American Express Company history

The American Express Company is one of the most visible companies in the world. Known primarily for its widely used green charge card and blue box logo, American Express provides travel and financial services to millions of people and businesses each year.
The American Express Company has a long history. It was founded in 1850 to carry packages and financial instruments mainly on the RAILROADS; the express offered direct delivery and insurance for its consignments. The new firm was actually a merger of smaller companies run by three legends of American business history: Henry Wells, William Fargo, and John Butterfield. The first two went on to found WELLS FARGO & Company, while Butterfield organized the Overland Mail, the first effort at a land postal link between the West Coast and the East. The three men fought each other often but the benefits of the merger were so apparent that the company survived its internal strife and grew rapidly. By the late 1860s, American Express had formed a CARTEL along with four other express firms (Adams Express, United States Express, Southern Express, and Wells Fargo) to divide territory and control competition within the express business. These efforts at cartelization were remarkably successful, and the five dominated the business for more than 50 years.
The express cartel was able to control its business because federal law barred the United States Post Office from carrying packages over a certain weight. But the Post Office spurred American Express toward an important innovation. In an effort to win a greater share of financial transport, and to prevent the theft of letters containing cash, the Post Office introduced the postal money order in 1864. This eroded a lucrative part of the express business, and in 1881, the new president of American Express, James Congdell Fargo (William’s younger brother), authorized the creation of an express money order that quickly won a large market share of the money order business.
Several years later, Fargo was traveling abroad and found it difficult and expensive to change small sums of money from one currency to the next. He returned home determined “to do something” about it. He turned to Marcellus Fleming Berry, the man who had devised the express money order system. Berry created the American Express Traveler’s Cheque, a money order with a specific face value and (originally at least) a guaranteed conversion rate into all of the major European currencies. The traveler’s cheque—the TC in company parlance—is the most significant original product idea in the company’s history.
The traveler’s cheque (the company chose the British spelling of “check”) was launched in 1891 at a time when Americans were just beginning to travel abroad in large numbers. The cheque was a huge success. In order to service cheque holders, as well as to conduct an international express business, American Express began to establish offices in Europe, which led in a short time to a more general business for travel and tourism throughout the world.
The success of the TC, money order, and travel businesses could not have been more opportune for American Express. In 1905, the express industry was brought under the regulatory supervision of the INTERSTATE COMMERCE COMMISSION; eight years later it faced competition from the Post Office’s parcel post; and finally, in 1918, under the stresses of war, the U.S. government forced a merger of all express operations into a separate entity, the American Railway Express Company. But American Express was able to survive the change and expanded its financial and travel operations. By the 1920s, it had a worldwide network of offices.
In the 1920s and for more than 30 years thereafter, the traveler’s cheque was the company’s main source of profit. The TC’s profitability came not from small service charges the company gained on each sale, but rather from the fact that people bought cheques one day but redeemed them later, often weeks later. This meant there was always a balance of money for uncashed cheques, a “float” that could be reliably tracked and invested in safe interest-bearing instruments. By the early 1950s, the TC float had reached more than $250 million and was invested mainly in municipal bonds, guaranteeing the company several million dollars in annual income.
In the 1950s, the company wondered whether a new device for travel and entertainment, a universal charge card pioneered by Diners’ Club, posed a threat to the TC, and there was a running debate within the company over how to respond to the threat. Many younger executives wanted to acquire Diners’ Club, while some senior officials wanted to create an American Express card. But the only opinion that mattered was that of the chief executive, the autocratic Ralph Reed, and he seemed to oppose any involvement in the “credit card” business. Late in 1957, however, he authorized the creation of an American Express credit card (as they called it then), which was launched the following year.
The effort was so poorly thought out that the card led to millions of dollars in losses over the first five years, and Reed’s successor, Howard Clark, tried to sell the card operation. When that effort failed, Clark instead found a skilled manager who turned the unit profitable, and the company embarked on an aggressive market program. The tag line, “Don’t leave home without it,” became one of the most famous ad slogans of the 20th century, and the card soon surpassed the TC as the company’s principal moneymaker.
The success of the card gave the company a high stock price and an urge to use it for acquisitions. Clark acquired the Fireman’s Fund Insurance Company, while his successor, James Robinson, added brokerage companies, private and investment banks, and financial advising operations. By the 1980s, American Express was hailed as a “financial supermarket,” one of the strongest diversified financial companies in the world.
But the various parts of the company did not always mesh, and before long American Express divested itself of insurance, brokerage, and investment banking subsidiaries. As income fell, commentators wondered whether American Express could survive as an independent entity, especially since the card’s profitability seemed in doubt.
But American Express has had a knack for surviving. Over the years, it was threatened by government regulation, a takeover attempt by the Chase National Bank, and a scandal in a small warehousing subsidiary that almost led to the company’s bankruptcy. But American Express survived those crises as well as recent downturns in its fortunes. At the end of 2002, it was still independent, still very profitable, and, with a market capitalization of more than $50 billion, still a force to be reckoned with in the financial world.
Further reading

• Burrough, Bryan. Vendetta: American Express and the Smearing of Edmund Safra. New York: Harper- Collins, 1992. 
• Carrington, Tim. The Year They Sold Wall Street. Boston: Houghton Mifflin, 1985. 
• Friedman, Jon, and John Meehan. House of Cards: Inside the Troubled Empire of American Express. New York: Putnam, 1992. 
• Grossman, Peter Z. American Express: The Unofficial History of the People Who Built the Great Financial Empire. New York: Crown, 1987.