American Express

Everyone calls American Express a closed-loop network that owns every merchant and cardholder. Its own filings say otherwise: third parties run the long tail. The closed loop holds for the high-spend core - direct merchants are the minority of locations but command the lion's share of the dollars - and the real asset is the data those transactions leave behind.

Visa taxes transactions. Amex taxes affluence — twice. It bills merchants ~1.4–3.3% to reach high spenders, then bills the spenders an annual fee that grew double-digit for 26 straight quarters and hit $8.4B in 2024.

Everyone says Amex's moat is its wealthy cardholders. The real floor is a closed-loop data engine and a 5-4 Supreme Court ruling. The ceiling: a fee gap that's collapsed to 1.6%, and a single airline that drives 12% of all spending.

In February 2025, Capital One bought Discover for $35.3 billion and acquired the very thing analysts call Amex's unique advantage — a closed-loop network. So what actually protects American Express? Not the loop. The flywheel running inside it.

In 1991 Amex charged restaurants ~4% while Visa charged ~1.2%, and 250 of them revolted. The fix wasn't to cut the merchant fee. It was to build two more places to charge — and in H1 2025, card fees grew 20% while merchant revenue grew 6%.

The story is that Amex skims a fatter fee out of greed. The truth is structural: Amex owns all three seats at the table, recycles the extra economics into rewards, and on $1.55 trillion of spend in 2024 the loop pays for itself.