⚠ Coverage Bought With PriceModerate threat

American Express (AXP) — threat to the moat

Amex is winning the corner shop by charging it less, and the average rate pays for every new sign in the window.

Wider acceptance is not free, and Amex has said so in its own filings. As it pushes into smaller merchants and everyday categories it has "experienced erosion of our merchant discount rate"1, and in the second quarter of 2026 it attributed lower average rates to "shifts in spend mix by geography and merchant categories"2.

Billed business mix, Q2 2026 (%)71%Goods and services28%Travel and entertainmentAmerican Express Q2 2026 statistical supplement
Seven dollars in ten are now spent on everyday goods and services.

The mechanism is simple. A grocery store or a small café will not pay what an airline or a hotel pays, so every location that joins the network at a lower rate pulls the average down. Discount revenue as a share of billed business fell from 2.29% in 2023 to 2.24% in 20253.

That would be a fair trade if the new locations brought spending that would not otherwise exist. Part of it does; part of it is spending that already happened on the card elsewhere and simply moves to a cheaper merchant.

The trade also changes who Amex serves. A network built for travel and entertainment, where margins were high, is becoming a network for everything. Travel and entertainment was 28% of billed business in the second quarter of 2026 and goods and services 71%4.

Amex can live with a lower rate if volume grows faster. Discount revenue rose 9% in the second quarter of 2026 on billed business up 9%5. The test is the gap between those two growth rates; if discount revenue grew two points or more slower than billed business for a full year, acceptance would be diluting the price faster than it added to the volume.

References
  1. ReportedAs it pushes into smaller merchants and everyday categories it has "experienced erosion of our merchant discount rate", and in the second quarter of 2026 it attributed lower average rates to "shifts in spend mix by geography and merchant categories".
    American Express Form 10-K for fiscal 2025 - Item 1A risk factors, competition and regulation. — FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedAs it pushes into smaller merchants and everyday categories it has "experienced erosion of our merchant discount rate", and in the second quarter of 2026 it attributed lower average rates to "shifts in spend mix by geography and merchant categories".
    American Express Form 10-Q for the quarter ended 30 June 2026 - capital return, held-for-sale cobrand portfolios, discount revenue drivers and the Millennial and Gen-Z cohort. — Q2 2026 · publ. 24 July 2026 · source ↗
  3. ReportedDiscount revenue as a share of billed business fell from 2.29% in 2023 to 2.24% in 2025.
    American Express Form 10-K for fiscal 2025 - card metrics: billed business, spending per card, cards-in-force, fees per card and network volumes. — FY2025 · publ. 6 February 2026 · source ↗
  4. ReportedTravel and entertainment was 28% of billed business in the second quarter of 2026 and goods and services 71%.
    American Express second-quarter 2026 statistical supplement, Form 8-K exhibit 99.2 - segment results, card metrics, capital and credit - consolidated results, card metrics, capital and credit. — Q2 2026 · publ. 24 July 2026 · source ↗
  5. ReportedDiscount revenue rose 9% in the second quarter of 2026 on billed business up 9%.
    American Express second-quarter 2026 earnings release, Form 8-K exhibit 99.1. — Q2 2026 · publ. 24 July 2026 · source ↗
Sources
Generated September 28, 2026