How Does American Express Defend Its Mode?

American Express relies on powerful network effects and its valuable brand to generate economic profits over the years. It has created a virtual cycle with its collection of card holders being desirable to merchants who have been willing to pay higher transaction fees. More recently though competitors have turned this model against the firm targeting its card holder base with ever increasing levels of rewards and services while charging merchants lower fees than American Express does. The company also saw its image of exclusivity take a bit of a hit earlier this year when Costco ended a 16 year relationship with the firm. With restrictions on interchange fees and the growth and acceptance of mobile payment technologies likely to impact future revenue streams, moves by the firm to go down market in pursuit