factors. Our overall EPS growth is generated by 3 drivers. For growth in our businesses, by more effectively leveraging our expense base and from the strength of our capital position.
We use each of these levers as we manage the company over the short, moderate and long term. We don't focus on one at the expense of the other. We use our judgment to manage all 3 appropriately, given the environment, the marketplace, our assets and capabilities. And as I look at the breadth and depth we have across the company, I believe we're well positioned in each of these areas. We have a strong consumer franchise, commercial business and merchant base, each of which has a wide international footprint, each of which has further penetration opportunities.
Steve, Doug and Anre will share why we're confident in our growth potential in these businesses, while Jeff will go into greater detail on the expense leverage and our capital strength. It was with consideration to each of these drivers that we developed the growth scenarios we shared with you last year. Now as you'll remember, last year we made some specific assumptions in terms of our business metrics in order to develop some financial scenarios. The scenarios we put together were not intended to be a forecast and didn't represent an actual calendar year. Rather they were an exercise to show how our financial results might play out based on certain assumptions.
These two scenarios were intended to show how our business model could generate earnings growth on a sustainable basis. Our first scenario was based on our revenue performance at the time. 4% growth, which translated into 5% to 7% earnings growth based on our assumptions. Our second scenario illustrated a pathway to higher EPS growth. Under this scenario, generating 6% revenue growth could yield EPS growth of 10% to 12%.
Now based on the performance we achieved in 2016, including the momentum we had exiting the year, The second scenario is our area of focus. As you'll see from our business presentations, we have a range of growth opportunities we're capitalizing on, opportunities that if we are successful can help us sustain a 6% revenue growth rate. If we're able to achieve this revenue objective over the next several years, I believe we'll be in a position to consistently generate EPS growth of 10% or more. Now let me be clear, this is not a new forecast or a new target. It's a scenario for the next few years given the environment we're in and the way we're managing the company.
There are many moving pieces, economic, regulatory or competitive that could come into play here. But let me be very clear, our entire management team, our strategies, our tactics are focused on achieving the scenario of 6% revenue growth and 10% earnings per share or more. As I said earlier, we've seen a lot of changes over the last 12 months in the environment, in the marketplace and in the financial performance we've generated. We were able to exceed the initial guidance we laid out for 2016 because we capitalized on our assets and competitive advantages to drive revenues. We used our expense base more efficiently and made our investment dollars more effective.
And we maintained high returns and a strong capital position. While we're focused on the short term objectives, as I've said many times, we're managing the company for the long term. We're doing this by evolving and innovating our products, services and strategies for a changing marketplace, executing those strategies successfully in accordance with our values and consistently generating value for our shareholders, customers and employees. With that, let me now turn it over to Doug to update you on our global consumer business. Doug?
Thank you, Ken. Good afternoon, everyone. So, I'm going to try and move through 5 topics in the next half hour or so. I'm going to start with a brief overview of Global Consumer Operations and talk about 2016 performance headlines, then I'm going to drop down into our four growth focus areas. I'm going to start with innovating member value.
I'm going to bring a special focus to how we're trying to strike a balance between purely rational value like rewards and price and more experiential value. I'll talk about how we're looking to engage our member base more fully with our products, driving deeper loyalty and cost effective growth. I'll talk about what we're doing to transform acquisition, especially with respect to leveraging partnerships and technology to drive efficiency in a very competitive environment. And then I'll turn to my attention to our lending business and I'll talk about what we're doing to drive lending growth with a very sharp focus on existing customer needs. So a quick recap of Global Consumer Operations.
We operate consumer issuing businesses in 21 markets around the world. And this is the core of our business and it contributed $420,000,000,000 in volume in 2016. We complement these proprietary issuing businesses with bank partnerships in 130 countries around the world and those partnerships bring scale to our network in the form of $175,000,000,000 in 2016, they also give our network geographic reach as those partners issue product and acquire merchants in a wide range of markets. The majority of our volumes are still U. S.
Based. In fact, on a proprietary basis, this percentage would be even more skewed towards the U. S. And 54% of our merchant volumes are still taking place on our iconic high spending charge card products. And we've settled out at a mix of Amex branded and co branded product, which is about 2 thirds Amex branded, 1 third co branded.
We're comfortable with that mix. So 2016 was a transitional year for the company and certainly was for the consumer business. You've all seen the reported numbers in gray on the left there. I'm going to focus my attention on the adjusted numbers on the right, which have Costco Merchant and Co Brand removed from all periods, give you a cleaner view of our continuing core operations. So, in a very competitive environment, new accounts acquired were up to a record level, up 13% for the year.
Billings growth was 8%. Loans accelerated from 8% to 12% growth and these volume metrics helped contribute to strong balanced revenue growth of 6 percent during the period. Dropping down for a closer look at our international growth, you can see that billings volume accelerated modestly from year to year from 8% to 9%. But as Ken said, during the year, volumes accelerated and the acceleration was disproportionately driven by our proprietary business, which comes with a richer mix of revenue and profit per dollar of billings and so we're happy with that shift. At the bottom, you see some performance statistics on 5 of our largest international markets and you can see the 3 of them Japan, Mexico and the UK substantially outperformed the industry with growth rates between 8% 10 percentage points faster than the industry contributing to material share growth in each of those markets.
In Australia, where we're seeing some significant changes in regulation, we grew at the rate of the industry. And in Canada, we still had some work to do as we underperformed the industry by 5 percentage points. Looking at adjusted volumes in the U. S, you can see that billings growth accelerated from 6.3% to 7 point 6 and this acceleration was largely driven by those record numbers of new customers acquired that I showed on the previous slide. Loans accelerated in the U.
S. From 9.5 to 12.8 and the majority of this acceleration was contributed by increased engagement from existing customers. And when I get to the lending section of the document, I'll talk about how we're achieving that. We like our more balanced and diversified revenue mix when compared to the industry overall. We source less than 50% of our revenue from net interest income compared to an industry benchmark closer to 75%.
We also drive about 25 percent of our revenue from discount revenue, net of rewards cost and another 25% from fee based revenues, representative of our ability to create value and price for that value. And importantly, not only did we have a strong starting point, but each of these 3 revenue categories grew in 2016 in both the U. S. And internationally. So a quick look at the external environment as we see it.
Ken mentioned intense competition. We expect it to continue in the U. S. And in a range of markets around the world, reflective of the attractiveness of the payments industry in terms of growth prospects and relative margins. We expect international regulation to continue to evolve and to impact our bank partnership business, especially in the geographies of China, Australia and the EU.
And this will cause us to continue to evolve how we partner with banks in those geographies. And finally, credit and funding costs, which have been at historic coincident lows for an extended period. In the back half of 'sixteen, we saw these costs begin to tick up for ourselves and the industry and we would expect that to continue throughout 2017. Now dropping down into our focus areas for growth, central to driving growth from existing and new customers is our ability to build differentiated value into our experiences and product line. Now our approach to value has always sought to drive a balance between the more purely rational, and here I mean pricing and rewards and the more experiential and emotional elements.
Now there's been a lot of focus recently on the left hand side of this chart and I understand why. It's where a lot of the competition has been and it's easier to put those elements in a spreadsheet. But it's not all that our customers care about and I would argue that it is also a very difficult place to build sustainable competitive advantage and long standing loyal relationships. Our brand has long been differentiated on the experiential side of services and servicing and we trust our customers, some of the most sophisticated consumers in the world to do those calculations of value themselves. So we'll continue to make adjustments on the left hand side as competition and customer expectations evolve, but we will seek sustainable differentiation and competitive advantage on the right side by innovating to meet our customers' experiential needs and this is an area where we believe we are differentially experienced and credible with consumers.
Now at the top of our list of brand attributes is a customer focused service reputation and this reputation built over decades spans transaction level servicing to heroic support in times of crisis. And we're committed to strengthening this competitive advantage, continuing to enhance our core card servicing from instant card replacement to dispute resolution and fraud prevention. We'll also move more of our servicing content into digital channels and ensure that it is simple and easy for our customers to interact with those capabilities. We're also focused on the top end of the service pyramid, our concierge and lifestyle services. We're investing in concierge capabilities, in relationship managers to cater to our customers' travel needs, and we're also focused on fusing our experience there with artificial intelligence and mobile technology to make these services available to a much wider range of our customers on cost effective digital platforms.
Increasingly for a brand like ours that serves customer segments like we do, the experience is the product. And increasingly, that experience is taking place on mobile. Over the last 2 years, we've seen a doubling of our monthly app active users globally And those users log in 50% more frequently than they did 2 years ago. This has tripled the number of monthly interactions that we have on our mobile app and tripled the opportunities we have monthly to serve and market to our consumers. And we think there's plenty of room for these trends to continue to play out at a similar pace over the next couple of years.
But it's not just existing customers, increasingly prospective customers are researching our products and applying for our products through mobile channels. In fact, over the last 2 years, more than 50% of our application growth has been driven by mobile applications. So we're doubling down on mobile. We're enhancing servicing and marketing from getting a card replaced to finding a lounge in an airport. We're also very excited about the potential for chat or messaging based servicing.
This is an area where we entered last year in partnership with Facebook Messenger and we're hard at work building these capabilities into our proprietary mobile app. Now you're all busy right now. It would be hard for you to get on the phone with one of our great customer care professionals. But what if you could fire off a text and get us started doing some work on your behalf, whether it's researching a charge that you don't recognize, booking an airline ticket or investigating dining options for you and your family. We think this has the capacity to deepen relationships in a meaningful way with our customers at their pace and in a cost effective fashion.
Now making all of this content relevant and easy to navigate requires an intuitive interface and that's why broad benchmarking led us to the timeline, a scrollable interface common to most forms of social media. And for us, the mobile experience is becoming a key source of member value providing information, control, convenience, but it's also a channel by which customers become aware of the full value of membership. Merchant offers are now presented in a contextually relevant fashion and activated with a single tap and they're activated 50% more often in this new design than the previous one. It's also a great opportunity to lounge opportunity associated with an upcoming trip. Another area where we're focused on enhancing member value is with respect to merchant acceptance.
This is a long standing pain point in the U. S. And outside. And as you heard from Andre Williams last year and I suspect you'll hear from him again this year, we have made great progress affiliating new merchants and closing the coverage gap to the point where we are now mobilized against achieving parity coverage in the U. S.
By 2019. And for those of us on the issuing side, this is a great opportunity and obligation to accelerate member awareness and engagement with this expanded merchant footprint. And that's the journey we're on. In 2016, we estimate that we created 4,000,000,000 impressions in our marketing channels and above the line media focused on improved coverage. In quarter 4, we operated a shop small promotion aimed at engaging our customers with our new small merchant coverage.
And if you look at it as a metric, the number of card members enrolled, it was our largest, most successful promotion ever. And you should expect us to get increasingly targeted by customer segment, geography and industry in the way we communicate these coverage advances. We're in the early innings, but we're committed and all of the payoff in terms of increased loyalty and engagement is still in front of us. A good way to bring together how we're trying to balance the purely rational and experiential elements is through the lens of our new Platinum product, which we announced the elevation of last week. So it starts with a refreshed set of credentials for Badge, a stainless steel design that's meant to convey an elevation in value and service and prompt customers to take a fresh look at an iconic product.
And since this product is geared to serving our customers' travel and lifestyle needs, this journey starts in our travel and lifestyle service center, where an experienced client manager dispenses advice, books travel and the customer gets 5 times MR points on airfare. That's rational value on the back of a premium service experience. Upon arrival at the airport, TSA PreCheck expedites you through security to one of our lounges. It could be one of our Centurion lounges like the ones we've just announced in Hong Kong and Philadelphia, could be airline partner lounge like Delta or a 3rd party lounge partner. One thing we know is our customers tell us lounge access is extremely important to them and their families and we have access to more lounges globally and domestically than any competitor.
When you arrive at your destination airport, the new Uber rides with Platinum benefit gets you dollars 15 off the ride and the VIP service matches you with a top rated driver. Upon arrival at the hotel, the Fine Hotel and Resorts benefit gets you early check-in at noon, a complimentary room upgrade and $100 resort credit for use during your stay. And finally, as dinner approaches, tapping a button on your mobile app connects you directly to a platinum concierge who answers the phone greeting you by name, consults with you on dining options and books a restaurant from our Global Dining Collection. This is an example of how we're looking to bring a world of support to Platinum membership and it's representative of the focus we have on service based differentiation throughout our product line. Now I should note that while competition in this space is fierce, we feel like we're elevating Platinum from a position of strength.
2016 saw record levels of Platinum acquisition, the largest customer base at the end of the year we've ever had and despite a slight blip in attrition at the end of Q3, attrition rapidly returned to historic low levels and that all occurred before we infused additional distinctive value into this product. So an important part of our growth strategy is to leverage this value that we're putting in our products to better engage our customers and drive cost effective growth and loyalty. And the opportunity to grow billings from our existing customers is substantial. While we serve about 45% of our customers' spend needs, that still means that our customers spend $400,000,000,000 a year on competitor products. And with coverage approaching parity, all of that is accessible to us.
Now on the right hand side is geographic that just tries to communicate something that's very intuitive, which is marketing dollars spent against existing customers typically have higher return than marketing dollars spent against prospective customers. Our challenge is to prove that we can scale those investments in a way that's respectful and relevant to our members and still maintain high returns. That's what we've been working on. We've been working on innovating new offers, on expanding our channel reach, especially in customer initiated channels like digital and inbound phone. We've been working hard to take friction out of the enrollment experience on these offers and we've been using data analytics to drive relevance and return.
Streamlining the customer experience has been a big focus area for us in 2016 and what we've built what we refer to as member fast track journeys, reducing the number of clicks often from 4 to 1 to enroll in an offer, minimizing data entry for customers and streamlining and clarifying disclosures. And all this has led to a substantial increase in accepted marketing offers in a range of channels, 47% in digital and I would say there we are still at the beginning, we are just beginning to get real marketing content into our mobile app. You can see e mail 200%, streamlined journeys, more immersive experiences and inbound phone up 79% on the back of us empowering our customer care professionals with more value and offers to extend to our members. We're also innovating new types of offers and testing them in the marketplace from the content to the creative. Offers in the areas of coverage awareness and engagement, incentives to get customers to move recurring payments like wireless bills or cable to American Express or even free trial upgrades for members who we estimate to have large off us competitor activity.
And all this work on channel expansion, customer experience and offers has led to a substantial increase in accepted marketing offers to existing customers, 82% year on year and it has built momentum throughout the year and we carry strong momentum into 2017, which will allow us to shift additional marketing dollars into high efficiency customer marketing channels. Now last year, I described how we'd seen modest deterioration in wallet share in tenured customers in 2014 'fifteen and I said we were focused on arresting this decline. Based on internal modeling we do, we build momentum and largely stabilized wallet share in 2016. And what's more, we believe that all of the work and momentum we've done will allow us to focus on moving more dollars towards existing customers and refocusing on expanding wallet share in the coming years. On the right hand side, you see a trend line on U.
S. Billings attrition. And last year at this forum, I told you that we typically retain 98% of our billings from year to year. And despite the competition, we did again in 2016. In fact, billings attrition decreased modestly in 2016, driven by a decrease in voluntary or non credit attrition.
We're pleased with these results. Now I'm going to turn up my attention to how we're using partnerships, technology and analytics to transform acquisition. So we're very focused on better serving the needs of existing customers, but acquiring new customers is a key test of relevance and a key driver of growth. And you can see in 2016, despite the competitive environment, we reached a record number of new customers acquired, up 16% year on year. And we did it without compromising our focus on differentially high spending, high credit quality customers.
We also continued to market a mix of products valuable enough to command an annual fee. In fact, 63% of our acquisitions were on fee based products in 2016. Now this is a slide I'm bringing back from last year, which illustrates that we have more than replaced the lost distribution reach from Costco. In 2014, that light blue sliver, which represents Costco volumes, contributed about a third of all U. S.
New account originations. And in just 2 years, we've more than closed that gap. And as you can see at the bottom, we've done it largely on the back of AXP Branded Product. AXP Branded Product accounted for only 41% of our new customer acquisitions in 2014. 2 years later, it accounts for 63% of our new customer acquisition.
Now when we talk about acquisition, we often talk about it as a funnel. At the top of the funnel, you've got marketing and advertising activities that are aimed at creating interest and driving traffic from target segments. This is also an area where competitive intensity reveals itself most dramatically and it's a place where capabilities in the area of partnerships, technology and analytics play very large roles. Further down in the funnel are the activities aimed at converting and engaging that responsive underwriting and responsive underwriting and interactive negotiation capabilities play a very important part. There's also a virtuous cycle at play here, which means the better job you do at converting traffic, the more traffic driving investments you can cost justify.
So, last year I told you that digital channels were driving the majority of our application growth. That is even more true in 2016. And within digital, it's really mobile. Mobile application volumes have grown 75% compound the last 2 years in a row and I would predict that by the end of 2017 we'll have passed desktop as the single largest source of application volume for us. What's also important about this particular channel is it is rich in the next generation of customers with almost 50% of applicants being below the age of 35.
So we know that focusing innovation on mobile acquisition across the funnel is going to be key for us to remain competitive and to remain relevant to the next generation of consumers. So we're focused in a range of areas to improve our ability to drive high quality traffic here at 3. I'll start with member referrals and a member referral is an existing customer recommending a friend, relative or colleague for a new account. And outside the U. S, this contributes nearly 15% of our new member billings.
And we love these applicants because they tend to be much higher credit quality, higher spend and more loyal customers. So we're investing in marketing and technology capabilities that will allow us to extend this track record for growth outside the U. S. And to allow the U. S.
To rapidly come up to speed. We're also focused on leveraging our millions of corporate card customers to generate growth for our consumer business. Cross sell in this area could be very powerful. It's another affinity group that is characterized by high spend and low credit risk. And so we're focused on making investments in this area to make this source of distribution a powerful engine for growth for our consumer business and a key differentiator for key corporate clients.
Finally, we're focused on moving our targeting and underwriting technology out to key co brand and distribution partners, allowing us to more sharply focus on the segments where we're interested and provide superior application experiences for our partners and their customers. So I turn my attention to efficiency and to a topic that has been popular in industry circles these days and it goes by various names gaming or churning. And for purposes of this discussion, I'll define it as a consumer taking out a new credit card account, engaging in the 1st 3 or 4 months at the level required to earn the acquisition incentive, a cash back incentive or airline points and then disengaging and moving on. And certainly the very intense at times ordering on irrational competition based on rich sign up bonuses and a whole social media ecosystem that's grown up around this particular phenomena has put pressure on gaming and churning trends. Now our more conservative incentive structure and the controls we have in place have largely kept gaming rates constant over the last couple of years, but we still see a substantial opportunity to use our analytics and technology, surgically remove gaming and reinvest in higher quality, more loyal new customers, achieving an acquisition efficiency gain on a year on year basis.
And so we'll leverage technology and analytics at all of our marketing and underwriting touch points. We'll suppress gamers across channels and at the point of application. Key to enabling all of these use cases from corporate cross sell to member referral to gaming reduction is our new dynamic application and underwriting technology. And this technology supports custom application flows, it's device responsive, it allows applications to be interactive short, this new suite enables us to maximize conversion rates while optimizing margins through interactive negotiation with applicants. So finally, I'm going to turn my attention to our lending business.
And as you can see from this slide, we've enjoyed strong loan growth over the last 2 years, 8% in 2015, 12% in 20 16. You can also see the dark blue portion of that bar represents the U. S. Portion of our loan book And we are still predominantly a U. S.
Focused lender, although I will say both the U. S. And international books grew and grew at an accelerated rate in 2016. Our customers account for about 35% of all U. S.
Credit card spend and they account for about 30% of all U. S. Credit card loans. So contrary to popular belief, our customers do borrow on credit cards. They just typically rely on competitors to meet that important need.
So we view strengthening our lending offerings to existing customers as a key competitive and customer necessity. We also view the $175,000,000,000 in loans that our customers have on competitor products as a very attractive source of growth for the future. And we're highly focused on leveraging our data, channel and brand advantages and translating those into compelling customer value to incent our customers to shift share of their lending activity. So what are some of those areas where we're focused on compelling value? I'll start with customer level pricing.
We develop a 3 60 degree view of our customers spending and lending wallet. And when we see an opportunity to adjust price to profitably gain share, we will do that. And that price adjustment at individual level may be in the form of a promotional APR. It may be a permanent APR reduction coupled with a line increase. It could even be an APR that is specific to a merchant or industry where we feel we're missing an opportunity.
And these adjustments have been met with great customer response and in fact we quadrupled the use of this tactic in 2016. We also launched new term loan products in Q3 of last year and these products are focused on existing customers and are defined by competitive pricing married with a great customer experience. The customer experience features pre approval, a simplified online enrollment form that can be completed in 3 to 4 minutes and rapid disbursement of funds. These loans have met with great customer response and I think it's also important to note that this particular asset class for us anyway features returns that compare favorably to credit cards. Finally, we're bringing transaction level control to our card products, enabling customers to take individual card transactions and turn it into a term loan.
We like this and we think it's a very compelling offering for large transactions or for customer segments that are uncomfortable with revolving credit. We launched it in a limited fashion in 2016 and are looking to expand it geographically and across products in 2017. And I would say our focus on existing customers is paying off. 50% of our loan growth before attrition in 2016 came from tenured customers, up from 39% the year before. In fact, that acceleration from 9.5% to 12.8% was largely driven by this phenomenon.
And we like this shift because growing from existing customers typically features lower marketing costs, less credit volatility and also a shorter time to revenue than prospect driven acquisition. So with all the work we've done on capabilities and products and married with the fact that we still have less than 25% wallet share of existing customers, we think we have a lot of room to run here. So I've refreshed the slide that I showed you last year comparing our current portfolio to the one that entered the 2,008 crisis. On the left hand side, you see our write off rate trends, which are stable at low levels and at levels quite a bit below where they were in 2,007 before the last recession. On the right hand side, you can see key portfolio stats comparing today's portfolio to the portfolio that existed at the end of 2,007.
And you can see the current portfolio features far lower concentrations in higher volatility segments like low FICO scores and low tenure. We also have less exposure to lower margin balances like balance transfer balances than we did in 2,007. Now please note, we have refined our methodology here year on year and all balances are classified according to their tenure, the customer's tenure with American Express, not the tenure on the product where they reside. Now we know any time you're growing a lending business, you're going to be subject to the volatility of vintage maturation and cycles as well. But we like our position on a relative and absolute basis and we believe that remaining focused on disciplined underwriting and growth from existing customers will help us sustain this position.
So a quick look at our global loan performance and returns. And on the left hand side, you see trends in our net credit margin. So our write off rates over the last 5 years have trended down, that's the lower line by about 120 basis points, while yield has steadily expanded over that time period by 50 basis points and this has led to an expansion of our net credit margin from 6.2% to 7.9%. Now there are a lot of ways to get to a 7.9% net credit margin, a lot of combinations of yield and write off. We like the way that we get there.
On the right hand side, you see a metric we refer to as yield loss coverage. It's a very simple metric. It divides yield by loss rate and it shows on that metric American Express has a yield 6 times its loss rate compared to an industry benchmark of 3.4. What this suggests to me is that we have a differentially strong capacity to profitably absorb future volatility. So this is the same approach I laid out a year ago and with 12 more months of execution behind us, it remains largely unchanged.
We continue to believe that there is a strong competitive and customer rationale for strengthening our lending offerings. And we remain focused on leveraging data, channel and brand advantages to better meet the needs of our consumers and convince them
to shift
share. We also remain mindful of the cyclicality and volatility of the lending business and we're focused on winning the downside of the next cycle. And we think key to that is best in class portfolio quality and concentration in less volatile segments, as I showed you a couple of slides ago. We also think it's important to maintain underwriting approaches that explicitly contemplates cyclical volatility and decision science that effectively leverages internal and external data. Finally, we think it's important to maintain a flexible high efficiency collection infrastructure that can respond to the inevitable changes in volume over time.
We like the characteristics of our lending business and remain focused on growing it from within our existing customer base.
So just in closing, I hope over
the last half hour I've given you a good feel for our growth focus as well as a sense of the trends and tactics that will lead us to be able to successfully innovate member value with a balance between the rational and the experiential, how we use that value to strengthen member engagement and drive cost effective growth, how we believe we can maintain disciplined above market loan growth rates by focusing on existing customers and how we can realize growth efficiencies across our investments in technology, marketing and people. And done well, we believe this will result in strong balanced revenue growth in 2017 and beyond. So with that, let me end and let me ask Steve to come up and talk about Global Commercial Services.
Thanks, Doug. Good afternoon. Today, I'm going to talk about Global Commercial Services. American Express is the global leader across all commercial payment segments, from small and midsized businesses to the largest companies in the world. Commercial payments continue to be a large and growing part of American Express's overall business.
The growth opportunities in this space are significant, particularly in the small and middle market segments. Despite intense competition, we are confident that we can maintain and grow our position due to our many unique advantages, which give us global scale that is unrivaled. Our growth strategy is working. We've generated strong momentum by attracting new companies to the American Express franchise and growing business with existing customers. We are confident we can build on this momentum going forward as we are uniquely positioned to win in the commercial space globally.
Let me start by providing some context on our commercial business, including how it's different from our consumer business. Here's a financial snapshot. For the full year 2016, commercial payments contributed 39% of the company's total bill business and spending was up 7% on an adjusted basis. Our commercial business is predominantly charge. Business loans represent only 16% of American Express's total loans.
That said, business lending was up 16% last year. Commercial payments currently account for 31% of the company's revenues, having grown 5% on an adjusted basis in 2016. We manage our commercial business as 3 distinct segments: Global and Large Accounts, U. S. Small and Midsize Companies, and International Small and Midsize Companies.
We are now managing the U. S. Small and Middle Market as one segment following the consolidation of our commercial payments activities last year. Here's a look at the billings distribution across the segments. The Global and Large Market segment includes companies that generate over $300,000,000 in revenue annually.
Making up nearly 2 thirds of our commercial billings is the small and middle market segment, which includes companies with annual revenues under 300,000,000 dollars Our international small and middle market segment is the smallest in terms of billings, but is our fastest growing segment. The dynamics of our commercial and consumer businesses are quite different. The commercial business is much more spend centric than the consumer business. Over 90% of commercial billings are on charge cards, with less than 10% on credit cards. In addition, the average annual spend per commercial card is 2.3 times higher than consumer card.
Lastly, the commercial cost base is different. Our cost includes significant operating and technology expenses, our sales and client management functions, and the global infrastructure needed to support customers' broad data and servicing requirements. That's some context on our commercial business at American Express. Now let's look at the growth opportunities in the commercial space. Total business spending globally represents an enormous growth opportunity as much of the spending today is on checks and ACH.
Looking at the opportunity from a card perspective, the commercial space is still a relatively nascent space when compared with the overall consumer space. According to a recent analysis, the addressable global commercial card opportunity is at 19,000,000,000,000 which is smaller than the consumer segment overall, but it represents a greater growth opportunity as the consumer segment is 4x more penetrated. Commercial payments differ from consumer payments in a number of key aspects. The commercial business customer base includes business owners, company employees, CFOs, procurement offices, and they all have different needs. Commercial transactions are often between known parties, where buyers and sellers already have a business relationship.
Transactions are typically planned and are larger than typical consumer transactions. And comprehensive data is required to help clients effectively manage their corporate payment programs. This is especially true among large accounts who need to manage their programs consistently and dynamically across countries. To compete effectively in this space, you need capabilities that are different from those in the consumer business, particularly in the areas of underwriting, technical infrastructure, data management, sales and servicing. American Express created the commercial card business over 50 years ago and we have invested in building these capabilities from the ground up.
More recently, we combined our 5 commercial businesses business units into 1 single organization that is laser focused on our 3 customer segments. In doing so, we integrated platforms, product lines, sales teams and marketing channels, in each case taking advantage of the best qualities of each unit. Through these efforts, we have realized significant synergies and efficiencies across the
business. In building our commercial business, we've
created a number of competitive advantages that give us scale and position us for continuing our leadership within this space. They include our global footprint, we operate in over 200 countries, our large and diverse customer base, comprising millions of business customers around the world our closed loop network, which connects buyers and sellers our commercial underwriting capabilities that enable us to provide greater spend capacity to our customers and more effectively manage risk our global distribution channels, including in country sales and account teams, telesales and digital capabilities our global business travel joint venture, which gives us a unique advantage in serving our clients end to end T and E needs and our world class service and brand. In addition, unlike our competition, we have the advantage of being a global issuer, network and acquirer, which gives us all the pieces necessary to connect buyers and sellers at scale. Finally, to compete effectively in commercial payments, you need a range of products to meet a wide variety of business needs. Today, we offer a diverse suite of payment products and solutions specifically designed for businesses.
These include traditional charge and credit cards for small businesses, corporate cards, corporate card products and business travel accounts for larger companies, virtual payments, purchasing solutions, cross border payments, and business financing solutions. This diverse product suite sold and serviced through an integrated multi channel global distribution system is a true differentiator for us. Our overall commercial strategy is focused on leveraging and enhancing our existing assets to accelerate growth. To do that, we are focused on 4 strategic pillars across all of our commercial segments. The first pillar is product innovation.
We'll continue to add to our core products with new benefits and new card offerings as our customers' needs continue to evolve. Adjacent to the core, we will create more lending solutions for small and middle market companies. Finally, we'll continue our focus on the B2B payment space by extending our supply chain spending initiatives. Our second pillar is leveraging our robust set of distribution channels. We deployed a variety of sales channels to distribute our products across the commercial spectrum.
We will continue to fine tune these channels using rich data capabilities to identify, target and reach prospects to offer them the most relevant value in the most efficient manner. And with an integrated distribution approach, we can coordinate all of our marketing messages to capitalize on our brand's leadership position. Our third strategic pillar is deepening relationships with our customers. The data provided by our closed loop augmented by our big data capabilities provides deep analytics and insights for our clients. This enables us to consolidate more of their spending on our products and services.
We also have a major advantage in having feet on the street in countries all around the world. We have a large network of human capital and expertise focused exclusively on commercial payments, which we use to identify final pillar in our growth strategy for growth is to provide a superior customer experience across all commercial segments. Our data and underwriting capabilities enable us to provide our commercial customers with significant spend capacity while minimizing losses. We help our customers meet monthly cash flow needs and enable larger transactions they require to run their businesses. We also continue to invest in our world class global customer service network to meet the needs of our clients and provide them with peace of mind wherever they are in the world.
And we are expanding our mobile and digital offerings to help our customers manage their relationships with us on the road or in their office. This 4 pronged strategy plays out differently across our 3 commercial segments based on customer needs and business requirements. In the Global and Large Corporate segment, we will leverage the 4 pillars to maintain our leadership position. In the small and middle market segment in the U. S, we're focusing on accelerating our momentum, and outside the U.
S, we'll continue to drive scale. So that's a very high level look at our overall commercial payment strategy. Now I'd like to take a deeper dive into each one of the segments. 1st, let's look at our foundational Global and Large Corporate segment. We remain the leader in this segment with relationships with over 60% of the global Fortune 500.
Global and large accounts make up approximately a quarter of our commercial billings. 2 thirds of those billings are generated in the U. S. Billings in this segment declined slightly in 2016, in line with large companies' focus on expense reductions. It is important that we maintain our leadership position here as high spending card members in this segment help drive merchant relevance, especially within T and E.
In terms of billings mix, this is a 100% charge business with close to 60% coming from travel and entertainment spending. Let's take a look at our recent billings performance in this segment. A good portion of our spending decline in 2016 was driven by declines in organic spend, a trend we've seen over the last several years as large companies have pulled back on T and E spending and reduced headcount in response to continued uneven economic conditions and the resulting pressure on earnings. As an example, here at American Express, last year our own T and E spending was down 9% globally and we were not an outlier. Account losses were relatively modest and they were offset by business from new signings.
So as you can see, success in this segment means maintaining our strong relationships and capturing as much available spend as possible in an environment of expense reductions. So how do we win and retain business in the Global and Large Corporate segment? Customers in this segment differ from each other in terms of their individual needs and customized solutions are often required. Let's take a look at 1 global client and how we've met their specific needs employees in over 90 countries, including several emerging ones. They depend on us to seamlessly support thousands of employees across all those geographies.
They also need sophisticated analytics and tools to monitor employee spending to ensure policy compliance. And they rely on us to provide the insights and data they need to negotiate better terms with their suppliers. This global company has chosen American Express as their corporate card provider for the past 30 years, because we've proven that we can meet their needs with our unique global assets, specifically our global footprint, data and analytics capabilities, and expense management tools. Currently, this client spends over $900,000,000 a year with us. And over the years, we have deepened our long standing relationship through in person account management.
For example, in 2016, we analyzed this client's accounts payable to help them manage and simplify and optimize their indirect spend. As a result, we are migrating nearly $50,000,000 of their supplier spending in over in 7 countries. To achieve our goal of maintaining our leadership in the Global and Large Account segment, we're focused on 3 primary objectives: continuing our push to sign new marquee accounts deepening relationships through supplier based spending solutions and enhancing the customer experience. In terms of B2B, we're introducing new solutions that integrate into our clients' existing processes. We're strategically targeting new prospects and deploying specialized sales teams to expand current relationships, and we're leveraging our merchant supplier relationships to connect buyers and sellers.
We've also enhanced our global capabilities over the past few years. We've expanded our digital servicing platform to 150 countries and have significantly improved customer satisfaction. In fact, last year we saw a 12 point improvement in Net Promoter Score among key decision makers and global clients in the U. S. And a 17 point improvement among our U.
S. Large market clients in the U. S, an important factor in retaining their business. Now let's turn to the SME segment, our commercial growth engine. This segment is largely underpenetrated as the majority of small business companies still do business via check and ACH.
Because of the size of the opportunity here, competition continues to intensify. The U. S. SME segment is the largest in our commercial business. We are the number one small business and commercial issuer in the United States, according to the latest Nielsen data.
This segment contributes nearly 2 thirds of our commercial volume and is our most profitable with margins 33% higher than Global and Large. Billings are growing and the vast majority of spending, just over 80% is non T and E. Close to 90% is on charge versus lending. Let me give you a little more context about billings in this segment. Smaller businesses are highly sensitive to changes in the economy.
Each year, new businesses come into existence and other businesses fail. Some years they grow rapidly and other times they contract and some customers go to competitive products. As a result, there's typically a good deal of churn in this segment. Sustaining growth in the SME space requires a long term commitment to invest in things like new products, robust distribution channels, infrastructure and advocacy. It's a commitment we've made to this segment for 30 years and it's a big reason for our leadership position today.
As you just saw, 2016 billings grew 9% on an adjusted basis. Organic spend grew 13,000,000,000 dollars We had $4,000,000,000 in account losses due to credit cancellations and $11,000,000,000 of voluntary attrition. And we added $24,000,000,000 from new signings and exited the year with very strong momentum. To sum up, volume from new signings last year was more than double our losses from customers who left the franchise voluntarily. Additionally, when you combine our organic growth and net new billings, we have already more than replaced all of the Costco volume we lost in this segment.
So how do we win with small and middle market companies? Let's take a look at an e commerce company with over 100 employees and approximately $40,000,000 in annual revenue. When the founders started the company in 2012, American Express was the only card issuer to offer them the flexible spending capacity with our Plum Card, which offers early pay discounts or delayed payment terms to maximize cash flow. The company grew rapidly and as it expanded, provided the solutions they needed along the way, including adding an employee corporate card program and using our underwriting capabilities to give them additional spending capacity. Our diverse product line and risk management capabilities has helped this business grow, and in so doing, they grew their spending on American Express to $28,000,000 per year.
One of our key competitive advantages in the SME segment, as that case study showed, is the higher spend capacity that we can provide our customers. Instead of assigning our commercial customers a static line of credit, we can help them fund their businesses according to their demonstrated ability to pay. As shown here, our dynamic authorizations capabilities enable us to provide our U. S. Small business customers with 3 times greater spend capacity versus competitors.
And when we look at our larger small business customer, that number jumps to 8x higher. This enables us to capture more of our customers' business spending on our products and spend they do. Our largest small business customers spend an average of $1,300,000 annually on their American Express cards. Our objective in the U. S.
SME segment is to continue to accelerate growth. We've made significant progress against this objective to date. We have continued to sign new accounts by offering best in class value propositions and leveraging the scale of our diverse acquisition channels. We have continued to deepen relationships with existing customers by increasing our share of their business spend and selling adjacent products. Let's start with some of the new and enhanced products we introduced in 2016.
As you may recall, last January, we introduced Simply Cash Plus in the U. S. For our small business customers. This innovative credit card uses the no preset spending limit capabilities of our charge card products to allow qualified card members to spend above their credit limit. This enables them to pay for larger purchases like inventory and equipment.
In its 1st year, SimplyCash Plus has performed very well with a 33% higher average spend per new card acquired. Another example of our customer driven approach to delivering unique value for businesses is our Business Platinum product. In October, we relaunched Business Platinum in the U. S. With enhanced benefits and premium rewards specifically designed for businesses.
We added 1.5 times membership reward points for transactions above $5,000 and we are providing a 50% more redemption value to enhance reload on select air transactions. Our objective is to acquire new customers and motivate current customers to pay more of their suppliers with the card. The Business Platinum Card accommodates larger transactions with our spend capacity advantage and rewards customers at an even greater rate. Early results are promising. We've seen greater card member engagement through increased acquisitions as well as a higher number of transactions above $5,000 While our commercial business is heavily spend centric, we view the lending space as an attractive adjacency over the longer term, and we'll continue to grow lending judiciously.
Last spring, we introduced Working Capital Terms, an innovative digital non card lending solution, offering qualified existing card members up to 750,000 in short term credit lines at competitive rates. Card members receive loan decisions within minutes after completing a quick and simple application process online. Payments can be made to any verified supplier whether or not they take American Express. In October, we announced a partnership with Intuit that embeds working capital terms into QuickBooks, offering qualified open customers who are also Intuit small business customers access to short term financing to pay their vendors directly. Our $10,000,000,000 of total loans in our commercial business is concentrated in the U.
S. SME segment. We continue to have an opportunity to grow lending with these customers as cash flow continues to be a top need. In 2016, we grew lending by 16% overall. We achieved this double digit growth responsibly.
Since 2007, our super prime to subprime ratio is 3.5 times higher and our low FICO portfolio has decreased by over 60%. When it comes to accelerating acquisition, we are optimizing distribution channels to approach our customers more holistically, presenting them with a single face of American Express. We're also leveraging our scale and best practices to drive effectiveness and efficiency. Overall, we increased projected volume from new signings by 23% year over year and the number of new signings increased by 12%. As I said earlier, we have integrated our distribution channels to target the right products to the right customers across the SME segment based on their needs.
And this integrated approach is more efficient. On the digital front, we've enhanced the capabilities we built in Open and extended them to the U. S. Middle market companies. This channel has delivered a 17% increase in a number of new signings and a 22% increase in projected volume from new signings year over year.
In our telesales channel, we brought our small and middle market sales teams together with outstanding results to date. And in our field sales channel, projected volume from new signings grew by 25% with a 5% decrease in signings, achieving our goal of focusing our most expensive sales channel on our largest opportunities. So in total, we accomplished a 12% increase in new signings overall, a 23% increase in projected new volume with only an 8% increase in total investment dollars across all of our channels, demonstrating a significant improvement in overall efficiency, which we will continue to build on going forward as this is now built into our business system. We are expanding relationships with our existing customer base to accelerate growth. Of the 2,300,000 customers we have in the U.
S. SME segment, fewer than 10% have 2 or more commercial relationships with us. While not every customer will qualify for or need more than one of our products, we have the significant opportunity to offer additional products to our client base. Leveraging our big data capabilities to identify customers with opportunities for growth as well as the best channel to reach them. Now let's take a look at our international SME business.
This segment contributes 10% of our total commercial spend volume, and we continue to see strong growth rates outside the U. S. In 2016, we grew billings 13% on an FX adjusted basis in this segment, and we continue to be the number one issuer globally. This segment has nearly 2 thirds of its billings coming from non T and E categories and spend is almost entirely on charged products as we currently offer lending in only a few countries. Let's take a look at how we serve an international SME customer.
Here's a small IT distribution company based in Sydney, Australia with 12 employees across offices in Melbourne, New Zealand and Singapore. They originally came to American Express seeking a solution to facilitate payments from Australia to their international suppliers. They began using our FX IP product, which offer them a convenient platform to make payments in U. S. Dollars, Singapore dollars, British pounds and New Zealand dollars at competitive rates.
And as they grew, they entered our cross border payment capabilities in their New Zealand and Singapore operations, enabling them to take advantage of early supplier pay discounts. They then established a business Gold Card relationship to earn rewards on additional categories of business spend. As you can see, this customer has developed a deep and growing relationship with American Express as their business has grown and that their needs have evolved. Our objective in the SME segment outside the U. S.
Is to drive scale. To do this, we'll continue to focus primarily on new card acquisition. Last year, we optimized our global distribution channels by unifying our international small business and middle market sales and distribution teams, so we could reach more customers more efficiently. We are leveraging best practices, digital tools and products from the U. S.
As we build our SME footprint globally. Here are our top 8 international markets, which together account for more than 85% of our total SME business outside the U. S. In 2016, we achieved double digit FX adjusted billings growth across the majority of these markets. More importantly, momentum increased in most markets as we exited the year.
As in the U. S. SME segment, we are achieving these results efficiently. Across our international markets, we've increased new signings by 14% and increased projected volume from new signings by 37% with an increase in investment of 22%, again demonstrating a significant improvement in efficiency. In summary, the Commercial segment is an important and growing part of American Express's overall business, and it represents a major growth opportunity for us going forward.
We have built a tremendous set of assets that give us a competitive advantage, including our large and diverse customer base, our global footprint, our closed loop network, our underwriting capabilities, our distribution channels, and our service and brand. We are leveraging these assets to continue growing this business. Our growth strategy is comprehensive and robust and is anchored on 4 pillars: developing new innovative products, leveraging our distribution channels, deepening relationships with current customers, and providing superior service. And our strategy is working. We are the number one small business and commercial issuer globally.
We're the number one issuer for small businesses in the U. S. We're the number one commercial issuer in the U. S. In fact, we are larger than the next 3 issuers combined according to Nielsen data.
And we're the number one commercial issuer for Fortune 500 Companies. We created the commercial card business and we continue to be the undisputed global leader. By continuing to focus on our strategy and leveraging our scale and unique assets, we believe we will be able to continue this momentum and deliver sustained growth to American Express over the short, medium and long term. Thank you. And now we'll have a short break before we hear from Anre on Merchant and Loyalty Business.
So it will be about a 15 minute break.
Good afternoon, everyone. It's a pleasure to be here today to talk to you about the Global Merchant Services and Loyalty Group. But before I do that, let me give you a little context about the organization. As a reminder, I lead all of American Express' merchant related businesses. This includes Global Merchant Services or GMS as we refer to it, which manages the relationships with the millions of merchants around the world that accept American Express.
The Global Loyalty Coalition, which includes our Payback Rewards programs in 5 markets and the Plinti program in the U. S. Acertify, our online fraud management company and in auth, a leading provider of mobile and web device authentication, which we acquired in December, and the team that runs the company's payment network. This structure enables us to have an end to end approach with merchants from acquisition and processing to network operations, loyalty programs and marketing support. The role of Global Merchant Services is unique because of American Express's closed loop system.
We are able to facilitate commerce on the network by working closely with both issuers and merchants. On the issuing side, we have partners who issue American Express cards and have direct relationships with card members. Issuers include our proprietary businesses, like our consumer businesses in the U. S. And international commercial payments, which includes our corporate and small business clients globally, as well as dozens of bank partners around the world.
For example, we partner with Commercial Payments to address specific needs of clients who may desire expanded card acceptance in a particular geography where their employees travel often. We also work with commercial payments in the B2B space, ensuring we convert the suppliers of corporate clients into American Express accepting merchants. All of this work enables us to bring volume onto the network in a customized way on behalf of our customers and clients. Now on the other side, we work closely with our merchants across all segments to help them grow their businesses through a range of services, including marketing support, business insights, fraud prevention and national campaigns like Small Business Saturday. Because we understand the needs of both issuers and merchants, we can effectively connect them in ways that deliver benefits to both sides.
So with that as background, let me move to the agenda. Today, similar to the approach taken by my colleagues Doug and Steve, I'll provide a progress update on the 2 year game plans that I covered in my presentation last year. I'll start with merchant coverage because as you know, we're working hard to dramatically improve coverage in key markets around the world. I'll give you an update on OpBlue in the U. S.
And our efforts to achieve parity coverage with Visa and Mastercard in the U. S. By 2019, a goal we announced at this meeting last year. I will tell you about our other merchant acquiring models we are using outside the U. S.
I will share insights into how we continue to strengthen our merchant relationships. And given the level of interest, I'll provide some visibility into our discount rate. And last, I'll give you an update on the Global Loyalty Coalition. So let's begin with merchant coverage, specifically with OpBlue in the U. S.
As a reminder, OpBlue is a merchant acquiring program we first announced in February of 2014. It was initially designed to expand acceptance among small merchants in the U. S. OpBlue allows 3rd party acquirers to contract directly with U. S.
Small merchants for American Express Card Acceptance. U. S. Small merchants who sign up through OpBlue have the convenience of working with a single source, the 3rd party acquirer, who sets the price and can give a single statement, one settlement process, one contact for servicing for all the major card networks the merchant decides to accept. Importantly, OpBlue Partners also provide relevant merchant data back to American Express so we can maintain our closed loop of transaction data.
With OpBlue accepting American Express becomes a lot simpler for the small merchant. Now since last year, when we met last year, 3 more OpBlue partners have launched, including Chase Commerce Solutions, which is the 2nd largest acquirer in the U. S. The dates you see under each logo on the slide are when the acquirers launch OpBlue in the marketplace. Today, all 18 OpBlue partners are live, and these partners account for virtually 100% of the merchant acquiring volume in the United States.
Now at last year's forum, Ken and I shared a goal to get to parity coverage with Visa and Mastercard in the U. S. By 2019. And as Ken said at the time, this is not something we would have said even 2 years earlier, so it represents a major shift in our strategy. But let me share with you what we are doing to achieve the parity coverage goal.
First, let's take a look at our coverage in the U. S. And how that compares to Visa and Mastercard. Now this data is from the Nielsen report, an industry standard publication, which estimates merchant acceptance using 3rd party sources. It shows the growth in merchant acceptance locations for American Express for Visa and Mastercard from 2013 to 2016.
According to Nielsen, they estimated that American Express increased coverage in the U. S. From 6,400,000 locations in 2013 to 8,500,000 locations in 2016. And that Visa and Mastercard grew from 9,400,000 to 10,700,000 over the same period. Nielsen includes roughly 600,000 ATMs and retail branches where customers can get cash advances as part of Visa and Mastercard acceptance locations.
So to make this more of an apples to apples comparison of merchant locations, If you adjust for that, the number of Visa and Mastercard merchant locations would be 8,800,000 in 20 13 and 10,100,000 in 2016. With that adjusted view, our GAAP to parity, as estimated by Nielsen, is in the neighborhood of about 1,600,000 locations, which we believe is directionally correct. Opelu helped us add more than 1,000,000 new merchant locations to our network last year. These merchants are in industries like restaurants and retail. For example, over 100,000 restaurants started accepting American Express in the U.
S. Last year. Over 40,000 clothing stores start accepting American Express last year. And we have covered information like this across industries and geographies that we've been using in our marketing to our card members to let them know of the many more places they can use their card. And we will continue to leverage OpBlue to close the coverage gap in everyday spend industries like restaurants and retail.
But while we're making good progress in expanding coverage in many industries, we do have larger gaps in a few areas. These key industries, for example, government, education and healthcare, each have unique challenges. We also have gaps to close with some franchises, because in some cases, a parent company may endorse accepting American Express, but only a portion of their franchise locations take the card. We have targeted efforts to close these gaps and achieve our goal of parity. For example, we are modifying pricing in the targeted key industries.
We have a heightened focus on franchises and are devoting more resources in our efforts to gain 100% acceptance in all franchise locations. And we now are fully leveraging OpBlue Acquires to help us target underpenetrated industries. But as we make progress on closing our acceptance gap and many new merchants start warmly accepting American Express, we expect to generate incremental volume on the network from existing card members, just as Doug alluded to earlier. But let me now move to other third party acquiring models. Last year, I shared with you some examples of different third party acquiring models that we are leveraging to significantly expand coverage outside of the U.
S. And we continue to make this a priority. Let me give you just a quick update on some of our efforts. We launched OpBlue in Canada in June of 2015 and today we have 5 partners accounting for more than 90% of the merchant acquiring activity in Canada. We launched OpBlue in Mexico in November of last year.
And we also continue to leverage our other acquiring partnerships in key markets. Each construct is unique to the acquiring landscape and the regulatory framework in the local market. So last year, we launched a number of these partnerships, including LCL, which is part of the 2nd largest acquirer in France, Global Payments in the UK and Czech Republic, and also the State Bank of India. And all of these programs are helping to significantly increase the number of merchants on the American Express network in key markets, which in turn enables us to capture more business from our card members. Now Japan is an example of a country where we've been able to significantly expand acceptance.
We have a reciprocal partnership there with JCB, which is the largest merchant acquirer in that country. JCB works with us to help ensure all American Express cards are accepted at virtually all JCB merchant locations throughout Japan. And in return, we help JCB expand their acceptance in other countries of importance to their card members like in Canada. And this has proven to be a very powerful partnership. We've seen significant growth in coverage through this model and the number of American Express accepted merchant locations in Japan has tripled with the JCB partnership.
And this expanded coverage in turn has enabled significant FX adjusted build business growth, nearly doubling over the past 5 years. We also continue to dramatically improve coverage by signing big perception changing merchants that are well known in their markets, some having thousands of locations. Now here's some examples of a few major signings we've had from last year around the world. All D4 Instance is a supermarket chain with 1600 locations in the U. S.
And over 1800 in Germany. Adia is a grocer in Spain with 2,000 company owned locations and others that are franchised. And Capell is a household goods and furniture retailer with 1500 stores in Mexico. But each of these goes a long way to improving our perception of coverage in the local market. So let me now turn to our merchant relationships.
Many might believe that our merchant relationships are strained given the merchant litigation we face in the U. S. And the payments regulation around the world. However, we remain steadfast in our commitment to improve our relationships with merchants in every country and in every merchant segment. We recognize that if we continue to strengthen our relationships, more merchants will warmly accept American Express cards.
So let me just give you some progress that we've made in this area. As a reminder, in 2012, we began conducting an annual survey of merchant satisfaction. Last year, we issued a survey in these 13 countries, which make up the great majority of the volume on our network. We send the survey to our managed merchants, which includes global, national and regional merchants, as well as to small merchants. We ask merchants a battery of questions.
However, a core metric we use is net promoter score, a well known metric that tracks both customer satisfaction and loyalty. We have continued to improve our net promoter score each from each year from when we began tracking satisfaction in 2012. And in our most recent survey in 2016, we were up another 4 points globally. Now throughout last year, we continued to take actions to improve merchant satisfaction. We rolled out several new merchant friendly policies.
For example, we no longer hold merchants liable for charge backs less than US25 dollars globally. We also no longer hold merchants responsible for charge backs on transactions more than 120 days old. We've expanded Amex Offers, a digital ecosystem connecting merchants with card members. Amex Offers targets relevant and valuable offers to card members, helping merchants attract new customers and generate repeat business. Last year, the number of merchants participating in Amex offers increased by more than 50% and the number of card member redemptions more than doubled.
We also expanded and reinforced our small merchant pricing in key countries including Australia, Hong Kong and the UK. And we have enhanced our digital servicing capabilities globally, providing merchants with a more streamlined experience for online payments reconciliation and reporting and enabling them to complete critical tasks more easily and quickly. Helping merchants fight fraud is another way we can help strengthen our merchant relationships. As you may be aware, American Express has the lowest fraud rates in the industry. We have important assets that we use to maintain that leadership position and to continue our efforts to help protect merchants against fraud.
One of those assets is Acertify. Since we acquired the company in November of 2010, Acertify has grown to become the global leader in e commerce fraud management. Their platform helps merchants identify fraud across all payment networks, not just American Express. And over the past few years, Assertify has entered new countries, gained large global clients and moved into new industries. They have a strong and proven track record of helping clients grow their businesses through effective and efficient fraud management and the related cost savings.
In December of last year, we acquired Innoth, another strategic asset we now have in the fraud space. In auth is a leader, a leading provider of mobile and web device authentication. Their technology detects risk and protects against fraud in a variety of digital channels. It's used by some of the largest financial institutions, banks, payment networks and merchants across a wide range of industries. As more commerce shifts to online and mobile, our merchants are faced with protecting themselves against the emerging risks that come with digital technology.
Inoff can help us protect them with leading edge protection. Improving merchant satisfaction year after year will continue to be a strong focus for us going forward. Now let me turn to the discount rate. I showed you this very slide at last year's forum. It looks at the average global discount rate over the past 4 years.
Our historical guidance around discount rate is that it would move down 2 to 3 basis points per year. Looking back to 2012, you can see our discount rate has decreased by an average of 1 to 2 basis points through 2015. Now as a reminder, different factors may play a role in either positively or negatively impacting the discount rate. For example, we may have merchant specific negotiations that result in a lower discount rate. There may also be volume driven rate changes to encourage and or reward merchants for growing American Express spending.
Some years, we may have an accrual or release that impacts the discount rate. Our mix of spending impacts the discount rate, sometimes positively, sometimes negatively, depending on the volume of spending we have in various industries and geographic markets. And as we said before, we expect to see some incremental decrease in our average discount rate over time due to the OptBlue program. Now last year, I told you that in 2016, we expected the discount rate to decrease between 3 4 basis points for the full year, and that was partly due to merchant specific negotiations, including those responding to the new regulatory environment in Europe, the grow over of a large accrual release in 2015 and the continued expansion of OpBlue. So let's look at the 2016 actuals.
The discount rate decreased 1.7 basis points last year compared to the 3 to 4 basis points decline that we estimated. Last year, we benefited from fewer volume driven rate changes and less impact from the mix of spending than we expected. So let me give you some visibility on what we believe will happen this year. In the first half of this year, due to merchant specific negotiations, the benefit of not having Costco as a merchant, the mix of spending, the expansion of ops blue, all of those combined, we expect to see an increase in the discount rate of about 1 to 2 basis points for the first half of this year. In the second half of the year, we expect more merchant specific negotiations as new regulations go into effect in some parts of the world.
We also have finished lapping the end of our Costco relationship and will therefore no longer have the benefit of the Costco volume at the lower discount rate coming off of our network. As a result, for the second half of the year only, we expect the discount rate to be down 4 to 5 basis points. But let me put that into some context, because when we look at the full year of 2017, we expect the blended discount rate to decline 1 to 2 basis points. This will be the result of merchant specific negotiations, the benefit of not having Costco as a merchant, the mix of spending and the expansion of OptBlue. And if we look beyond this year, we continue to expect the declines in the discount rate decline approximately 2 to 3 basis points due to merchant specific negotiations and the continued expansion of OTs Blue.
Now given the various factors that can impact the discount rate, I'm confident that our outlook includes everything that we know at this time. So let's move to the Global Loyalty Coalition. As I said last year, the Global Loyalty Coalition business is a growth opportunity for the company. As a reminder, we have 6 loyalty programs around the world, along with some examples of the major partners we have in each is what you see on this slide. Importantly, these are all places where customers shop or visit frequently.
If you own a car, you're going to the gas station often. Most people have a telecom service with their phone and Internet. And people regularly shop at department stores, supermarkets, pharmacies or drugstores. And we will continue to grow our loyalty programs by adding new partners in key industries just as we did last year with the addition of Southeastern Grocers to Plenty in the U. S.
But let me share how we did last year in a couple of key metrics. The number of active cards enrolled in either payback or plenty programs around the world grew from $92,000,000 in 2015 to 108 active members in 2016, which was a 17% increase. The revenues grew to $410,000,000 in 20 16, up 10% on an FX adjusted basis over the prior year and nearly $100,000,000 more than 2 years ago. We are pleased with our progress to date with the Loyalty Coalition and we will continue to focus our efforts on expanding the existing programs globally. Now you may recall that last year I talked about the payback program in Germany as an example of how the loyalty coalition programs can become a strategic asset for us.
So just as a quick reminder, the Payback program has been in Germany for 17 years. 8 out of 10 people in Germany know the Payback brand. 1 out of 3 earns Payback points. And research has shown that the Payback card is ranked 3rd most important card in German wallets. We bought the loyalty partner business back in 2011, and in 2012, we launched the American Express Payback co brand card in Germany.
I've shared with you in the past that before 2012, our consumer cards in force in Germany were decreasing. But since we launched the co brand, we grew cards 7.8% between 20132015. And in addition, those Extra Card members helped us increase billings growth from being flat before to growing over 5% between 2013, 2015. But just so for an update on 20 sixteen's progress, we continue to see very strong growth. Cards in force with payback was up 14.7% year over year and billings increased 14% over that same period.
So Payback in Germany is a great example of what happens when we leverage the power of these two brands. So in summary, we continue to have strong growth opportunities in the Global Merchant Services and Loyalty Group and we are executing well against our plans. We have a strategy of leveraging 3rd party acquiring models in key countries around the world, and this is enabling us to dramatically improve coverage and make a meaningful difference for our card members and where they can use their card to spend. We have an important goal of reaching parity coverage in the U. S.
By 2019, and we're making good progress and have a plan in place to achieve this important milestone. We recognize our merchant partners as a critical customer segment, and continuing to improve merchant satisfaction will strengthen our relationships and lead to more merchants warmly welcoming our card members. And we are growing the Global Loyalty Coalition, a business that we believe has the opportunity to become a key strategic asset for American Express. So I'm confident about our opportunities we have to help American Express grow into the future. Thank you.
And now I welcome Jeff to the stage.
Well, thank you, Anre, and good afternoon, everyone. Thank you for your interest in American Express and thank you for those of you here in person for sitting through the long afternoon. My role is to try to put into a financial context, what you've heard over the last few hours from Ken, Doug, Steve and Anre. I'm going to try to do that clearly, but also a little quickly because that will get us to the Q and A, which I suspect is probably the part of the day most of you are most interested in. As I do that, I'm going to frame my remarks really around the 4 key investor questions that Ken opened today by talking about.
I will though towards the end because it is March 8, make a few comments about what we've seen thus far in Q1 before I close it out and get to your questions. So let's start with the key investor questions. And in particular, let me start with the very first one. How are you performing against the 2 year financial plan you provided last year? And so Ken pointed out we are pleased with our progress.
And I would say we have performed financially better than we expected as we really focused the entire management team on the 3 priorities that you've been hearing about all afternoon, accelerating revenue growth, optimizing investments and resetting the cost base.
And when you look at
our 2016 results, you see really good progress on 3 of those. We accelerated adjusted revenue momentum as we went through the year, ending the year at 6%. We were able to spend a record amount on growth initiatives to position the company for the longer term and we made solid progress on our efforts to take $1,000,000,000 out of the cost base. Now, I will admit that when you look at the reported numbers column on this page, it's not always easy to see the progress I just described. And I would remind you all that in response to requests from many of the people in this room and other shareholders, we have for the last few quarters and in most of what you've heard today been talking about our adjusted numbers where we take out of the historical comparisons, the impact of our historical relationship with Costco to help you all understand the underlying or core trends that will become evident as we get a little further into 2017.
I do suspect I can speak for many of you in this room and I will say I can speak for the management and say we will be happy when we get to Q3 the back half of twenty seventeen and have very clean comparisons to show you based on reported numbers. But back to progress, when you think about 2016, we set out our original expectations in January of last year. We were really pleased to see stronger progress in every part of the company that allowed us to both do even better than we had originally anticipated in terms of earnings per share for our shareholders, while also funding the record level of spending on growth initiatives. That's why we have even greater confidence standing here today in the 2017 guidance we've given you of $5.60 to 5.80 dollars So that's enough, I say about 2016. Let me turn to 2017 and as I do that, broaden it out a little bit and talk a little bit about some of the other key investor questions as I go through a little bit more detail about our views of 2017.
Now before I do that, let me describe for you the assumptions we've made about external environment that we're in because that's obviously an important input into how we think we're going to do. Those of you who followed us for a while know we don't try to come up with our own economic forecast. We generally assume things that are in the economic consensus. And when you look at GDP growth, as Ken mentioned earlier, in fact, in the U. S, the consensus for growth is a little stronger than actual growth was in 2016.
That's a big positive for our company since while we are very global, our biggest business is still in the U. S. When you go beyond the U. S, the story is a little bit more mixed in the other big countries and areas where we do business with a few with expectations of a little stronger economic growth and a few with expectations of a little weaker economic growth. Overall though, because of the primacy of the U.
S. In our business, this is a more positive outlook than we had last year despite some of the uncertainty that is probably inherent in the environment. The next thing we have to make assumptions about are interest rates. And of course, if I had this discussion last week, I probably would have used different words than what you see on this slide. The Fed Board of Governors seems to have been particularly active the last week at making speeches.
So as we stand here today or at least as I looked it up late last night, the forward curve today anticipates about 60 basis points of an increase in interest rates by the end of 2017. And that is certainly a higher expectation of interest rates than would have American Express is a liability sensitive company, meaning that all else being equal because of our spend and fee centric nature and because of the size and scale of our global charge card franchise, as a general matter, if everything else is held equal, a rising interest rate environment, the 100 basis point change would cost us about $200,000,000 a year in lost net interest income and that's a sensitivity we put in our 10 ks each year. That simple sensitivity though ignores 2 other considerations that you do need to think about. 1st, if you think about history as a general matter, rising interest rates tend to occur in an environment of stronger economic growth, which is obviously a positive for us. If you think about the slide I just showed you, in fact, these rising interest rates, the consensus would say will be accompanied by an environment of stronger economic growth.
The other thing to think about is the way we have evolved our funding mix over the last number of years. And so this chart actually goes way back to pre financial crisis and then compares it to the funding stack that we have today. And very importantly, you see that today our funding stack includes about $30,000,000,000 of high yield savings accounts. When we do the very simple calculation that comes up with the $200,000,000 sensitivity to a 100 basis point increase in interest rates, we assume a beta of 1 on those high yield savings accounts. Now if you look at the last year and a half, in fact, the Fed has gone through 2 rate increases and rates really haven't moved on our high yield savings accounts.
So that would imply a beta of 0. Now I'm certainly not suggesting that that's the right beta going forward. Ultimately, what happens here will be the function of lots of things in the competitive and economic environment. But certainly internally, we run lots of different sensitivities. A very common one we run assumes a beta of about 0.7 on these.
I think the broader point is that while we are in a rising interest rate environment and our company as a general matter is more liability sensitive than many other financial services firms. The 2 other considerations you need to think about are the general correlation to greater GDP growth as well as the way our funding mix has evolved. So we also need to make assumptions about a few other things. We assume unemployment rates get a little bit better as we go through the rest of 2017. And then on exchange rates, which have been volatile over the last couple of years, and which are important to us given the size of our global footprint, we do just assume that exchange rates stay about where they are today.
To remind you, if the U. S. Dollar moves about 10% against every single currency in which we do business around the globe, that's about a $200,000,000 challenge for us given the earnings we have outside the U. S. Last external comment I would make is, we don't assume any material changes in the current tax or regulatory environment.
There's lots of talk about lots of things in the U. S. From our perspective, none of that talk has crystallized into proposals that are sufficiently clear or sufficiently likely to pass to be included in our guidance. We're happy if you like in the Q and A to talk about any specific proposals you may have be thinking about and how they might impact us, but we haven't built them in into our outlook. So that's the external environment.
What I'd like to do in the next few minutes is walk you through the various things we've said about 2017 as well as the various things we've seen in the 1st couple of months of the year to help you understand the assumptions and the thinking and the planning that's going into our guidance of 560 to 580 dollars for the year. As I do that, I would remind you that you've heard us talk for years about the fact that we have a flexible business model. There are multiple ways for us to get to the $560,000,000 to $580,000,000 What I'm going to do this afternoon is talk you through sitting here today on March 8, what appears to be the most likely pathway to that outcome. So let's start with revenue. Sitting here today, I'd expect as we go through the year for adjusted revenue growth to be in the 5% to 6 percent range.
Now Ken showed you this slide earlier this afternoon and we are very pleased by the momentum that we built as we went through the second, the third to fourth quarter of 2016 and the fact that we exited 2016 with adjusted revenue growth at 6%. And if nothing else is clear to you after the last couple hours, I hope it is crystal clear that we are very focused on as a management team on sustaining getting to and sustaining a 6% revenue growth rate. So that is what we are very focused on
for
2017 as well as beyond 2017.
Now a question I get
a lot from many of you in this room on that subject is, Jeff, what's different today? What makes you think you can sustain the 6% kind of revenue growth rate that you hit in Q4 2016 versus where you were a few years ago? In 2015, we had 4% revenue growth. And of course, there's many things that are different and you just heard all of Doug, Steve and Anre talk about many of those things. But when I step back and think about what are the most probably important and material things that are different today versus where we were a few years ago.
I look to the list that you see on this slide. The focus that Doug talked about, about driving existing customer engagement and organic growth more is different. The steady progress that you heard both Doug and Steve talk about in terms of becoming more efficient every year and how we acquire new card members, That's different. The combination under Steve's leadership of both our small business and middle market organizations to create one focused organization that is meeting more broadly our customers' needs, very powerful difference. The strategy of further penetrating across our commercial customers all of their payment needs.
The tremendous progress Anre just talked about on merchant coverage, so very, very different things versus where we were a few years ago. And last, the steady progress now we've made the last few years on capturing an ever greater share of our own customers borrowing behaviors. These are
the big
things that make us believe we are very much focused on the right things to drive towards that sustained level of 6% revenue growth. Now the last one on this list lending expansion leads me to another question that I get a lot from many of you in this room, which is Jeff, are you guys abandoning your spend and fee centric business model? And Doug showed you a chart earlier that was focused just on our U. S. Consumer business and pointed out that in our U.
S. Consumer business, the reality from a competitive perspective is we are a little bit more Lens centric in that business in order to be able to have the economics to compete with good value propositions in that market. But remember, that's the U. S. Consumer Business.
Our company consists of a commercial business, which is 90% charge, which is about the size of our consumer business. Our non U. S. Consumer business is not as lend centric. Our network business doesn't involve any lending.
So if you go back to the second half of twenty fourteen, about 83% of our revenues came from spend and fee economics. And I would make the point that nobody in this room was asking me back in 2014 about whether we were abandoning our spend and fee centric model. And yet after a couple of years of steadily getting really nice growth in lending with the sale of the Costco portfolio that 83% has now become 82%. So the point here is that we think we have a long runway of steadily getting a greater share of our own customers borrowing behaviors. But because we're growing nicely in fee revenue, because we're growing nicely in discount revenue and because we're starting from a very low base in terms of net interest income, it will not have any material impact on the overall profile for our earnings come from.
Now with our expectation of continued good loan growth with attractive economics, I would expect net interest income in 2017 to grow in excess of 10%. And as you would expect, given that, I would expect provision to grow at a higher rate because you've got both volume driving it as well as a greater mix of early tenure loans, which will go through a seasoning process. If you think about metrics, I would expect in 2017 to absolutely continue to have best in class credit metrics. Now, I do in terms of lending write off rates expect some continued gradual increase in write off rates, 2 things to drive that, the seasoning of the portfolio that I just referenced, as well as the fact that we have shifted to doing more lending on proprietary products versus cobrand products. And as Doug talked about, the proprietary products tend to have more economics, higher revolver rates, higher yields, that does come with a slightly higher write off rate.
If you think about Charge, we had hit our all time historic low in terms of write off rates on Charge in 2016. So off that really low base, I would expect to see some modest increase in charge write off rates. In total, I would say that I'd expect overall write off rates in 2017 to be up 15 basis points to 25 basis points. I'd remind you that that's right in line with what a year ago I talked about as our expectation in the higher growth scenario that we talked about last year. So let's go on to one of Ken's other key investor questions, which was how can you possibly sustain revenue growth if you're going to moderate down levels of marketing and promotional spending.
And to answer that question, I actually want to talk collectively about all the things we do that drive card member engagement. And so let's start with rewards. So what I've got on this chart is a calculation of history that shows you the ratio of rewards costs right off our GAAP income statement to our proprietary billings. And I'm showing you the number this way because I actually know many of you model the company's overall financial results using this ratio, which is a perfectly reasonable thing to do. But it is important to remember a few things about this calculation.
The numerator actually does not include our cash back rewards because we account for those as contra revenues. And the denominator proprietary billings in fact includes the billings on a lot of products that don't have any rewards on them at all like many of our corporate products. This ratio also is a mixture or an amalgam of consumer products, commercial products, small business, corporate. So the point of all that is that while this is a useful metric for modeling the company's overall financial results or rewards costs, I would greatly caution you not to use this to think about our value propositions relative to others. We look at our value propositions relative to others on a product by product basis.
We feel really good about those value propositions. We focus on a mixture,
a
comparison. So all that said is a caveat. I would expect for the company overall for this ratio to be about 5 basis points up in 2017 versus where it was in 2016. That's primarily driven by the changes that we made late last year in both the U. S.
Consumer and Small Business Platinum Products. I would caution you that while it's 5 basis points about for the whole year, this number jumps around
a little bit quarter to quarter.
It's a very complex accounting calculation.
And when I think beyond
2017, standing here today, we feel good about our value propositions in co brand, in Cashbrac, with membership rewards. All that said, acknowledging the intensity of the competitive environment, as you go beyond 2017, I would expect to see rewards costs continue to grow a little faster than billings, not at the rate you see in 2017, but a little faster than billings. That then brings us to card member services where we have also been growing faster than billings. And that's because this is really where a lot of the spending that is targeted at the unique and differentiated assets and services we have goes. And so in 2017 beyond 2017, I would expect to continue to see this number grow faster than our billings because the spending we do here is the spending that particularly reinforces the unrivaled brand strength we have that comes from our differentiated assets and services.
So now we get to marketing and promotional costs. And we have very clearly said that we expect these costs in 2017 to be down where they were in 2016 and to be roughly similar to where they were in 2015. So why are we comfortable that we can do that without seeing revenue growth slowdown? Three reasons. 1, every year and you heard Doug and Steve both talk a lot about this, we get more efficient and better at getting more out of every dollar we spend in this area in terms of driving card member acquisition and organic growth.
2, the 2016 number was unusually high because with the transition of 2 big co brand portfolios in the U. S, you had some pretty unusual market dynamics, which created some unique opportunities for us that don't repeat themselves in 2017. And third, we do think broadly about all the things we do to drive card member engagement and we are focusing more on card member services rewards and Ken also referenced earlier some of the things we do that actually end up in the operating expense line. We're doing more of all those things to drive card member engagement.
And in fact, when you put it all together,
our spending in 2017 on what I'm going to broadly call card member engagement will look pretty similar to what it was in 2016. And to go back for a second to marketing and promotion, for all the reasons I just walked you through, beyond 2017, I'd actually expect marketing and promotional costs to grow more slowly than revenues and more slowly than billings as every year we take advantage of the steady efficiencies that Steve and Doug both talked about. That then brings us to operating expenses, where we said we expect our operating expenses to be below $10,900,000,000 for 2017 and we have said we are making solid progress on our plans to take $1,000,000,000 out of the cost base of the company. So where does the $1,000,000,000 come from? Boy, lots of places.
There's no easy answer. But while the $1,000,000,000 comes from many line items, the biggest chunk comes out of the operating expense line. And when you think about the things we're doing, the kinds of things and there's hundreds of things, but they all tend to fall into the 3 categories you see here. With the most important and most powerful one the way we have evolved the organization. And we've evolved the organization not just to be more efficient, but also to be faster, to be more nimble, to be more focused on only the most important and most valuable opportunities for the company.
We've also reengineered a lot of processes to take better advantage of our global scale using Global Centers of Excellence. And we've been thoughtful about where we do work and when we do work. So you put all that together and as we go through 2017, I would expect sequentially each quarter, you should see a greater and greater decline in operating expenses year over year as more of these efforts come to fruition. And I am very confident as we get to the end of the year that we will be at our $1,000,000,000 run rate for taking that $1,000,000,000 out of the cost base. That then leads to the next question I get is, okay, so what happens after 2017?
And I think a little bit
of history is instructive here. So this chart points out that if you go all the way back a decade, over the 10 year period ended in 20 16, we grew the volumes that we were running over our network by almost doubling them. They were up 85%. And yet during that entire 10 year period, we only had to grow our operating expenses 20%, Because of the fixed cost nature of our business, because of the fact that we are heavy, heavy in terms of our technology use and technology gets more powerful and cheaper every year, because every year our card members and our merchants want to interact with us more digitally because every year we're very focused on what are the next things we need to do to drive efficiencies. And if you look at the last few years, every year we have been able to steadily get operating expense leverage due to the nature of our business model.
So this is what makes us very confident that when you go beyond 2017, if you get to revenue growth, the levels we're targeting, we are very confident we can continue to deliver operating expense leverage. So that then brings us to our last topic, capital. So we feel really good about our capital position and we have a tremendous track record. Over the 3 years, we've been amongst the highest returners or payout we have amongst the highest payout ratios of any of the CCAR Banks over the last 3 years. We've done that while steadily growing our dividend and while significantly reducing our share count.
And all that leaves us with a capital structure and balance sheet that is continuing to be very strong in our judgment and in the Fed's judgment. And if you think about one of the other questions that Ken raised to investors, which is how does our business model continue to provide competitive advantage? I think sometimes we take for granted the strength of our business model when inevitably the economy doesn't perform so well, right? And this is a chart that shows you the Federal Reserve's modeling from last year's CCAR results. And it says that in a severe economic downturn, the most profitable financial institution in the country is American Express, one of the only few to still make money.
And so when people say are you abandoning the spend and fee centric model, these charts I think are a powerful reminder of one of the advantages of the business model we have. So it's March, we are in the middle of this year's CCAR process. I would probably expect 2 things from us if I was you. 1, I would expect that our results will continue to come out very, very strongly in terms of how the Fed models things and I would remind you it is the Fed who ultimately has to get comfortable with our business model and our capital structure. And the second thing you should expect is that we will continue to be very focused as a company and as a management team on using our capital strength to create greater returns for our shareholders.
One change for us this year is the Fed has tweaked some of the rules they use to segment banks for the CCAR process. And as a result, this year for the first time American Express will not be subject to the qualitative portion of the test, which means it is strictly a quantitative test for us. That is a very good thing for us. And we think being categorized in that way is absolutely a correct reflection of the fact that we as an institution do not pose a lot of systemic risk for the economy. Beyond 2017, we'll have to see.
There's lots of proposals and lots of discussion about what might happen to capital rules, but we'll have to see what happens with any of those. I think no matter where they go, we as capital perspective. Okay. So let me make a few comments since it is March 8 on Q1 and what we have seen thus far, and I'll quickly wrap up and we'll go to Q and A. So first, based on everything that we have seen thus far in the 1st 2 months of the year, we remain very comfortable with our full year EPS guidance of $5.60 to $5.80 In terms of Q1 EPS, I would expect our EPS to be up quite considerably sequentially from where we were in Q4 and I'd expect our Q1 EPS to be somewhere in the range of what you saw in Q3 of 2016, which was an adjusted EPS of about $1.24 To remind you, in Q4, we ramped way up due to some opportunities we saw on a range of spending around growth initiatives.
In Q1 we're beginning to return to a more normalized level. As you go through the year then beyond Q1, I'd expect EPS to sequentially grow each quarter in line with our comfort with our annual EPS guidance. And there's 2 things driving that in 2017. 1, as I said earlier, I would expect each quarter for the decline in operating expenses to sequentially grow. And 2, there's some growth in revenue as you go through the year.
Most of that is just normal seasonality. I'd remind you that Q1 is generally our lowest quarter from a revenue perspective and Q4 is generally highest. And then there's a little bit of growth as you go through the year in revenue from all of the things that heard Doug, Steve and Andre talk about continuing to gather traction. From a billings perspective, I'd expect our billings to be in the range of where they were in Q4, which was on an adjusted basis, all these numbers are adjusted, dollars 0.07 per cent. It's still a little early to say whether there is a clear change in behavior from what if you read surveys appears to be some growing commercial and consumer confidence, too early to call that yet.
Loan growth, I'd expect to be in excess of 10% in line with what we expect for the full year. So you put all those metrics together, that should comfortably bring revenue into the range we have for the full year of 5% to 6%, despite the fact I would remind you the prior year had leap day, which is sort of irrelevant on a full year basis, but in a quarter is actually almost 1% of the days or revenues that you've lost. In line with that revenue growth and in line with what I said for the full year, rewards loans. For both rewards and provision, I would expect the percentage increase in Q1 to be a little greater than it was in Q4. So overall, when you think about the momentum that we built in 2016 and the results we have seen in the 1st 2 months of 2017, we are right on track with the plans we have to earn between $5.60 $5.80 for the year.
So you've now been sitting here for about 3 hours, which we appreciate. I hope you feel the confidence that we all feel in the plans we have in place to achieve our markets that we're in and we are incredibly focused on a management team as a management team on getting to that sustainable 6% revenue growth rate. If you get to a sustained 6% revenue growth rate, we are very confident that our business model will produce steady operating expense leverage and we are very confident that our business model will continue to generate excess capital that we can provide use to provide further returns to shareholders. And so if you can get
to that
6% revenue growth rate, it will consistently lead to EPS growth in excess of 10%.
So that's the story.
It's very consistent with what we told you a year ago. We think it is responsive to the current competitive economic and regulatory environment and it's built upon the foundation of the fact that we are in a very attractive part of the payment space with opportunities for growth across many, many different parts of our portfolio. We have unrivaled brand strength
that nobody else has and a set
of differentiated assets and a very simple financial model that pulls it all together. So with that, I'm going to invite my colleagues up to the stage to join me and we'll be happy to talk about whatever all of you would like to talk about. Thanks, Jeff.
So we'll open things up for Q and A.
Thank you. Sanjay Sakhrani from KBW. I just wanted to clarify the 6%, Jeff, that you talked about. Is that the new 8%? Just want to clarify that first and I have a follow-up.
I think we've been crystal clear, Sanjay, that as I said, the entire management team, our strategies, our tactics are focused on 6%
revenue growth.
I think that's as clear as we can be.
Got it. All right. Just want to make sure. And then I guess the second question maybe for Doug and then Jeff. The enhancements made to the Platinum card, could you just talk about what drove those enhancements and then whether it was offensive or defensive?
And then when we think about the revenue growth targets that you guys have provided, is that factored in, in terms of its benefits?
So, I mean, I'll start with that, Sanjay. So here's what I would say. I'll be like totally candid about it. The notion that we went through as substantial an elevation on Platinum as we did, we're not fast enough to do that in response to Chase. I wish we were.
I wish we were that agile. We're not fast enough to do all that negotiating, all that 3rd party tech integration and such in that time period, let alone sourcing the form factor and the whole deal there, right. So that was in the works well before any sapphire changes. I will say that, as I said earlier, when we look at some of the things that are easiest to change that are most commodity in nature, like rewards earn rates on air and things of that nature, Those are kind of last minute calls based on the competitive environment and those are kind of responsive to the competitive environment. So, that's what I would say about that.
In terms of how we think about growth and how we think about forecasting billings growth out into the year, we are definitely factoring in success on the Platinum elevation.
I'd make a broader point as we think about premium, sapphire, etcetera. I think part of what is going on at one level is people are taking a very narrow look at value. And what they're simply doing is doing a numerical analysis of a certain set of features and saying that's what counts. And what they're ignoring is they're saying we're not going to count services because we don't know how to add it up. We're not going to count customer service because we don't know how to add it up.
We don't know how to ascribe value to the brand. And the reality is what we've had is 60 years in a business that frankly if you didn't believe that brand works, then we'd have a problem as a company. Brand has to be matched with value. But when you talk about rational value, customers in fact are rational in fact in saying services and service are some of the inherent reasons why I decide to get the product. And so part of the balance that we go through, I want to be clear here, is we've got to look against all of our different segments in Consumer and Commercial and say what are the features that are most appealing to different customer segments, but also what are the other assets.
And when we talk about the experiential assets, I think part of the problem is because people can't put a number against the asset, they discount it. And very frankly, we can get into a theoretical debate, but I got 60 years on my side. I've got the service, I've got the brand, I've got the services, So you can say because I've had this argument, frankly, with different people for as long as I've been with the company and as long as I've been CEO of people who have said, look, I don't know if the brand really is that valuable or I don't know if the customer really figures out the service. So in platinum, the way I look at it is we took a great platinum product. Listen to what Doug said in his presentation is that platinum in fact was performing very well before we made the changes.
We had a slight drop, which we recovered before we came out with the new features. And so what we believe is we're building on strength, but when you look at the features that we added with Platinum, do not discount the experiential aspects, the other features and the customer service that we have, because what we're focused on is not short term incentives to get people in and listen to what Doug said on gaming, my view is, you're going to hear a lot more about gaming in the next 12 months to 36 months in the card industry, a lot more about gaming. What we're focused on is long term sustainable profitable relationships with our customers.
Yes. All right. Ken?
Thank you. Ken Bruce, Bank of America Merrill Lynch.
On that point, there's a lot
of money that's getting thrown at the card industry from all your competitors yourselves. How should we look at the efficacy of those dollars being spent? How do we measure you? It used to be cards in force, spending, Greg, a lot of different things. How should we be measuring you to see if these investments are in fact paying off?
I'll start off and then I think we can sort of go down the row. I think all of the above. I think you got to look at billings. I think you got to look at AR growth. I think you got to look at margins.
I think you have to obviously look at revenue growth. What's been interesting is a lot of the issuers out there, they have a model that's driven obviously dependent on net interest income and they need AR growth. And in fact, what they haven't delivered over the last several years, many of them, is much revenue growth at all. So it's not just a year or 2, but it's over several years that they've been in that situation. So I think what you've got to look at is what's the balance and for us is the sustainability, because we've been through periods of time where people have bought market share and then crashed and burned.
I mean, I give another example going back in history of the AT and T universal card. Free, I got that question a lot of, well, once it's a free card, it's going to be a big problem. They were gaining a lot of market share and then crashed and burned. And so I think you've got to look at each of those features. I think we're pretty transparent about telling you what's happening in different areas.
Market share is harder to do on a quarter by quarter basis, but we certainly try to talk about it on a yearly basis about how we performed. I think we've given you indications in different customer segments, in different product categories, how we're doing from a performance standpoint against all those metrics. But I think it's useful for us to sort of go down the row and talk about it.
And I might start, Ken, up at a macro perspective, because another way to phrase your question in a way that I get a lot is, gee, you've had these elevated levels of spending for a few years. What did you get for it? Well, let's see. We hit a 6% revenue growth rate in Q4. We have, as Doug pointed out, completely replaced the acquisition engine that Costco was.
And I don't want to be too personal, but it was a year ago that people would have said, the heck you're going to be able to reach 6% revenue growth. We don't see how that's going to happen even ex Costco.
We have been rebuilding capabilities in a way so that if you think about several of these presentations, we pointed out that our customer satisfaction ratings, which we track meticulously, are all continuing to go up. We have built capabilities that are going to pay off for years, particularly in Steve's world around the commercial card base. So and we have built capabilities that as you go through 2017 will allow us to get many of the cost efficiencies that we've talked about. So we feel really good about the spending we have been doing and the platform it has built at a macro level, but I'll let my colleagues add.
Well, something I will add in is that usually the questions that I have seen in the reports and in the news have to do with just the U. S. Consumer market about products in the premium segment, which when you look at the business that we compete in, I think that's a very narrow view of what we do. We have many different segments. We compete beyond the U.
S, we compete beyond consumer and we have different product categories and we don't just generate net interest income. So it's not really a comparison because it's just one segment and one slice and one geography, but it doesn't represent all the flexibility and differentiation that we have around the world in our product set.
And the only things I would add, our model is dependent on our ability to attract high spending, high margin customers and then capture a lot of insistance. And that's why I keep bringing back the wallet share and the organic growth statistics. I think you need to hold our feet to the fire. I'll be back here next year and I'll be showing you how we've progressed on share of wallet. I think clearly, you see a lot of confidence on how our customers will do very want to see the results of that particular investment.
I think you'll want to see that while the logic of growing loans from existing customers, both from a competitive and customer point of view is sound at one level, we need to be able to demonstrate that we can do that and still maintain the type of risk adjusted margins that we do. And I take Andre's point, which is, are we going to respond to some very dynamic environments outside the U. S. And prove that we can continue to drive share taking levels of growth there. I mean, I would evaluate us on all those areas.
So, ultimately, when you compare us to the competitive set, we're a pretty transparent business. We're a payments business. We don't have the ability in a given year to say our retail banking business did this, our investment banking business did that to sort of cover up any ills in our card business. So, when you look at how you're going to measure us, it's really how are we growing top line revenue year over year and what are we doing from an earnings per share perspective. And that's how you can determine whether we've been effective with those dollars.
That's how I look at it.
Hi, Don Vendetti, Citi. So Ken, my sense is that you're not really interested in any larger strategic acquisitions similar to what I think your thought was last year. But as you look at your merchant relationships, it just seems like you'd be able to leverage that through more e commerce type add on value services, I mean, similar to what you're doing in fraud. Do you feel like there's any opportunities there? And also do you feel like you have the right assets to compete with what's going on in digital payments?
Yes, I think one of the things that is really important Don and I think it's been a consistent theme is what I believe fundamentally is with the convergence of online and offline and with the closed loop data, American Express in fact has more capabilities to take advantage, because the reality is that we know whether the spending takes place online or offline. We know at what time, where they are, where they're going. And so if you think about the services space, absolutely, we see bolt on opportunities, partnership opportunities with a range of digital companies and frankly there are some of the large digital companies that we're talking to and partnering with that are very impressed with the data and the analytical capabilities we have and in fact the platforms that we have and the speed to market. So if you just think about the number of decision scientists that we now have in the company, I think that number now is close to over 1500 that we have and the wealth of data. And so I think the ability to do bolt on acquisitions as well as to do partnerships has been substantially enhanced.
And I think that is both in the side, not only of consumer, but as you saw in merchant, but frankly in commercial, I think there are some very, very good opportunities.
And then just a follow-up for Steve. If you look at the pie of build business, everything is kind of moving along pretty nicely with the exception of large corporate.
Can you talk a little bit
about why that's so important in terms of the merchant acceptance around the world? And is there anything you can do in that business competitively or do you just sort of wait for corporate T and E to just pick back up?
Yes, we certainly don't wait for corporate T and E to pick back up. So that's not a really good strategy. What we're out there doing is every day working with the existing clients that we have, working to get more of their team needs because not all not every single one of our clients has mandated policies and we talk about the advantages of mandated policies. We're out there trying to sign new accounts. We're looking to expand some of their B2B spending.
And the reason you look to expand into B2B spending is not only is it profitable for us, not only is it efficient for them, but what it also does is it gets you more of a grip within the account. But when you look at, and as I showed in the slide, I think it's 60%, 66% T and E spending, that is very powerful spending for our merchants. And it is spending that is required. If you have a if you do have a corporate card program as an employer, your employees have to put that spending on the card, and that is very insistent, high spending card spending for merchants, restaurants, hotels and airlines. And it allows us then to get many of the benefits that we do get, whether that be for the fine hotels and resorts or whether that be for airline benefits and what have you.
So, we're going to continue to focus on our large and global accounts to maintain what we have and to win the ones that we don't have.
Yes. We'll go here and then we'll go back to you, Craig. Thank you. David Togut with Evercore ISI.
Looking at some of your competitors in corporate cards, did you grow materially faster? For example, if you look at Mastercard, their GDP growth consistently is in the teens, Visa probably high single digit to low double digit. So, there certainly are differences, of course, in size and mix, but why shouldn't American Express have aspirations to grow materially higher than let's say 5% or 6% in Corporate Card?
Yes. So I think as I laid out, we're really running 3 different businesses. And so if you look at our international small and middle market business, our aspirations are actually to grow a lot faster than we're growing at 13%. And so you look at that business and I think our aspiration is to continue to grow that fast in double digits. When you look at sort of middle market and SME in the United States, we're growing at a 9 plus and our aspiration is to continue to have to grow that faster.
As we just said, you have global and large, which is 25% of our business. So on a weighted average, it winds up pulling down the overall mix. Now we don't want to get rid of that business, we don't want it because as we just said, it was important for card member assistance. But I think over time, as we continue to grow our small and middle market business in both international and in the U. S, that growth rate will come up because if you went back 5 or 6 years, the large and global accounts were a larger portion of that spend.
And so when Jeff does his quarterly calls and you guys ask questions about, well, geez, what's going on with corporate card spend, it's not just one segment you have to look at. And that's why I did the presentation today in 3 segments going through 3 different strategies and talking about the organic spend, the new signings and the losses. And it is a school of thought that we're losing share in large and global accounts. That's not the case. It's a bit of a contracting space at the moment.
But when you look at small and middle market in the U. S, you see a lot of momentum from an organic perspective, you see a lot of momentum from a new signings perspective, and you're overlapping Costco as well. So we feel really good about where we are from a small and middle market perspective, both internationally and the U. S. And I think that we feel good about what we're doing with large and and global accounts.
It's just that when you mix that together, you get a really uneven picture of what's going on. And so, what I would encourage you to
do is to sort of
ask those questions about the 3 segments. Yes. I think it's really important that segmentation separating out the large market because I think as Steve demonstrated very, very clearly, it's more of a secular phenomenon. It's not an issue of us losing share and we're growing very well in small business and middle market. There are some secondary benefits of having the scale that Steve talked about.
So if you look at a program like Fine Hotel and Resorts, there is no other program that can be matched, because the reality is we're bringing significant scale to those hotels and airlines. And so, you've got to look at the integrated aspects of the model, but as we look at this sector, commercial sector, I see that as a growth opportunity for us because of the significant penetration opportunities we have in small to middle market. Just as a quick follow-up, Steve, can you talk
a little bit about your strategy in virtual payments? I think you mentioned it in your remarks, but what particular vertical markets are you pursuing?
Yes. So, from a virtual payments perspective, we're obviously looking at we're looking at B2B, which is a huge piece. We're also looking at the travel vertical, is a big piece for us as well. So I think those are 2 of the big verticals for us right now.
Great. You can bring the mic over, right?
I was hoping to ask a regulatory question in terms of regulations that we actually have side of. In Europe, we have PSD II coming beginning of 2018, plus you currently have an exemption versus interchange cuts that were made. Have you had any further discussion regarding that exemption and what we should expect there after the 3 year period is up? And secondly, as PSD2 comes into focus, do you expect any material change to your growth trajectory due to direct bank payments or any other side effect? Thanks.
Let me have Anuray handle that. So, you're right, Craig, in that the regulation is not directly targeted towards American Express. Some portion of the commercial is exempt. We're watching as it evolves, working where we can to try to influence the outcome or at least make sure it's an informed decision that's made. It's happening over time.
It's not necessarily one key moment in terms of how each country develops their own local market rules that we have to comply with. But we believe over time, we'll be able to successful. I think Doug partly alluded to the fact that in some of the markets, our bank partnerships are evolving and we are pushing more volume through our proprietary business and that's what's growing very strongly in different markets around the world. So I don't know if you want to add anything to that, because I know it's something that you're focused on from a strategy perspective.
No, I
mean, I think Craig, I'm sure you know what the dynamics are. I mean, as part of this change in regulation, it's causing us to pull back from a bank partnership model in those models across Europe. The traditional bank partnership models or licensing agreements are in wind down status and all the partners are aware of that. And it will have a volume metric impact on us. The flip side of it is we find our proprietary businesses to be quite competitive these days in Europe and growing strongly both in the UK and across the continent at share taking levels.
And I think while you might see some metric impacts from a billings point of view and such, I would expect on the core metrics of revenue and pre tax will be in good shape. And the longer term, what happens after 3 years when they do a broader review, I mean, it's anybody's guess, right, I would say. I will say we're pleased with the performance of our European business over the last 2 or 3 years, though it's been a real bright spot for us.
Thank you.
In the back, Betsy?
Hi, thanks. Betsy Graseck, Morgan Stanley. Henri, you put up a slide talking about how the penetration has been increasing obviously of merchants that are accepting Amex in part through the Oplu program. Could you just give us a sense as to the pace of change and the pace of adoption that you're expecting from here? I got the impression that maybe it would be a little bit slower given some of the challenges with franchise and healthcare, etcetera, but maybe you could give us some color around that.
And then if I could also just understand how important it is to get that penetration to drive the 6 percent, 7% revenue growth 6% revenue growth that you're looking for firm wide?
Okay. So, we're talking about the U. S. Market, not about the rest of the world. I did show where our locations in force, the number of merchants that we have on the network today as it compares to the other networks.
The ABPU program introduced at the beginning of 2014. If you remember when it was introduced, we did not have all of the acquirers in the United States. We've made progress over time. I would say now that we in the Q4 of last year has Chase, which is the 2nd largest acquirer now joining the program, not even at full strength from an acquiring standpoint until this Q1 in a way that will increase the pace in terms of the number of small merchants that we can acquire. The thing that has, I think changed is after 3 years of the program, we've identified looking at all the industries where we've been acquiring merchants, there were a couple of industries, a few that I highlighted, government, healthcare, education, where we weren't growing at the pace that we would desire.
Therefore, we're making some modifications that would improve that, right? So, overall, we feel that Opelu has worked well for us. It's enabled us to close the gap, and we're confident that the pace can increase to a point where we can get to parity by 2019. Now one thing I will say is that will enable us to drive more spending from existing card members by giving them incremental places to be able to use their American Express card. The 4th quarter promotion that Doug mentioned was our most successful a belief that there's greater a belief that there is greater spending capacity that could be acquired with expanded network.
But I will say that not 100% of all the potential has been baked into our plans in 2017. So, we'll have to see how things evolve over time, but you should feel confident that it presents another growth opportunity for the company, which is what we are attempting to display today.
Yes, maybe to just state that slightly differently. I think this is one of the most powerful and important longer term initiatives we have. If you think about things that are giving us confidence about 2017 in our guidance, it's a smaller piece, right, because you have to get to all the changes we're making and then you also have to change perceptions and that's why this is really powerful longer term, but just one of many things as we think about 2017. Yes.
I think the other point is that while Anre obviously doesn't want to go into some of the specific strategies against the 4 industry groups he cited, we have very, very clear strategies and that's why we have not changed the objective that we have to be a parity coverage in 2019. So, we still have a high level of confidence that that
is the right objective for us. Yes.
David Ho, Deutsche Bank. As we think about the deposit franchise, both as a driver of, again, the loan growth opportunities farther out as deposit betas start to move higher, Two ways of thinking about it. It seems like that would be an engine that you'd like to obviously accelerate on more transactional side from a funding standpoint, but also even from a new customer acquisition standpoint, if you think about millennials gravitating towards debit cards, and you haven't really talked about serve as much as an acquisition engine for that. Can you address those 2 issues?
Well, so I'd say a couple of things about our funding strategy. I mean, we are trying to balance a few different objectives with our funding strategy. One, we think it's really important from a long term safety and security perspective to have steady access to the 3 different sources of funding we use, the asset backed market, the unsecured market and the deposit market. So you're not going to see us grow any one of those to the exclusion of the others, because we like the mixture of the 3 and you need to be active in all three markets. Second thing that I would say is that, remember we are a very complex global institution, so there is some complexity due to how you fund our non U.
S. Businesses versus our U. S. Businesses that also gets into how much you grow the deposits. All that said, I would say over the next few years, you should expect to see the portion of our funding stack that comes from high yield savings accounts grow somewhat, but not to a huge degree.
Now today and I'll turn to my issuing colleagues here, we tend to operate that business fairly independently, although a large percentage of the people with high yield savings accounts are other very good customers of Amex. But I would say, and I'll look at Doug here, today we don't particularly try to leverage across the two products.
No, I
mean, I would say, David, the traffic runs the other way by and large, right, which is its card customers and folks with a real belief and affinity for the brand that are engaging on the deposit side. So, I think it would require a different product construct and strategic for us to turn deposit or current account type of capabilities into a product to attract and further engage millennials. So, I think it's not on the back of the current high yield opportunity, I would say.
Yes, someone over here.
Hi, Rick Shane with JPMorgan. We've seen an evolution today in terms of what I'm curious given the incentives for management, has there been a discussion with the Board about new incentives in light of essentially lower growth objectives?
I think what's important and I wouldn't characterize it as lower growth objectives. What I would say is, in the environment that we're in, I think given the economic environment, given what we see as a range of opportunities, As we look, as I said earlier, at the peer group, which certainly has not generated much in general in revenue growth, there have been a few exceptions. But what I feel very, very good about with our Board is we go through a very rigorous and disciplined process every year aligning not only our short term objectives, but our moderate to long term objectives against the financial metrics that we have in place. And so I think that from a perspective standpoint, the view is that 6 6% revenue growth rate would be an attractive growth rate and 10% earnings per share growth would also be attractive. And we've aligned our financial incentives with those objectives.
Yes, over here and then we'll there was someone here. So we'll go left here and then we'll move right. I see
it. Thanks. Good afternoon. Bill Carcotte with Nomura. Ken, I was hoping that you might be able to comment on, I guess, a little bit of a follow-up on the commentary earlier about the Platinum product.
Gordon Smith at JPM Investor Day, I believe last week or very recently talked about year to date the growth in the sapphire reserve product through February was, I believe, 14%, which was consistent with what they had achieved in the Q4 of last year. And that was the highest growth that they'd seen in the last decade. And they also put up a slide showing that the characteristics of the acquired customers, like I think $800,000 net worth. Effectively, as you guys have said, it was a full frontal assault on the Platinum product. As that growth has been sustained through February, I guess, one would think perhaps some of that came from traditional Amex Platinum customers, but you guys talked about how there was just a blip in attrition and then it came back.
Is that attrition just customers who might have closed the Platinum card? But I guess maybe I'm trying to understand what the spending has been on those platinum cards perhaps as some of that spending been lost and what's kind of the confidence of when being able to regain that?
So I'll talk very generally. I think what Doug said is, we saw a very slight blip. We feel very good about the spending that we're generating on Platinum and we feel very good about the cards. And as we said, 2016 was the strongest year that we've had with Platinum. And we said that we had a blip.
We, in fact, normalized, and that was before we introduced any new changes to the product. So the reality is we feel that we're building on strength on strength. And I think Doug was pretty clear about that.
Yes. I mean the only thing
I would say, I have a hard time really tracking the Chase numbers only because it's too new. You've got a lot of accounts in promotional periods and such. But our incremental attrition over those 2 months, which were the only 2 months that were above trend, is smaller than the number of accounts we acquire every month. So this was not a portfolio changing event. Now are there more platinum customers that have signed up for the Chase Sapphire Reserve product?
Absolutely, undoubtedly there are, right? Can we see the impact on our spending? You got to remember, coincident with that launch, we moved to the 5x Air promotion. And so it's hard to kind of unpick would our growth have been stronger if Chase Reserve had never been launched? Perhaps.
It's hard to say. I would say. But I would also say that I don't remain kind of like that's over with, it was 2 months and now we're done. It is a full frontal assault as you say and it's ongoing hand to hand combat. I would say that I would expect customers who take that product up and engage with it fully for some of the commodity like benefits that are on that product, they wouldn't continue to pay $4.50 or 5.50 in the future for an Amex Platinum product.
So I expect it would have some impact on attrition in the future. We're not seeing it right now and we're but believe me, we are intensely focused on monitoring these things at a customer level.
Yes.
I think to Doug's point, we're never relaxed about the competition. Obviously, we're very, very focused on it. But what I would also emphasize is again the point I made earlier that we have long term relationships with our customers. Platinum is a very, very strong customer base. What will be interesting is to see how long the Chase Sapphire customers, what happens with that product over time.
Because rest assured, those are benefits that are very easy to replicate. And so it will be interesting to see what happens from a competitive standpoint. So what I would not assume is that they're going to be in 1 category and everybody else is just going to sit by and watch them with their features on the product. Those features will be replicated just as we know almost every American Express product and service, some of our features have been replicated throughout our 60 year history. That will continue.
What will be interesting is to see not just with Chase, but with other competitors is what happens when the short term incentives are dried up or what happens if people game. And we'll just have to see what happens from an industry standpoint. So, I think that we're in the early innings on new products, but I think it would be a mistake for anyone to believe that some of those features will not be replicated over time from a competitive standpoint. Yes, if someone yes.
It's Jamie Freeman at Susquehanna. Yes. Andre, I wanted to ask you about the evolution 61 where you show the chronology with the relationships in the acquiring community. Have you tested the elasticity there? Is there a way to incent one over another or to grow faster or less fast?
Are there any bounties going on? Is the balance of power with you or with them? Should we be thinking about that over time?
Okay. Well, this is the way you should think about it. And the things that we've shared before, with OptBlue, it's wholesale pricing to a certain extent. We offer pricing and the pricing is the same for all of the merchant acquirers, wholesale. They determine the end pricing that the merchant pays, they decide.
We no longer give incentives and pay the merchants I mean the acquirers directly for the acquisition and that saves us tens of 1,000,000 of dollars a year because then we are offering them wholesale pricing. They make their revenue on their markup, which they determine. By having more acquirers in the program out in the marketplace being able to offer the OpBlue program with whatever pricing construct they desire, there's competition amongst them about how they will go to market, how they will price and what their portfolio of networks look like. And we share information about how fast people are selling American Express merchant services, but they compete with each other. It's not that we provide financial incentives to 1 or the other based on volume or their activity.
Is that helpful?
Yes, that's helpful. Thank you. And then I know it's the deep end of the pool, Jeff, but you said we could and I get questions about this. So Mastercard said that they would qualify as an exporter in a VAT a border adjustment tax regime. That was the CEO said on the Q4 call.
Is there any I realized that you under indexed in export, but is there any reason to believe you'd be any different as a potential benefit?
Well, here's what I would say, just maybe to step back and answer your question broadly to level set for everyone. So we have a 33% to 34% tax rate, that's what we said about 2017. I would tell you not terribly proudly that our cash tax rate is about the same as our book tax rate, makes us quite unusual. And we are predominantly a U. S.
Taxpayer. As about when you look at tax accounting, about 85% of our earnings are actually generated in the U. S. When you look at the border adjusted tax, there's different definitions of it out there. But as we read some of the more credible ones, we actually think it's fairly neutral to us given our business model, which remember is unique, it's not the same as the 2 networks.
And so any reduction in rate would be very positive for American Express, because we don't have any particular aspect of our structure today that prevents us from being a very significant taxpayer. So we would be a significant beneficiary of any trade that's out there today, including a border adjustment tax that involves going to a federal rate down in the 20 something.
Now that Costco is pretty much gone and you have a lot of data, especially in Canada and in the U. S. With regard to the customers you lost there, Can you talk about how many of those customers you were able to retain or get back in the form of other cards or give some sort of clue as to how much of
your loan growth is related to that as opposed to Yes.
Couple of comments. First, to be very clear, we have no Costco data anymore, because they are all in a way the day we sold the portfolio. So we don't even know who those customers were at this point from a marketing perspective we're very rigorous about following that. I'd remind you all that we said all along that our goal was to retain at least 20% of the spending of the Costco co brand card members and back when we still could track the data more effectively than we can now, we were tracking well ahead of that goal. And I would say we feel really good both from a consumer and small business perspective about the efforts we made in 2015 2016 to for those people who were really Amex, not Costco loyalists, retaining their business, putting them into other Amex products, and so we feel really good about where we are.
At this point, we can't make any other public comments about where we are because we don't track the individuals. I don't know if you guys want to add anything.
No, I just from a commercial perspective, if you just look at our reported results and our adjusted results, our reported results are positive from an SME perspective, where we had all of our Costco spend. So we've been able to effectively work with our customers to get them onto other products. Which ones they are at this point, I couldn't tell you. But you ask yourself, well, why? And it gets back to proposition and the value proposition is much more than just rewards.
The value proposition for small businesses is giving them that ability to spend and that's a huge thing and that's what our customers did not walk away from.
Yes. Right here and then we'll go in
the front. Okay, you'll be next. Yes.
You've been sitting on over 20% excess capital versus targets for some time. And you expressed your confidence in how you do in the quantitative part of the CCAR process and you're no longer subjected to the qualitative part. So is now the time to finally get to your targeted capital ratio?
Well, just to be clear, so yes, we feel very comfortable with our capital ratios and feel very comfortable with the risk profile of the company. However, what we think is somewhat irrelevant since the Fed CCAR process determines this. And as forgive me when I get into the weeds just a little bit, to remind you all the way the CCAR process works is the Fed models your results in a financial crisis worse than the 2,008 crisis. And then they say we're going to take those results and that's what I showed you, we have the highest results of anyone in that scenario, but then they say now we're going to assume that right through that severe crisis you continue with all the share buyback and dividends that you requested, because we've generally been requesting close to 100% payout and because we somewhat uniquely have an ROE over 25%, it means that over the 9 quarter CCAR process, the way the Fed does the scoring, you're actually buying back over half of your capital base. And so from the Fed's perspective, the way the CCAR process works, we are not sitting on excess capital.
We are running the process as aggressively as we think prudent and as the Fed's process will allow us to be. So you should expect us to continue to be aggressive. Some of you who really follow this closely would know that Governor Tarullo, who has now said he's going to leave the Fed Board of Governors, gave a speech late last year where he said, maybe we should actually not continue with the rule that we're going to assume that you continue with all your share buybacks right through a severe crisis. Now I'm not sure what will happen with that proposal he made in his speech now that he's leaving, that would make a big difference for us if that change were ever to be adopted. But for now, from the Fed's perspective, given the way the process works, we are not sitting on excess capital.
Hello. Jason Harbs, Wells Fargo. Assuming a continuation of the 6% to 7% revolving credit growth that we've seen over the past year, how long do you think you can sustain the 10% adjusted loan growth target? And I guess where I'm going with that is, as you talk I think I didn't see it in these materials, but I think in prior years you've talked about 15% to 20% being the target NII as a percentage of total revenue. Is that still the appropriate target to think about?
Well, I think there's 2 questions here. Let me quickly answer the financial policy one and then I'll let Doug talk about the market. So, we've just made the observation that and I showed you slides today, today we're at 82% of our revenues coming from spend and fee economics and we're getting really nice growth in fees. We're getting steady growth in discount revenue. And so if you go do the math, Doug could continue and Steve could continue to grow for years at the rate in excess of 10 and the 82% is only going to change very slightly.
And so, we don't view that as the governing factor. The key question for us, which I'll let Doug and Steve talk to is, what do we think the opportunity is to add attractive economics, continue to grow above market because we're capturing an ever greater share of our customers borrowing behaviors? I mean from my point of view, a
lot of it depends on the environment, right, and just how hot the market gets, what happens to credit trends across the industry. I personally don't have an explicit target to grow loans in double digits over an
an
us borrowing activity. You see the statistic there, it's $175,000,000,000 ish off us. So basically every 1% you're moving over is 3.5% growth in a year, right? So you don't have to make large inroads to put a 3%, 4%, 5% increment over what you get from going out in the market acquiring new customers, which is what drives a lot of competitors' loan growth. I would also say we have a bit of a competitive advantage because the 25 percent doesn't really tell the whole story.
There are large numbers of customers we have that do not borrow at all from us. And what this enables us to do with customer level capabilities and such is to be disruptive, to adopt a challenger mindset. We don't need to worry about cannibalizing existing borrowing margins and such. We can go out and be very focused. There are times when being the £800 gorilla isn't helpful, like when someone launches a broadside at one of your premier products.
On the other hand, there are times when it's to be the insurgent is not a bad thing. And so we'll see how the credit environment pricing changes. But my expectation is the ability to move a percent or 2% of our customers' borrowing wallet with some of the products, pricing tools that I described is a reasonable thing to believe in for us in the moderate term.
And I think, Doug, the key thing is the portfolio of products that we've created, both non card and personal lending as well as credit card lending gives us a lot of optionality.
I think on the commercial side, our main objective is to meet customer needs. That's the thing that we want to do. And when you look at the book of lend that we have right now is very, very small, especially if you relate that to our share of spending in that space, okay? It's a $10,000,000,000 book. It's onesix the size of our consumer business, and it is targeted at the very low end of our small and middle market, so these are our smallest customers, and it's targeted at our top customers.
And so we believe that we still have, being very responsible, we still have headroom to continue to meet those customer needs. And then as I also talked about, we put up a working capital terms product, which is a very different product, which is a 30, 60, 90, 120 day product to meet needs for short term cash flow borrowing as well. So we'll continue to do those things very judiciously, and I think that's going to help us meet our customer needs.
Yes. I think one thing that's important, just to put a little historical perspective, is when I joined the company in 1981, we were almost exclusively a T and E pay in full company. If you are going to be a customer needs driven company, you in fact have to develop and evolve products and services. So what you saw us do, which would have which was viewed as heretical by management at that time in the '80s was in the '80s '90s is move more to everyday spend. And in fact what we were able to do was to become more relevant to our customers and still in fact generate attractive economics.
The reason why we got into lending is because our customers said we would like to in fact borrow from you. Our job was to make sure we constructed a set of value propositions that had the appropriate economics And that's what we're doing. So we are going to continue to be customer driven, but we're going to do it in a prudent way. And we also have overall financial objectives that we've set for the company, because we think that's the most sustainable way for us to operate going forward. But that's something that we'll continue to do.
But I do think it's important to focus on where we were and where we've evolved to. And in fact, that's allowed us to grow, generate good economics and gain increased scale.
Yes, let me just in
the back and then I'll come back to you, Ken, since we haven't had a gentleman have the opportunity
to ask a question.
Hi, Josh Beck with Pacific Crest. So I wanted to ask about the acquisition channel that has effectively replaced what was the Costco engine? And when you think about the customer lifetime value of those customers, the acquisition cost, how do those compare and contrast with what Costco was historically adding?
Good question. Doug? Well, it's I mean,
it's a mix of channels that have added up to it, right, from proprietary channels where we drive traffic through paid search, display media, from our above the line advertising and the way that drives un referred traffic to our site, affiliate partners and comparison sites. Co brand partners, I think if you listen to Delta's earnings calls or shareholder meetings, you'll hear them talk about the very strong performance we've had with them as well and predominantly in their channel. So I think all those things from a channel point of view add up. In terms of cost, look, Costco was a very, very inexpensive distribution channel, right. So the cost of replacing that volume is certainly higher.
The flip side of it is the margins on that volume and the persistence of that volume, since it's largely on proprietary product or AXP branded product is an attractive trade off.
Thanks. Ken Bruce, Bank of America Merrill Lynch. This is a somewhat complicated question, so bear with me. You've got a very strong corporate franchise, as you pointed out in your remarks or on the slides and in your remarks. The some of the competitors that look at that corporate and commercial business, specifically in the large corporate space, kind of point to effectively the better merchant acceptance that they have globally.
And my question is, do you believe that it's a strategic imperative to take the Opelu and some of the parity goals that you have in the U. S. And extend that more broadly as you think about PSD2, where you've had some of your partners abroad that had been doing the acquiring, does that change in any respect your acceptance more broadly. So in such a way does it in any way impair your corporate franchise because it's been so strong and others jealously kind of look at it and kind of look at the merchant acceptance as maybe the one kind of key weakness. I guess fortunately none of the issuers have frankly been able to repeat any of the benefits you have.
So
Yes. So let me I mean, I think it's probably more of a commercial question. But if you just look at you can go back over the years and when we've talked about the corporate card business and we continue to quote the same statistics, we're 60% plus of the global Fortune 500. And from an acceptance perspective, it's really T and E bound when you think about large companies and what they really need. And our coverage is good enough.
And will it continue to get better? Yes. As ANRAY continues to roll out, more and more OpBlue, it's going to get better. We fight this fight every single time that we have an RFP. And when you look at it, it ultimately does not turn into a situation where we lose because of coverage.
It turns into a lot of conversation about coverage. But there is so much more to the corporate card program than just a restaurant that may not accept or a small hotel that may not accept. And the advantage that we have, when we find that a restaurant or that hotel doesn't accept, I can call Anre and he can go sign it, not personally, but he can get somebody to go sign it, unless it's
a good location. Sometimes personal.
Sometimes personally if it's a good location. When you look at the large and corporate space, there are really only 2 issuers today. It's Citi and it's American Express. There is nobody else that really has a global program. Everybody else has pulled out.
And when you're dealing with large companies, there are not a lot that don't have subsidiaries in other markets and you need to be able, as I talked about, that global footprint, being able to have that service, being able to deliver it. And so as we go through it, we will get a restaurant, a hotel that doesn't accept it. But having that closed loop and having the ability to call on Ray, if you're at Citi, I'm not sure who you call. And that's a big deal for us. So we'll continue to work on the coverage because the coverage is much more important for us from a commercial perspective in market locally, as you continue to build your SME franchise, as you continue to build B2B in those markets, as you have a local presence.
But even with that, we're growing 13% in the small market, small middle market in those 9 priority 8 priority markets that I showed. So we're going to continue to focus on coverage. We're going to roll out out Blue and we're going to continue to make sure that we can increase our coverage, but that's not stopping us from either retaining or growing our corporate business right now.
So, Ken, let me add a couple of things to what Steve said. Thanks for all of you to consider. Our commercial business is very strong. We're number 1 in many markets around the world and globally, and we've been able to accomplish that over the last several decades with the coverage that we had. What I would say is imagine what we can accomplish with parity in the U.
S. And with improved coverage in different places around the world. Some of the places that we're focusing on expanding coverage is directly in response to what corporate clients and what our local issuers want. So as I highlighted some of the larger ones, if you think about signing a supermarket chain in Germany with 1800 locations, that's not necessarily for our corporate clients, but it helps build the perception of American Express coverage in the country. It's really for the local card members who are going to the supermarket every day.
So, we're doing both. We're responding directly to what corporate clients need by having our sales teams direct it at places that are interested to them. We also are building perception chain signings that changes how Amex is viewed in the market. And then we're expanding through 3rd party acquirers or the OpBlue program in the Americas to make a dramatic difference. We think when you put all that together, it just gives us greater growth potential from existing card members and also from new corporate clients.
And that is the power to closed loop, right? Right. Right. I mean that is the manifestation of the closed loop, the ability to connect buyers and sellers. Yes.
So one thing, I'm just going
to make one comment and then we'll take one more question. I think one thing tactically to remember is, which really does help with the reality and the perception is to be able to go to a corporation and say,
give us
what your spending needs are and we'll take your spending needs and we'll match it up against our coverage. We have had a very good success rate of doing it. It's just saying very directly, tell us what the spending needs are. Then to Steve's point, what we do is if we say, if there are some openings, hey, Anre, close it. And in a very directed way to be able to say, we're representing this company, this is where the spending is taking place, merchants are pretty responsive.
So we've been able to deal with that. At the same time, we're going to continue as both Steve and Anre have said to expand our coverage. So I think from a timing standpoint, we've got one more question. Does anyone want to take the last question right back here?
Chris Donat with Sandler O'Neill. Thanks for fitting me in here. One for Steve on the growth we've seen in your small business loans. I think in January, the data was up 18% year on year and you're nearly $10,000,000,000 Earlier this week at the LendIt conference, an executive from an online lender said he thinks in a few years, the marketplace for small business loans will be fully digital. I'm just wondering when you look at your growth that you've had for small business loans, is that all through the digital channel or are you using multiple channels and having success in a lot of places or is it kind of one story?
No, I think when you look at our overall acquisition, it mirrors our acquisition. But a lot of the loans that and our acquisition is spread out as I showed, but a lot of the loans that we have and a lot of the growth is with existing customers. And so whether that is lending on charge, whether that is line extensions to existing customers or just existing customers getting a lending product. So, will more and more things move digital? I mean, that's why we have working capital as well, which is a totally digital product to existing customers where you apply online and get approved you get approved in a matter of seconds.
So, it's a pretty much a balanced view for us right now.
Okay. Thank you. Good.
All right. Well, thank you very much. Appreciate it.