Two Point Two Four PercentNarrow moat

American Express (AXP) — moat facet

American Express still charges merchants a premium, but the premium has lost 27 basis points since 2013 and nothing in the filings suggests it will stop sliding.

The price a merchant pays to accept an American Express card is the oldest measure of this moat, and it has been drifting down for more than a decade. Amex reported an average discount rate of 2.51% in 2013 and 2.46% in 20151, then 2.37% in 2019 and 2.30% in 20212. It later switched to a slightly different measure, discount revenue as a percentage of billed business, which was 2.29% in 2023 and 2.24% in 20253.

Merchant discount rate (%)2.51%20132.46%20152.37%20192.30%20212.29%20232.24%2025Average discount rate to 2021; discount revenue over billed business from 2023. Forms 10-K
Twelve years of small cuts add up to about $4.5 billion a year.

The fall is small in any one year and large in total. Twenty-seven basis points of rate, applied to the $1,669.8 billion of billed business Amex carried in 20254, is about $4.5 billion of discount revenue a year5. That is roughly an eighth of the $37,401 million the company actually booked as discount revenue that year6.

Amex has explained the drift in its own words more than once. In its 2017 annual report it said it had been under pressure, including from "regulatory-mandated reductions to competitors' pricing"7; when regulators cut the interchange that Visa and Mastercard issuers may charge, the merchant's alternative to Amex got cheaper, and Amex had to follow part of the way. In the second quarter of 2026 it put the latest decline down to "shifts in spend mix by geography and merchant categories"8: more spending abroad and at everyday merchants, where the rate is lower.

The rate has not collapsed, and the reason is the customer on the other side of the counter. The average proprietary Card Member spent $25,453 on the card in 20259. A merchant who refuses the card refuses that customer, and most decide the fee is worth paying. Visa's own page on American Express, The Rival That Chose Economics Over Reach, describes the same trade from the other side: a closed network can charge more precisely because it is smaller.

The drift matters most for what it does to everything else on these pages. When the price per dollar of spending falls, the only way to grow discount revenue is more spending, and more spending is bought with rewards. That arithmetic is the subject of The Rewards Bill.

The drift has been gentle enough to hide inside growing totals. Discount revenue itself rose every year from 2021 to 2025, from $24,563 million to $37,401 million1011, so a reader looking only at the line would see a healthy business. The rate is what reveals that each dollar of spending is worth a little less each year.

The rate itself is the falsifier. Discount revenue as a share of billed business has lost about a basis point or two a year since 2021; a drop of five basis points or more in a single year, without a matching jump in international or everyday spending to explain it, would mean merchants had started to negotiate rather than accept.

Moat trajectory: Narrowing

2.51% average discount rate in 2013; discount revenue 2.24% of billed business in 2025.

The number that tests this moat
Reported
Discount revenue as a share of billed business
2.24% (2025), from 2.29% (2023)

The price merchants pay per dollar spent; a fall of five basis points in a year would mean merchants had begun to negotiate.

Source: American Express Form 10-K, FY2025 ↗
⚠ Threats to the moat
⚠ THREAT 01
Surcharging Puts a Price Tag on the Card
Every surcharge on an American Express card teaches the cardholder that the other card in the wallet is cheaper to use.
References
  1. ReportedAmex reported an average discount rate of 2.51% in 2013 and 2.46% in 2015, then 2.37% in 2019 and 2.30% in 2021.
    American Express Form 10-K for fiscal 2015 - the end of the Costco relationship and its share of billed business, loans and cards; the three-party network; average discount rates 2013-2015. — FY2015 · publ. February 2016 · source ↗
  2. ReportedAmex reported an average discount rate of 2.51% in 2013 and 2.46% in 2015, then 2.37% in 2019 and 2.30% in 2021.
    American Express Form 10-K for fiscal 2021 - billed business 2019-2021, average discount rate, net write-off rates, the 2021 reserve release and Delta shares. — FY2021 · publ. February 2022 · source ↗
  3. ReportedIt later switched to a slightly different measure, discount revenue as a percentage of billed business, which was 2.29% in 2023 and 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. ReportedTwenty-seven basis points of rate, applied to the $1,669.8 billion of billed business Amex carried in 2025, is about $4.5 billion of discount revenue a year.
    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 ↗
  5. Moat Explorer calcTwenty-seven basis points of rate, applied to the $1,669.8 billion of billed business Amex carried in 2025, is about $4.5 billion of discount revenue a year.
    Moat Explorer calculation from American Express's reported figures ($ millions unless stated). Incentives (variable customer engagement costs = Card Member rewards + business development + Card Member services): 2021 11,007 + 3,762 + 1,993 = 16,762; 2022 14,002 + 4,943 + 2,959 = 21,904; 2023 15,367 + 5,657 + 3,968 = 24,992; 2024 16,599 + 5,886 + 4,782 = 27,267; 2025 18,409 + 6,457 + 6,057 = 30,923; Q2 2026 5,051 + 1,755 + 1,949 = 8,755; Q2 2025 7,508. As a share of discount revenue: 16,762 / 24,563 = 68.2%; 21,904 / 30,739 = 71.3%; 24,992 / 33,416 = 74.8%; 27,267 / 35,192 = 77.5%; 30,923 / 37,401 = 82.7%; Q2 2026 8,755 / 10,163 = 86.1%; Q2 2025 7,508 / 9,361 = 80.2%. Discount revenue left after incentives: 24,563 - 16,762 = 7,801; 30,739 - 21,904 = 8,835; 33,416 - 24,992 = 8,424; 35,192 - 27,267 = 7,925; 37,401 - 30,923 = 6,478; Q2 2026 10,163 - 8,755 = 1,408; Q2 2025 9,361 - 7,508 = 1,853. Incentives / total revenue 16,762 / 42,380 = 39.6%; 30,923 / 72,229 = 42.8%. Incentive growth 30,923 / 16,762 - 1 = 84%; 30,923 / 27,267 - 1 = 13.4%. Discount revenue growth 37,401 / 24,563 - 1 = 52%; 37,401 / 35,192 - 1 = 6.3%. Rewards 18,409 / 11,007 - 1 = 67%; rewards / discount revenue 11,007 / 24,563 = 44.8%; 14,002 / 30,739 = 45.6%; 15,367 / 33,416 = 46.0%; 16,599 / 35,192 = 47.2%; 18,409 / 37,401 = 49.2%. Business development 6,457 / 3,762 - 1 = 72%; / discount revenue 3,762 / 24,563 = 15.3%, 6,457 / 37,401 = 17.3%. Card Member services 6,057 / 1,993 = 3.04 times (+204%); 6,057 / 1,392 = 4.35; growth 3,968 / 2,959 - 1 = 34.1%; 4,782 / 3,968 - 1 = 20.5%; 6,057 / 4,782 - 1 = 26.7%; 6,057 / 2,959 = 2.05. Card Member services / net card fees 1,993 / 5,195 = 38%; 3,968 / 7,255 = 55%; 6,057 / 9,993 = 61%; Q2 2026 1,949 / 2,862 = 68%. Membership Rewards liability 16.5 billion / equity 33,474 = 49%; URR +1 point = 4 x 229 = 916. Card fees: 9,993 / 4,042 = 2.47 (+147%); 9,993 / 5,195 - 1 = 92%; growth 6,070 / 5,195 - 1 = 16.8%, 7,255 / 6,070 - 1 = 19.5%, 8,449 / 7,255 - 1 = 16.5%, 9,993 / 8,449 - 1 = 18.3%; added 9,993 - 8,449 = 1,544. Share of revenue 4,042 / 43,556 = 9.3%; 5,195 / 42,380 = 12.3%; 7,255 / 60,515 = 12.0%; 9,993 / 72,229 = 13.8%. Average fee per card 131 / 58 = 2.26; 117 / 103 - 1 = 14%. Proprietary cards 86.6 / 70.3 - 1 = 23%. Marketing 6,252 / 12.5 million new cards = about $500; 6,252 / 1,544 = 4.0. Card fees plus net interest income (9,993 + 17,364) / 72,229 = 38%. Spending per card 23,496 / 20,392 - 1 = 15.2%; 24,059 / 23,496 - 1 = 2.4%; 24,608 / 24,059 - 1 = 2.3%; 25,453 / 24,608 - 1 = 3.4%. Billed business 1,669.8 / 1,070.5 - 1 = 56%; 1,669.8 / 1,550.9 - 1 = 7.7%; 870.7 / 1,070.5 - 1 = -18.7%. Network volumes 1,897.0 / 1,265.7 - 1 = 50%; 1,897.0 - 1,669.8 = 227.2. Merchant rate 2.51% - 2.24% = 0.27 points x 1,669.8 billion = about 4.5 billion; 4.5 / 37.4 = 12%. Pretax income 13,795 - 10,689 = 3,106. Revenue mix 2019: discount 26,167 / 43,556 = 60.1%; net interest income 8,620 / 43,556 = 19.8%; 2025: 37,401 / 72,229 = 51.8%; 17,364 / 72,229 = 24.0%. Net interest income 17,364 / 7,750 = 2.24; 17,364 / 8,620 - 1 = 101%; +100bp +19 / 17,364 = 0.1%. Card Member loans 151,832 / 87,400 - 1 = 74%. Held for sale 2,457 / 151,832 = 1.6%. Revenue 2020 36,087 / 43,556 - 1 = -17%. Deposits 152,488 / 210,300 = 72.5%; 156,973 / 152,488 - 1 = 2.9%. Delta: 13% x 1,669.8 = 217 billion; 8.2 billion / net income 10,833 = 76%; 8.2 / net card fees 9,993 = 82%; 8.2 / 7.4 - 1 = 11%. Other cobrands 26% - 13% = 13% x 1,669.8 = 217; proprietary 74% x 1,669.8 = 1,236. Valuation: market value 206.30 / 254.84 - 1 = -19%; P/E 206.30 / trailing net income 11.446 = 18.0; P/S 206.30 / 75.95 = 2.72; end-2025 254.84 / 10.833 = 23.5; end-2015 68.45 / 5.163 = 13.3; earnings yield 1 / 23.5 = 4.3%. Trailing twelve months to June 2026: revenue 72,229 + 38,544 - 34,823 = 75,950; net income 10,833 + 6,082 - 5,469 = 11,446; EPS 15.38 + 8.81 - 7.71 = 16.48. Diluted shares 696 / 1,003 - 1 = -30.6%. Net income 10,833 / 5,163 = 2.10; EPS 15.38 / 5.05 = 3.05. Berkshire 151.61 million / 675 million = 22.5%; 13F shares 1,149,942 + 149,061,045 + 1,399,713 = 151,610,700, value 388,967,882 + 50,419,898,471 + 473,452,922 = $51.28 billion (30 June 2026). Card balances consumer 144,974 / 218,054 = 66%. Card fees / discount revenue 9,993 / 37,401 = 27% (2025), 4,042 / 26,167 = 15% (2019). Marketing plus incentives 6,252 + 30,923 = 37,175. Provisions / net interest income 5,256 / 17,364 = 30%. Card Member loans growth 139,674 / 125,995 - 1 = 11%; 151,832 / 139,674 - 1 = 9%; billed business 1,550.9 / 1,459.6 - 1 = 6%. Price to book 305.50 / 48.42 = 6.3. Receivables 62,031 / (151,832 + 62,031) = 29%. GMNS Q2 2026 pretax 1,128 / 1,054 - 1 = 7%. Dividend yield 3.80 / 305.50 = 1.2%. Discount revenue at the 2013 rate 2.51% x 1,669.8 = 41.9 billion; each basis point of rate 0.0001 x 1,669.8 billion = 167 million (5bp 835, 10bp 1,670). Merchant locations at the start of 2026 about 190 - 20 = 170 million. Card Member services growth 2021-2025 +204% against net card fees +92%. A 2020-sized fall today: 18.7% x 1,669.8 = about 312 billion. Revenue outside the United States (7,073 + 5,218 + 4,194) / 72,229 = 23%. 2026 revenue guidance 72,229 x 1.10 = 79,452. Segments (2025, $ millions): revenue 34,814 + 16,926 + 13,000 + 7,759 = 72,499; less Corporate and Other 270 = 72,229. Shares of segment revenue: USCS 34,814 / 72,499 = 48.0%; CS 23.3%; ICS 17.9%; GMNS 10.7%. Pretax income 6,810 + 3,668 + 1,603 + 3,968 = 16,049; shares USCS 42.4%, CS 22.9%, ICS 10.0%, GMNS 24.7%. Pretax margins: USCS 6,810 / 34,814 = 19.6% (2020 3,103 / 16,347 = 19.0%; 2021 5,958 / 18,922 = 31.5%; 2022 5,400 / 23,914 = 22.6%; 2023 5,433 / 28,116 = 19.3%; 2024 6,377 / 31,427 = 20.3%); CS 3,668 / 16,926 = 21.7% (2020 1,013 / 9,234 = 11.0%); ICS 1,603 / 13,000 = 12.3% (2020 521 / 6,742 = 7.7%; 2021 929 / 7,435 = 12.5%; 2022 578 / 9,061 = 6.4%; 2023 973 / 10,430 = 9.3%; 2024 1,031 / 11,461 = 9.0%); GMNS 3,968 / 7,759 = 51.1% (2020 1,294 / 4,309 = 30.0%; 2021 1,874 / 5,129 = 36.5%; 2022 2,954 / 6,475 = 45.6%; 2023 3,656 / 7,396 = 49.4%). ICS pretax 1,603 / 1,031 - 1 = 55%. GMNS 2024 excluding the Accertify gain 4,398 - 531 = 3,867; 3,968 / 3,867 - 1 = 2.6%. Revenue 2020 to 2025: USCS 34,814 / 16,347 = 2.13; CS 16,926 / 9,234 = 1.83; ICS 13,000 / 6,742 = 1.93; GMNS 7,759 / 4,309 = 1.80. 2020 segment total 16,347 + 9,234 + 6,742 + 4,309 = 36,632; USCS share 16,347 / 36,632 = 44.6%. USCS Q2 2026 pretax 2,065 / 1,676 - 1 = 23%. Regions 2025: pretax 13,054 + 1,255 + 831 + 907 = 16,047; United States 13,054 / 16,047 = 81%; 13,054 / consolidated 13,795 = 95%; outside the United States (1,255 + 831 + 907) / 16,047 = 19%; revenue 56,015 / 72,229 = 78% - the incentive lines (rewards, business development, Card Member services) against discount revenue and card fees. — 2013-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in American Express's Forms 10-K, 10-Q, earnings releases and statistical supplements, Delta Air Lines' Form 10-K and market data; operands shown in the source line.
  6. ReportedThat is roughly an eighth of the $37,401 million the company actually booked as discount revenue that year.
    American Express Form 10-K for fiscal 2025 - income statement, business description and management. — FY2025 · publ. 6 February 2026 · source ↗
  7. ReportedIn its 2017 annual report it said it had been under pressure, including from "regulatory-mandated reductions to competitors' pricing"; when regulators cut the interchange that Visa and Mastercard issuers may charge, the merchant's alternative to Amex got cheaper, and Amex had to follow part of the way.
    American Express Form 10-K for fiscal 2017 - the $2.6 billion Tax Act charge and pressure on the merchant discount rate. — FY2017 · publ. February 2018 · source ↗
  8. ReportedIn the second quarter of 2026 it put the latest decline down to "shifts in spend mix by geography and merchant categories": more spending abroad and at everyday merchants, where the rate is lower.
    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 ↗
  9. ReportedThe average proprietary Card Member spent $25,453 on the card 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 ↗
  10. ReportedDiscount revenue itself rose every year from 2021 to 2025, from $24,563 million to $37,401 million, so a reader looking only at the line would see a healthy business.
    American Express Form 10-K for fiscal 2023 - income statements for 2021-2023 on the current presentation, segment results for 2022, discount revenue as a share of billed business. — FY2023 · publ. February 2024 · source ↗
  11. ReportedDiscount revenue itself rose every year from 2021 to 2025, from $24,563 million to $37,401 million, so a reader looking only at the line would see a healthy business.
    American Express Form 10-K for fiscal 2025 - income statement, business description and management. — FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026