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American Express CEO Stephen Squeri joins Yahoo Finance's All Markets Summit 2021

Yahoo Finance's Brian Sozzi has a wide-ranging conversation with American Express CEO Stephen Squeri on the next generation of consumers, the upcoming holiday shopping season, and crypto.

Video transcript

- Stephen Squeri is the Chairman and CEO of American Express. Under his leadership, the company has launched many new payment, financial management and lifestyle products for consumers and businesses. Amex also became the first foreign payments network to receive a clearing license in mainland China.

BRIAN SOZZI: And joining me now is American Express Chairman and CEO Stephen Squeri. Stephen, good to see you here. The only path for you, for your stock price this year has been straight higher. It just hit a record high on Friday. For those folks that have been completely out to lunch on the Amex story this year, how do you explain it?

STEPHEN SQUERI: Yeah, Brian. First of all, it's a pleasure to be here. I think, look, the results that we announced on Friday were, you know, I thought with terrific results and the market reacted to that. But the story wasn't just the results of what happened on Friday, it is a culmination of a strategy over the last few years.

I think what we did pre-pandemic in terms of focusing on expanding our customer base, investing in refreshing our products and services, investing in digital, that made all the difference. And then during the pandemic, we really focused on making sure that the American Express brand remained special to our customers, remained special in the marketplace, and we really wanted to back our customers, financial relief programs, value injection and service. And then as we came out, sort of at the end of last year, our focus there was, how do we really invest for more growth?

And we had the opportunities to get back to refreshing our products, investing in acquisition, and what happened as a result of that, you saw the results on Friday, we're 25% up year over year on revenue. You know, our earnings were good. Billings were 31% up.

Credit continues to be good. And the story for us, with travel still not where we want it to be, is goods and services, you know, makes up 80% of our spending right now. Online is up 27% for us and our goods and services spending is up 19% and we're out there acquiring cards, and in particular, we're acquiring millennials.

BRIAN SOZZI: That's where I wanted to go. I want to talk about topics and not topics or just categories you are seeing a rebound, but there seems to be a millennial and Gen Z really revival or interest in the card. Why is that the case?

STEPHEN SQUERI: Yeah, so look, just to talk about that revival, when you look at the percent of cards that millennials are acquiring from us, it's over 58%. Most of our platinum cards-- I think over 70% of our platinum and gold cards, 75% were acquired by millennials. And what's leading to spending charge for us, our millennial segment, which is about 27% of our overall billed business, was up 38% Q3 '21 over Q3 '19.

So why? The reality is, is that we've expanded our value propositions. Our value proposition speak to millennials because millennials are looking for experiences, they're looking for access, they're looking to live their lives. And the pandemic, you know, while slowed them down maybe last year, they were the first ones that came out.

And so when you look at the overall value propositions that we have put together here, we've doubled down on travel, but we've also expanded into other categories, whether that be with our-- for a platinum perspective, our Walmart Plus membership. We look at other credits in terms of streaming and wireless. And I think that, you know, millennials just want to be on the go. And when you look at our fine hotels and resorts benefits, those benefits allow millennials, and anybody else, that has the Platinum card to check in early, check out late, get free breakfast, credits and so forth. And so the Platinum card is speaking to an active lifestyle.

BRIAN SOZZI: I'm sure I'm going to get push back on Twitter for this one, Steve, but you raise the prices for the cards. $695 now is that annual fee. I mean, do you think just based on momentum you are seeing the millennials, Gen Z, that the card is undervalued at that price and you might be able to push a higher price through?

STEPHEN SQUERI: Yeah, well, you know, look, we just announced that in July, so I don't think we'll be looking at any fee increases any time soon, but we price for value. And when we put more value into this product and we price for it, we wanted to make sure we put more value in than we price for it. And we expanded the value. As I said, we double down, we double down on, you know, on our travel benefits. And you know, there's a bunch of soft benefits in there as well, which is hard to quantify.

It's really hard to quantify the lounge access that we provide people with, the lounges that we continue to invest in, any other 1,200 lounges that people have access to. It's hard to quantify, you know, some of the other benefits that we have in terms of access and special dining offers through Resy, and also, again, that fine hotels and resorts benefit. So we feel it's, you know, it's fairly priced.

We feel it's a very good value and, you know, people are voting with-- voting with their wallets here as we're seeing acquisition levels. Look, we had our acquisition levels pre-raising the fee and enhancing the value, we we're up 20% over the prior-- over the prior '19 levels. We're now up over 60% on Platinum acquisition as with the new enhanced product.

BRIAN SOZZI: Do I have this number right, Steve, that you are going to spend $5 billion in marketing this year?

STEPHEN SQUERI: That is correct. And that-- the way we spend that money, that's a combination of not only some of the brand advertising that you'd see, which is not a large part of our budget, but we did value injection early on in terms of adding extra value into our products. But we also spend in customer marketing and we spend in, you know, obviously, card acquisition.

And I get asked this question all the time is, what do you target your spending at? Well, we don't target our spending at any particular number. We look at what the universe of investment opportunities offer us and that's how we make our investment decisions. And I think what's really important to understand is, when people look at American Express and the investment decisions that we're making, they think we're only making US decisions.

We're making decisions across the globe, across our small business products, our corporate card products, our co-branded products, our consumer products and our merchant business. And so we have a load of investment opportunities that we think are quite attractive. And at the beginning of the year, we didn't think we were going to spend $5 billion, but it's not something that we look at as a regulator. What we look at is, are we going to drive growth and we're going to drive future value for our shareholders?

BRIAN SOZZI: Well, it's clearly working here. Earlier on, Steve, we had Bank of America CEO Brian Moynihan, said the consumer is strong. Earlier I talked to fellow Queens native, Brian Cornell over Target, looking for a good holiday shopping season. What is the state of the consumer look like to you?

STEPHEN SQUERI: I would agree with-- I would agree with both Brian and Brian. And I'm never going to go against the Queens native with Brian Cornell. So look, the reality is, is what we're seeing, we're seeing as goods and services momentum continue, people have started their holiday shopping, probably not as early as they did last year due to the fact that Amazon had the Amazon Prime Day is really early in October, Apple had a big release.

But, you know, our spending index that we look at and our consumer index that we look at, it says 48% of our consumers have already started to shop for the holiday season, but yet almost 80% of those people are basically saying they want to wait for Small Business Saturday to support local retailers as well. And I think that's-- I think that's a great thing for the economy because, you know, and we've invested a tremendous amount not only in Small Business Saturday, but in small business shopping. Because as we know, the small businesses are really the lifeline and the lifeblood of our economy. So we're anticipating a very strong holiday season both from an online perspective and an offline perspective with people getting out.

The other thing that we're anticipating is, you know, our research has also said that probably 76% of our customers are going to get out there and travel for the holiday season. Remember last holiday season, nobody traveled. Everybody was at home. And I think now what you'll see is you'll see more people getting out there. And what's really interesting is, with the flexibility that is being offered by a number of companies in terms of work from home, you can travel maybe off hours, you can travel at a different-- you know, at your pace. Maybe you can leave a day early and stay a few days later. And so I think this will be helpful to our airline-- our airline partners. I think it'll be helpful to our hotel partners as well, for those people that don't have room for their entire family in their house.

BRIAN SOZZI: Speaking of flexibility and switching gears a little bit, you recently came out with a, I would say, very flexible work plan for your employee base. Why does that work well for Amex?

STEPHEN SQUERI: Yeah, well first of all, I think what you have to look at now, I mean, there is a war for talent and you really have to look at your overall colleague value proposition. And your colleague value proposition was used to be career growth, it was compensation, it was culture. And culture is really important to our company, but now it's flexibility and I think companies that are not looking at flexibility will, I think, ultimately longer term will struggle on the war on talent.

And you know look, for us, you know, the culture's important, being at home-- being in the office is important, but we've been away for the last 18 months and, you know, you see the results that we've had. We've had terrific results. We've had, you know, success in attracting people. But what we have come up with here is what we're calling and branding Amex Flex.

It's a combination of people that will work on site, people that will work hybrid and people that will work virtual. Our colleagues have told us, 80% of our colleagues have told us they want to be in the office. Now, they don't want to be in the office five days a week, but they want to be in office some of the time. And so when they're in the office, it'll give them an opportunity to interact with their colleagues, to co-create, to have spontaneous innovation and so forth.

And so, you know, it's been very well received by, you know, by our entire colleague base and we're also, in addition to that, providing our colleagues with an opportunity to work four weeks from anywhere that they choose to work. And so, even if you're in a hybrid mode and you're coming in one or two days a week, at some point, whether it's over the summer, whether it's during the fall or in the winter, you can take four weeks off. You take those weeks off on-- You take them in weekly increments, doesn't have to be consecutive, and it gives our colleagues more flexibility. I think the important thing here is we trust our colleagues and with that trust comes responsibility and with that responsibility comes accountability and it's worked well for us so far and it's no reason not to continue it.

BRIAN SOZZI: And switching gears again here, we are coming up against time. I want to leave enough time for all things crypto. We've talked about this in the past. When is the Amex crypto link card going to hit?

STEPHEN SQUERI: Probably not going to see an Amex crypto link card any time-- any time soon. But let me talk about digital currencies for a second here. When you look at digital currencies, you're looking at three types.

You're looking at a traditional, cryptocurrency, your Ethereum, your XRP, your Bitcoin. You're looking at stablecoins. JP Morgan has a stablecoin. There's a Facebook Diem. Now you're looking at government backed digital currencies.

When I look at cryptocurrencies, I look at crypto and the ones I described as really more of an asset class and I sort of view it as gold. I don't see it as really something that's going to make inroads from a credit card perspective or even a debit card perspective in terms of payments. And why? Well number one, is tremendous-- there's still tremendous fluctuations.

Number two, you don't have the service with it, you don't have the dispute rights with it, you're not getting rewards and you're not extending credit. And so all of those values that occur within, you know, a credit card do not lend themselves to cryptocurrency. Having said that, look, we're involved with using the Amex card for stablecoins. We watch government backed digital currencies very, very carefully. You know, we're exploring other ways potentially to redeem your membership rewards points, but I don't think you're going to see an American Express card linked to cryptocurrency anytime soon.

BRIAN SOZZI: Is it too risky to go down that route, Steve?

STEPHEN SQUERI: Well, I mean, look, we don't use the American Express card to buy gold or to buy stocks, and if you take my position that cryptocurrency is an asset class, we're not-- we're not using the card for that. And so, it's not something that we think we need to do.

BRIAN SOZZI: All right, we'll leave it there. American Express Chairman and CEO Stephen Squeri good to see you and hey, good to see the stock price at a record high. We'll talk to you soon.