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Strategic, Business and Competitive Risks
−Removed: The impact of the COVID-19 pandemic and the measures implemented to contain the spread of the virus have had, and are expected to continue to have, a material adverse impact on our business and results of operations.
−Removed: The COVID-19 pandemic is having widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices.
−Removed: The pandemic and containment measures have contributed to, among other things:
−Removed: • Widespread changes to, and significant reductions in, household and business activity and consumer and business spending, as well as economic concerns and a rise in unemployment.
−Removed: • Adverse impacts on our cobrand and other partners in the travel and airline industries, our GBT JV and on our third-party service providers, merchants, customer acquisition channels, processors, aggregators, network partners and other third parties that we rely on for services that are integral to our operations.
−Removed: • Adverse impacts on the creditworthiness of our customers and other counterparties and their ability to pay amounts owed to us and our ability to collect such amounts and required increases in our reserves for credit losses.
−Removed: • Adverse impacts on industries representing a significant portion of our billed business (including, but not limited to, travel and entertainment (T&E) spending).
−Removed: • Adverse impacts on capital and credit market conditions and our deposit base, which may limit our access to funding, increase our cost of capital, and affect our ability to meet liquidity needs.
−Removed: • An increased risk of significantly higher Card Member reimbursements for goods or services purchased from merchants that cease operations or are otherwise unable to ultimately provide those goods or services or, in the case of our business partners, impairments of rewards points we purchased from those partners.
−Removed: • An increased strain on our risk management policies generally, including, but not limited to, the effectiveness and accuracy of our models, given the lack of data inputs and comparable precedent.
−Removed: • An increased risk of impairment, restructuring or other charges, including as a result of impairment of the value of our investments and other assets.
−Removed: • Adverse impacts on our daily business operations and our colleagues’ ability to perform necessary business functions, including as a result of illness, office closures and other limitations, or restrictions on movement.
−Removed: • Increased challenges in growing or retaining our Card Member base and in launching new products or businesses or refreshing existing products in line with expectations or the current and changing needs of our customers.
−Removed: • Increased spending on our business continuity efforts, such as technology, service centers and our supply chain, and readiness efforts for returning to our offices, which may in turn require that we further cut costs and investments in other areas.
−Removed: • An increased risk of an information or cyber security incident, fraud, a failure to maintain the uninterrupted operation of our information systems or a failure in the effectiveness of our AML and other compliance programs due to, among other things, an increase in remote work.
−Removed: These and other impacts of the COVID-19 pandemic may continue even after the outbreak has subsided and containment measures are lifted, and may exacerbate many of the other risks described in this “Risk Factors” section.
−Removed: The extent to which our business and results of operations will continue to be adversely affected will depend on numerous evolving factors and future developments that we are not able to predict, including the continued spread and severity of the virus and new variants;
−Removed: the imposition of further containment measures and their ability to control the spread of the virus;
−Removed: the availability, distribution and use of effective treatments and vaccines;
−Removed: the extent and duration of the effect on the economy, unemployment, consumer confidence and consumer and business spending;
−Removed: the availability and effectiveness of government stimulus measures;
−Removed: and how quickly and to what extent normal operating conditions and customer behaviors resume, such as with respect to travel, dining and in-person events.
−Removed: Difficult conditions in the business and economic environment, including as a result of the COVID-19 pandemic, have had and are expected to continue to have a material adverse effect on our business and results of operations.
+Added: Business and economic conditions are a major driver of our results of operations and difficult conditions in the business and economic environment, including as a result of the COVID-19 pandemic, have had a material adverse effect on our business.
We offer a broad array of products and services to consumers, small businesses and commercial clients and thus are very dependent upon the level of consumer and business activity and the demand for payment and financing products.
−Removed: economic growth, economic contraction or shifts in broader consumer and business trends significantly impact customer behaviors, including spending on our cards, the ability and willingness of Card Members to borrow and pay amounts owed to us, and demand for fee-based products and services.
−Removed: Factors such as consumer spending and confidence, unemployment rates, business investment, geopolitical instability, public policy decisions, government spending, international trade relationships, interest rates, taxes, energy costs, the volatility and strength of the capital markets, inflation and deflation all affect the economic environment and, ultimately, our profitability.
+Added: Slow economic growth, economic contraction or shifts in broader consumer and business trends significantly impact customer behaviors, including spending on our cards, the ability and willingness of Card Members to borrow and pay amounts owed to us, and demand for fee-based products and services.
+Added: Factors such as consumer spending and confidence, household income and housing prices, unemployment rates, business investment and inventory levels, bankruptcies, geopolitical instability, public policy decisions, government spending, international trade relationships, interest rates, taxes, energy costs, availability of capital and credit, inflation and deflation all affect the economic environment and, ultimately, our profitability.
Such factors may also cause our earnings, billings, loan balances, credit metrics and margins to fluctuate and diverge from expectations of analysts and investors, who may have differing assumptions regarding their impact on our business, adversely affecting, and/or increasing the volatility of, the trading price of our common shares.
−Removed: Spending at T&E merchants, for example, is sensitive to business and personal discretionary spending levels and circumstances impacting travel.
−Removed: We experienced the effects of this sensitivity in 2020 as a result of the COVID-19 pandemic, with T&E spending decreasing 61 percent compared to 2019, while non-T&E spending decreased 1 percent.
−Removed: Likewise, spending by small businesses and corporate clients, which comprised approximately 40 percent of our worldwide billed business during 2020, depends in part on the economic environment and a favorable climate for continued business investment and new business formation, as well as on related volumes of business travel.
−Removed: During the pandemic, Card Member billed business decreased 19 percent in 2020 compared to 2019.
−Removed: Increases in delinquencies and write-off rates as a result of increases in bankruptcies, unemployment rates, changes in customer behaviors or otherwise could also have a material adverse effect on our results of operations.
−Removed: We increased our reserves for credit losses significantly in 2020 due to the deterioration of the global macroeconomic outlook.
−Removed: The consequences of negative circumstances impacting us or the environment generally can be sudden and severe, as we experienced from the end of the first quarter into the second quarter of 2020 due to the pandemic.
−Removed: Our business is subject to the effects of geopolitical events, weather, natural disasters, other catastrophic events and other conditions.
−Removed: Geopolitical events, terrorist attacks, natural disasters, severe weather conditions, health pandemics, information or cyber security incidents (including intrusion into or degradation of systems or technology by cyberattacks) and other catastrophic events can have a material adverse effect on our business.
−Removed: Political and social conditions, fiscal and monetary policies, trade wars and tariffs, prolonged or recurring government shutdowns, regional or domestic hostilities and the prospect or occurrence of more widespread conflicts could also negatively affect consumer and business spending, including travel patterns and business investment, and demand for credit.
−Removed: As noted above, the COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on our business and results of operations.
+Added: The consequences of negative circumstances impacting us or the economic environment generally can be sudden and severe and can impact customer types and geographies in which we operate in very different ways.
+Added: The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and consumer and business spending.
+Added: The pandemic and resulting containment measures adversely impacted a significant portion of our network volumes (including, but not limited to, travel and entertainment (T&E) spending) and spending in certain categories have still not recovered to pre-pandemic levels.
+Added: For example, airline-related billed business was down 62 percent in 2021 relative to 2019 and spending by large and global corporate customers was down 45 percent relative to 2019.
+Added: The global macroeconomic outlook continues to remain uncertain due to a variety of factors, including the Omicron variant, labor shortages, supply chain disruptions and inflation, and the impacts of the COVID-19 pandemic may continue even after the outbreak has subsided and containment measures are lifted, all of which may continue to exacerbate many of the other risks described in this “Risk Factors” section.
+Added: The extent to which our business and results of operations could be adversely affected by the continuing impacts of the pandemic will depend on numerous evolving factors and future developments that we are not able to predict, including the continued spread and severity of the virus and new variants;
+Added: the imposition or concern of the possible imposition of further containment measures;
+Added: the availability, distribution and use of effective treatments and vaccines;
+Added: the extent to which vaccines are effective over the long term and against new, emerging variants;
+Added: the extent and duration of the effect on the economy, inflation, consumer confidence and consumer and business spending;
+Added: the impact on consumers and businesses as forbearance and government support programs end;
+Added: the continued stress on businesses due to shutdowns, operational changes and staffing issues;
+Added: and how quickly and to what extent normal operating conditions and customer behaviors resume, such as with respect to travel, dining and in-person events.
+Added: Our business is subject to the effects of geopolitical conditions, weather, natural disasters and other catastrophic events.
+Added: Geopolitical conditions, terrorist attacks, natural disasters, severe weather, widespread health emergencies or pandemics, information or cyber security incidents (including intrusion into or degradation of systems or technology by cyberattacks) and other catastrophic events can have a material adverse effect on our business.
+Added: Political and social conditions, fiscal and monetary policies, trade wars and tariffs, labor shortages, prolonged or recurring government shutdowns, regional or domestic hostilities, economic sanctions and the prospect or occurrence of more widespread conflicts could also negatively affect our business, operations and partners, consumer and business spending, including travel patterns and business investment, and demand for credit.
+Added: As noted above, the COVID-19 pandemic has had, and may continue to have, a material adverse impact on our business and results of operations.
Because of our proximity to the World Trade Center site, our headquarters were damaged as a result of the terrorist attacks of September 11, 2001.
Recent hurricanes and other natural disasters have impacted spending and credit performance in the areas affected.
−Removed: Other disasters or catastrophic events in the future, and the impact of such events on certain industries or the overall economy, could have a negative effect on our business, results of operations and infrastructure, including our technology and systems.
+Added: Other disasters or catastrophic events in the future, and the impact of such events on certain industries or the overall economy, could have a negative effect on our business, results of operations and infrastructure,
+Added: including our technology and systems.
Climate change may exacerbate certain of these threats, including the frequency and severity of weather-related events.
−Removed: Card Members in California, New York, Florida, Texas, Georgia and New Jersey account for a significant portion of U.S.
+Added: Card Members in California, New York, Florida, Texas and Georgia account for a significant portion of U.S.
Consumer billed business and Card Members loans, and our results of operations could be impacted by events or conditions that disproportionately or specifically affect one or more of those states.
−Removed: Because we derive a portion of our revenues from travel-related spending, our business is sensitive to safety concerns related to travel and tourism, limitations on travel and mobility, and health-related risks, including travel restrictions and bans as a result of the COVID-19 pandemic and changes in customer behaviors that may continue even after the outbreak has subsided and containment measures are lifted, such as decisions to delay or forgo business or personal travel.
+Added: Because we derive a portion of our revenues from travel-related spending, our business is sensitive to safety concerns related to travel and tourism, limitations on travel and mobility, and health-related risks, including travel restrictions and bans as a result of the COVID-19 pandemic, concerns that additional containment measures may be imposed on short notice and changes in customer behaviors that may continue even after the outbreak has subsided and containment measures are lifted, such as decisions to delay or forgo business or personal travel.
In addition, disruptions in air travel and other forms of travel can result in the payment of claims under travel interruption insurance policies we offer.
−Removed: The exit of the United Kingdom from the European Union could materially adversely impact our business, results of operations and financial condition.
−Removed: Our business in the United Kingdom and elsewhere may be negatively impacted by the exit of the United Kingdom from the EU (commonly referred to as Brexit), including from a deterioration of the economic environment in the United Kingdom and other countries in which we operate.
−Removed: While a trade deal was agreed to between the United Kingdom and the EU at the end of 2020, the financial, trade and legal implications of Brexit remain uncertain.
−Removed: As of December 31, 2020, the United Kingdom constituted approximately 4 percent of our worldwide billed business and the EMEA (Europe, Middle East and Africa) region as a whole constituted approximately 9 percent.
Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry.
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If we are not able to differentiate ourselves from our competitors, develop compelling value propositions for our customers and/or effectively grow in areas such as mobile and online payments and emerging technologies, we may not be able to compete effectively.
−Removed: We believe Visa and Mastercard are larger than we are in most countries based on billed business volumes.
+Added: We believe Visa and Mastercard are larger than we are in most countries based on purchase volume.
As a result, card issuers and acquirers on the Visa and Mastercard networks may be able to benefit from the dominant position, scale, resources, marketing and pricing of those networks.
Our business may also be negatively affected if we are unable to continue increasing merchant acceptance (including by merchants that accept cards on the Visa and Mastercard networks) and perceptions of coverage, or if our Card Members do not experience welcome acceptance of our cards.
−Removed: Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have and may offer richer value propositions or a wider range of programs and services than we offer or may use more effective advertising, marketing or cross-selling strategies to acquire and retain more customers, capture a greater share of spending and borrowings, establish and develop more attractive cobrand card and other partner programs and maintain greater merchant acceptance than we have.
−Removed: We may not be able to compete effectively against these threats or respond or adapt to changes in consumer spending habits as effectively as our competitors.
−Removed: Costs such as Card Member rewards and Card Member services expenses could continue to increase as we improve our value propositions for Card Members, including in response to increased competition.
+Added: Some of our competitors have developed, or may develop, substantially greater financial and other resources than we have and may offer richer value propositions or a wider range of programs and services than we offer or may use more effective strategies to acquire and retain more customers, capture a greater share of spending and borrowings, develop more attractive cobrand card and other partner programs and maintain greater merchant acceptance than we have.
+Added: We may not be able to compete effectively against these threats or respond or adapt to changes in consumer spending and borrowing habits as effectively as our competitors.
+Added: Costs such as Card Member rewards and Card Member services expenses could continue to increase as we evolve our value propositions, including in response to increased competition.
Spending on our cards could continue to be impacted by increasing consumer usage of credit and debit cards issued on other networks, as well as adoption of alternative payment mechanisms, systems and products.
The fragmentation of customer spending to take advantage of different merchant or card incentives or for convenience with technological solutions may continue to increase.
−Removed: Revolving credit balances on our cards could also be impacted by alternative financing providers, such as point-of-sale lenders.
+Added: Revolving credit balances on our cards could also be impacted by alternative financing providers, such as point-of-sale lenders and buy now, pay later products.
To the extent other payment and financing mechanisms, systems and products continue to successfully expand, our discount revenues earned from Card Member spending and our net interest income earned from Card Member borrowing could be negatively impacted.
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The competitive value of our closed-loop data may also be diminished as traditional and non-traditional competitors use other, new data sources and technologies to derive similar insights.
−Removed: Certain regulations, such as PSD2 in Europe and open banking initiatives in various jurisdictions around the world, could also diminish the value of our closed-loop data or the demand for our products and services by disintermediating existing financial services providers.
+Added: Certain regulations, such as open banking initiatives, could also diminish the value of our closed-loop data or the demand for our products and services by disintermediating existing financial services providers.
To the extent we expand into new business areas and new geographic regions, such as mainland China, we will face competitors with more experience and more established relationships with relevant customers, regulators and industry participants, which could adversely affect our ability to compete.
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See “Partners and Relationships” under “Business” for additional information on our business partnerships, including with Delta.
−Removed: Competition for relationships with key business partners is very intense and there can be no assurance we will be able to grow or maintain these partner relationships or that they will remain as profitable.
−Removed: Establishing and retaining attractive cobrand card partnerships is particularly competitive among card issuers and networks as these partnerships typically appeal to high-spending
−Removed: loyal customers.
−Removed: All of our cobrand portfolios in the aggregate accounted for approximately 19 percent of our worldwide billed business for the year ended December 31, 2020.
+Added: Competition for relationships with key business partners is very intense and there can be no assurance we will be able to grow or maintain these partner relationships or that they will remain as profitable or valued by our customers.
+Added: Establishing and retaining attractive cobrand card partnerships is particularly competitive among card issuers and networks as these partnerships typically appeal to high-spending loyal customers.
+Added: All of our cobrand portfolios in the aggregate accounted for approximately 19 percent of our worldwide network volumes for the year ended December 31, 2021.
Card Member loans related to our cobrand portfolios accounted for approximately 40 percent of our worldwide Card Member loans as of December 31, 2021.
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We may also choose to not renew certain cobrand relationships.
−Removed: The volume of billed business could decline and Card Member attrition could increase, in each case, significantly as a result of the termination of one or more cobrand partnership relationships.
+Added: Network volumes could decline and Card Member attrition could increase, in each case, significantly as a result of the termination of one or more cobrand partnership relationships.
In addition, some of our cobrand arrangements provide that, upon expiration or termination, the cobrand partner may purchase or designate a third party to purchase the loans generated with respect to its program, which could result in the loss of the card accounts and a significant decline in our Card Member loans outstanding.
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The amount we pay to our cobrand partners has increased, particularly in the United States, and may continue to increase as arrangements are renegotiated due to increasingly intense competition for cobrand partners among card issuers and networks.
−Removed: See "Off-Balance Sheet Arrangements and Contractual Obligations" under "MD&A" for additional information regarding commitments for payments to certain cobrand partners.
The loss of exclusivity arrangements with business partners, the loss of the partner relationship altogether (whether by non-renewal at the end of the contract period, such as the end of our relationship with Costco in the United States in 2016, or as the result of a merger, legal or regulatory action or otherwise, such as the withdrawal of American Airlines in 2014 from our Airport Club Access program for Centurion ® and Platinum Card ® Members) or the renegotiation of existing partnerships with terms that are significantly worse for us could have a material adverse impact on our business and results of operations.
−Removed: See "Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition" for information on the uncertainty regarding our cobrand and agent relationships in the EU.
+Added: See “ Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition” for information on the uncertainty regarding our cobrand and agent relationships in the EU and the UK.
In addition, any publicity associated with the loss of any of our key business partners could harm our reputation, making it more difficult to attract and retain Card Members and merchants, and could weaken our negotiating position with our remaining and prospective business partners.
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If we are not able to effectively manage these triggering events, we could unexpectedly have to make payments to these partners, which could have a negative effect on our financial condition and results of operations.
−Removed: See “Contractual Obligations” under “MD&A” for additional information on financial commitments related to agreements with certain cobrand partners.
−Removed: Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings, consolidations and other similar events that may occur in any industry representing a significant portion of our billed business, which could negatively impact particular card products and services (and billed business generally) and our financial condition and results of operations.
−Removed: During 2020, we pre-purchased loyalty points from certain of our travel cobrand partners, which we may use for future promotions, rewards and incentive programs for our customers.
−Removed: To the extent such partners cease operations or the loyalty points are no longer desired by our customers, the value of the pre-purchased points may be diminished and may result in an impairment charge.
+Added: See Note 12 to our “Consolidated Financial Statements” for additional information on financial commitments related to agreements with certain cobrand partners.
+Added: Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings, consolidations, operational outages, cyber security incidents and other similar events that may occur in any industry representing a significant portion of our network volumes, which could negatively impact particular card products and services (and volumes generally) and our financial condition and results of operations.
+Added: During 2020, we pre-purchased a significant amount of loyalty points from certain of our travel cobrand partners, which we have used and intend to continue to use for promotions, rewards and incentive programs for our customers.
+Added: To the extent such partners cease operations or the loyalty points are no longer desired by our customers, the value of any pre-purchased points we still have at that time may be diminished and may result in an impairment charge.
We could also be materially impacted if we were obligated or elected to reimburse Card Members for products and services purchased from merchants that have ceased operations or stopped accepting our cards.
−Removed: For example, we are exposed to credit risk in the airline industry to the extent we protect Card Members against non-delivery of goods and
−Removed: services, such as where we have remitted payment to an airline for a Card Member purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the airline, we may bear the loss for the amount credited to the Card Member.
−Removed: At December 31, 2020, our best estimate of the maximum amount of billed business volumes for goods and services that had yet to be delivered by, or could be charged back to, merchants was $19 billion.
−Removed: This amount assumes all such merchants worldwide cease operations and thus are no longer available to deliver such goods and services or to accept such chargebacks, and that all such billed business results in claims-in-full by Card Members.
+Added: For example, we are exposed to credit risk in the airline industry to the extent we protect Card Members against non-delivery of purchases, such as where we have remitted payment to an airline for a Card Member purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the airline, we may bear the loss for the amount credited to the Card Member.
+Added: At December 31, 2021, our best estimate of the maximum amount of billed business for purchases that had yet to be delivered by, or could be charged back to, merchants was $24.5 billion.
+Added: This amount assumes all such merchants worldwide cease operations and thus are no longer available to deliver such purchases or to accept such chargebacks, and that all such billed business results in claims-in-full by Card Members.
Such a maximum amount has not been indicative of our actual loss exposure in the past and we have not experienced significant losses related to these exposures to date;
−Removed: however, our historical experience may not be representative in the current environment given the economic and financial disruptions, particularly to travel, caused by the COVID-19 pandemic and resulting containment measures.
+Added: however, our historical experience may not be representative in the current environment given the economic and financial disruptions, particularly to travel, caused by the COVID-19 pandemic and resulting containment measures and staff shortages.
See Note 12 to the “Consolidated Financial Statements” for additional information regarding this exposure.
For additional information relating to the general risks related to the airline industry, see “Risk Management—Institutional Credit Risk—Exposure to the Airline and Travel Industry” under “MD&A.”
−Removed: We face continued intense competitive pressure that may materially impact the prices we charge for accepting our cards for payment for goods and services, as well as the risk of losing merchant relationships, which could have a material adverse impact on our business and results of operations.
+Added: We face continued intense competitive pressure that may materially impact the prices we charge for accepting our cards for payment, as well as the risk of losing merchant relationships, which could have a material adverse impact on our business and results of operations.
We face pressure from competitors that primarily rely on sources of revenue other than discount revenue or have lower costs that can make their pricing for card acceptance more attractive.
−Removed: Merchants, business partners and third-party merchant acquirers and aggregators are also able to negotiate incentives, pricing concessions and other contractual benefits from us as a condition to accepting our cards, being cobrand partners or signing merchants on our behalf.
−Removed: As merchants become even larger (such as the largest tech companies), we may have to increase the amount of incentives and/or concessions we provide to such merchants.
−Removed: We also face the risk of losing a merchant relationship that could materially adversely affect our billed business volumes, ability to retain current Card Members and attract new Card Members and therefore, our business and results of operations.
−Removed: Our average merchant discount rate has been impacted by regulatory changes affecting competitor pricing in certain international countries.
+Added: Merchants, business partners and third-party merchant acquirers and aggregators are also able to negotiate incentives, pricing concessions and other favorable contractual provisions from us as a condition to accepting our cards, being cobrand partners, offering benefits to our Card Members or signing merchants on our behalf.
+Added: As merchants become even larger (such as the largest tech companies), we may have to increase the amount of incentives and/or concessions we provide to them.
+Added: We also face the risk of losing a merchant relationship that could materially adversely affect our network volumes, ability to retain current Card Members and attract new Card Members and therefore, our business and results of operations.
+Added: Our average merchant discount rate has been impacted by regulatory changes affecting competitor pricing in certain international countries and may in the future be impacted by pricing regulation.
We have also experienced erosion of our average merchant discount rate as we increase merchant acceptance.
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Some merchants continue to invest in their own payment solutions, such as proprietary-branded mobile wallets, using both traditional and new technology platforms.
−Removed: If merchants are able to drive broad consumer adoption and usage, it could adversely impact our average merchant discount rate and billed business volumes.
+Added: If merchants are able to drive broad consumer adoption and usage, it could adversely impact our average merchant discount rate and network volumes.
A continuing priority of ours is to drive greater and differentiated value to our merchants that, if not successful, could negatively impact our discount revenue and financial results.
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Surcharging or steering by merchants could materially adversely affect our business and results of operations.
−Removed: In certain countries, such as Australia and certain Member States in the EU, merchants are expressly permitted by law to surcharge certain card purchases.
+Added: In certain countries, such as Australia and certain Member States in the EU, and in certain states in the U.S., merchants are expressly permitted by law to surcharge certain card purchases.
In jurisdictions allowing surcharging, we have seen merchant surcharging on American Express cards in certain merchant categories, and in some cases, either the surcharge is greater than that applied to Visa and Mastercard cards or Visa and Mastercard cards are not surcharged at all (practices that are known as differential surcharging), even though there are many cards issued on competing networks that have an equal or greater cost of acceptance for the merchant.
−Removed: In addition, the laws of a number of states in the United States that prohibit surcharging have been overturned in litigation brought by merchant groups.
−Removed: We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of payment or otherwise seek to suppress use of our cards.
−Removed: Our Card Members value the ability to use their cards where and when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American Express brand by prohibiting this form of discrimination, subject to local legal requirements.
+Added: We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of payment or otherwise seek to suppress use of our cards or certain of our cards, which could become more prevalent with the introduction of debit cards on the American Express network.
+Added: Our Card Members value the ability to use their cards where and when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American Express brand by
+Added: prohibiting discrimination through provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, subject to local legal requirements.
When we work with merchant acquirers, aggregators and processors to manage certain aspects of the merchant relationship, we are dependent on them to promote and support the acceptance and usage of our cards, but such third parties may have business interests, strategies or goals that are inconsistent with ours.
−Removed: If surcharging, steering or other forms of discrimination become widespread, American Express cards and credit and charge cards generally could become less desirable to consumers, which could result in a decrease in cards-in-force and transaction
+Added: New products, such as debit cards on the American Express network, could fail to gain market acceptance and American Express cards could become less desirable to consumers and businesses generally due to surcharging, steering or other forms of discrimination, which could result in a decrease in cards-in-force and transaction volumes.
The impact could vary depending on such factors as:
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and whether and to what extent these actions are applied to other forms of payment, including whether it varies depending on the type of card (e.g., credit or debit), product, network, acquirer or issuer.
−Removed: Discrimination against American Express cards could have a material adverse effect on our business, financial condition and results of operations, particularly where it only or disproportionately impacts credit card usage, our Card Members or our business.
+Added: Discrimination against American Express cards could have a material adverse effect on our business, financial condition and results of operations, particularly where it only or disproportionately impacts credit card usage or card usage generally, our Card Members or our business.
We may not be successful in our efforts to promote card usage through marketing and promotion, merchant acceptance and Card Member rewards and services, or to effectively control the costs of such investments, both of which may materially impact our profitability.
Revenue growth is dependent on increasing consumer and business spending on our cards, growing loan balances and increasing fee revenue.
−Removed: We have been investing in a number of growth initiatives, including to attract new Card Members, reduce Card Member attrition and capture a greater share of customers’ total spending and borrowings.
−Removed: There can be no assurance that our investments to acquire Card Members, provide differentiated features and services and increase usage of our cards will continue to be effective, particularly with changing consumer and business behaviors as a result of the COVID-19 pandemic.
+Added: We have been investing in a number of growth initiatives, including to attract new Card Members, retain existing Card Members and capture a greater share of customers’ total spending and borrowings.
+Added: There can be no assurance that our investments will continue to be effective, particularly with changing consumer and business behaviors as a result of the COVID-19 pandemic.
In addition, if we develop new products or offers that attract customers looking for short-term incentives rather than incentivize long-term loyalty, Card Member attrition and costs could increase.
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If we are unable to continue growing merchant acceptance and perceptions of coverage or merchants decide to no longer accept American Express cards, our business could suffer.
−Removed: Expanding our service offerings, adding customer acquisition channels and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements, and could adversely impact our average discount rate or dilute our brand.
+Added: Expanding our service offerings, adding customer acquisition channels and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements, fail to resonate with customers, adversely impact our average discount rate or dilute our brand.
Another way we invest in customer value is through our Membership Rewards program, as well as other Card Member benefits.
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We may not be able to cost-effectively manage and expand Card Member benefits, including containing the growth of marketing, promotion, rewards and Card Member services expenses in the future.
−Removed: If such expenses increase beyond our expectations, we will need to find ways to offset the financial impact by increasing payment volumes, increasing other areas of revenues such as fee-based revenues, or both.
+Added: If such expenses increase beyond our expectations, we will need to find ways to offset the financial impact by increasing other areas of revenues such as fee-based revenues, decreasing operating expenses or other investments in our business, or both.
We may not succeed in doing so, particularly in the current competitive and regulatory environment.
+Added: In addition, increased costs as a result of inflation, colleague retention and recruitment, supply chain issues and shortages of materials such as chips for our cards, and readiness efforts for returning to our offices may require that we reduce investments in other areas.
Our brand and reputation are key assets of our Company, and our business may be materially affected by how we are perceived in the marketplace.
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Our brand and reputation may also be harmed by actions taken by third parties that are outside our control.
−Removed: For example, any shortcoming of or controversy related to a third-party vendor, business partner, merchant acquirer or network partner may be attributed by Card Members and merchants to us, thus damaging our reputation and brand value.
+Added: For example, any shortcoming of or controversy related to a third-party service provider, business partner, merchant acquirer or network partner may be attributed by Card Members and merchants to us, thus damaging our reputation and brand value.
Acceptance of American Express cards by merchants in certain industries can also affect perceptions of us.
The lack of acceptance, suppression of card usage or surcharging by merchants can also negatively impact perceptions of our brand and our products, lower overall transaction volume and increase the attractiveness of other payment products or systems.
−Removed: Adverse developments with respect to our industry may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or
−Removed: litigation against us.
+Added: Adverse developments with respect to our industry may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us.
Furthermore, as a corporation with headquarters and operations located in the United States, a negative perception of the United States arising from its political or other positions could harm the perception of our company and our brand.
Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our business volumes, revenues and profitability.
+Added: We publicly share certain information about our ESG initiatives.
+Added: We may face increased scrutiny related to these activities, and our failure to achieve progress in these areas on a timely basis, if at all, could impact our reputation, colleague retention and public perceptions of our business.
A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our cards.
−Removed: We and third parties process, transmit, store and provide access to account information in connection with our charge and credit cards and other products, and in the normal course of our business, we collect, analyze and retain significant volumes of certain types of personally identifiable and other information pertaining to our customers and colleagues.
−Removed: Our networks and systems are subject to constant attempts to identify and exploit potential vulnerabilities in our operating environment with intent to disrupt our business operations and capture, destroy, manipulate or expose various types of information relating to corporate trade secrets, customer information, including Card Member, travel and loyalty program data, colleague information and other sensitive business information, including acquisition activity, non-public financial results and intellectual property.
−Removed: There are a number of motivations for cyber threat actors, including criminal activities such as fraud, identity theft and ransom, corporate or nation-state espionage, political agendas, public embarrassment with the intent to cause financial or reputational harm, intent to disrupt information technology systems, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites.
−Removed: Global financial institutions like us, as well as our customers, colleagues, regulators, vendors and other third parties, have experienced a significant increase in information and cyber security risk in recent years and will likely continue to be the target of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing, impersonation and identity takeover attempts), corporate espionage, hacking, website defacement, denial-of-service attacks, exploitation of vulnerabilities and other attacks and similar disruptions from the misconfiguration or unauthorized use of or access to computer systems.
+Added: We and third parties collect, process, transfer, host, store, analyze, retain, provide access to and dispose of account information, payment transaction information, and certain types of personally identifiable and other information pertaining to our customers and colleagues in connection with our cards and other products and in the normal course of our business.
+Added: Global financial institutions like us, as well as our customers, colleagues, regulators, service providers and other third parties, have experienced a significant increase in information and cyber security risk in recent years and will likely continue to be the target of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing, impersonation and identity takeover attempts), corporate espionage, hacking, website defacement, denial-of-service attacks, exploitation of vulnerabilities and other attacks and similar disruptions from the misconfiguration or unauthorized use of or access to computer systems.
+Added: These threats can arise from external parties, as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.
+Added: There are a number of motivations for cyber threat actors, including criminal activities such as fraud, identity theft and ransom, corporate or nation-state espionage, political agendas, public embarrassment with the intent to cause financial or reputational harm, intent to disrupt information technology systems and supply chains, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites.
+Added: Our networks and systems are subject to constant attempts to disrupt our business operations and capture, destroy, manipulate or expose various types of information relating to corporate trade secrets, customer information, including Card Member, travel and loyalty program data, colleague information and other sensitive business information, including acquisition activity, non-public financial results and intellectual property.
For example, we and other U.S.
financial services providers have been the target of distributed denial-of-service attacks from sophisticated third parties.
−Removed: These threats can arise from external parties as well as insiders who knowingly or unknowingly engage in or enable malicious cyber activities.
−Removed: We develop and maintain systems and processes aimed at detecting and preventing information and cyber security incidents and fraudulent activity, which require significant investment, maintenance and ongoing monitoring and updating as technologies and regulatory requirements change and as efforts to overcome security measures become more sophisticated.
−Removed: Despite our efforts, the possibility of information and cyber security incidents, malicious social engineering, corporate espionage, fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will evolve as new and emerging technology is deployed, including the increasing use of personal mobile and computing devices that are outside of our network and control environments.
−Removed: Risks associated with such incidents and activities include theft of funds and other monetary loss, the disruption of our operations and the unauthorized disclosure, release, gathering, monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other information (including account data information), the effects of which could be compounded if not detected or reported quickly.
−Removed: Indeed, an information or cyber security incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered.
−Removed: Information or cyber security incidents, fraudulent activity and other actual or perceived failures to maintain confidentiality, integrity, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory investigations and intervention (such as mandatory card reissuance), increased litigation (including class action litigation), remediation, fines and response costs, negative assessments of us and our subsidiaries by banking regulators and rating agencies, reputational and financial damage to our brand, and reduced usage of our products and services, all of which could have a material adverse impact on our business.
+Added: We develop and maintain systems and processes aimed at detecting and preventing information and cyber security incidents and fraudulent activity, which require significant investment, maintenance and ongoing monitoring and updating as technologies and regulatory requirements change, new vulnerabilities and exploits are discovered and as efforts to overcome security measures become more sophisticated.
+Added: In addition, we maintain cyber crisis response procedures and regularly test our procedures to remain prepared and reduce the risk of harm to our business operations, customers and third parties in the event of an information or cyber security incident.
+Added: Despite our efforts and the efforts of third parties that process, transmit or store our data and data of our customers and colleagues or support our operations, such as service providers, merchants and regulators, the possibility of information, operational and cyber security incidents, malicious social engineering, corporate espionage, fraudulent or other malicious activities and human error or malfeasance cannot be eliminated entirely and will evolve as new and emerging technology is deployed, including the increasing use of personal mobile and computing devices that are outside of our network and control environments.
+Added: In addition, new products and services, such as checking accounts and non-card lending, may increase our exposure to fraud and other malfeasance.
+Added: Risks associated with such incidents and activities include theft of funds and other monetary loss, disruption of our operations and the unauthorized disclosure, release, gathering, monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other information (including account data information).
+Added: An incident may not be detected until well after it occurs and the severity and potential impact may not be fully known for a substantial period of time after it has been discovered.
+Added: Our ability to address incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies.
+Added: Information, operational or cyber security incidents, fraudulent activity and other actual or perceived failures to maintain confidentiality, integrity, availability of services, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory investigations and intervention (such as mandatory card reissuance), consent decrees, increased litigation (including class action litigation), response costs (including notification and remediation costs), fines, negative assessments of
+Added: us and our subsidiaries by banking regulators and rating agencies, reputational and financial damage to our brand, and reduced usage of our products and services, all of which could have a material adverse impact on our business.
The disclosure of sensitive company information could also undermine our competitive advantage and divert management attention and resources.
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The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations.
−Removed: Our information technology systems, including our transaction authorization, clearing and settlement systems, and data centers, may experience service disruptions or degradation because of technology malfunction, sudden increases in customer transaction volume, natural disasters, accidents, power outages, internet outages, telecommunications failures, fraud, denial-of-service and other cyberattacks, terrorism, computer viruses, vulnerabilities in hardware or software, physical or electronic break-ins, or similar events.
−Removed: Service disruptions or degradations could prevent access to our online services and account information, compromise or limit access to company or customer data, impede transaction processing and financial reporting, and lead to regulatory investigations and fines, increased regulatory oversight and litigation (including class action litigation).
+Added: Our information technology systems, including our transaction authorization, clearing and settlement systems, and data centers, may experience service disruptions or degradation because of technology malfunction, sudden increases in customer or automated transaction volume, natural disasters, accidents, power outages, internet outages, telecommunications failures, fraud, denial-of-service and other cyberattacks, terrorism, computer viruses, vulnerabilities in hardware or software, physical or electronic break-ins, or similar events.
+Added: An increase in remote working as a result of the pandemic may increase the risk of such events occurring and the impact of such events on our business and operations.
+Added: Service disruptions or degradations could prevent access to our online services and account information, compromise or limit access to company or customer data, impede or prevent transaction processing and financial reporting, and lead to regulatory investigations and fines, increased regulatory oversight and litigation (including class action litigation).
Any such service disruption or degradation could adversely affect the perception of the reliability of our products and services and materially adversely affect our overall business, reputation and results of operations.
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These third parties may act in ways that could materially harm our business.
−Removed: We rely on third-party service providers, cobrand partners, merchants, customer acquisition channels, processors, aggregators, network partners and other third parties for services that are integral to our operations and are subject to the risk that activities of such third parties may adversely affect our business.
−Removed: As outsourcing, specialization of functions, third-party digital services and technology innovation within the payments industry increase (including with respect to mobile technologies, tokenization, big data, artificial intelligence and cloud storage solutions), more third parties are involved in processing card transactions and handling our data.
+Added: We rely on third-party service providers, cobrand partners, merchants, affiliate marketing firms, processors, aggregators, network partners and other third parties for services that are integral to our operations and are subject to the risk that activities of such third parties may adversely affect our business.
+Added: As outsourcing, specialization of functions, third-party digital services and technology innovation within the payments industry increase (including with respect to mobile technologies, tokenization, big data, artificial intelligence and cloud storage solutions), more third parties are involved in processing card transactions, handling our data and supporting our operations.
For example, we rely on third parties for the timely transmission of accurate information across our global network, card acquisition and provision of services to our customers.
−Removed: If a service provider or other third party ceases to provide the data quality or communications capacity we expect or services upon which we rely, as a result of natural disaster, operational disruptions or errors, including as a result of the impacts of COVID-19, terrorism, information or cyber security incidents, or any other reason, the failure could interrupt or compromise the quality of our services to customers or impact our business.
+Added: If a service provider or other third party fails to fulfill its obligations to us, it could interrupt or compromise the quality of our services to customers or impact our business.
A disruption or other event at a third party affecting one of our service providers or partners could also impede their ability to provide to us services or data on which we rely to operate our business.
Service providers or other third parties could also cease providing data to us or use our data in a way that diminishes the value of our closed loop.
−Removed: The confidentiality, integrity, privacy, availability and/or security of data communicated over third-party networks or platforms or held by, or accessible to, third parties, including merchants that accept our cards, payment processors, payment intermediaries and our third-party vendors and business partners, could become compromised, which could lead to unauthorized use of our data or fraudulent transactions on our cards, as well as costs associated with responding to such an incident, including regulatory investigations and fines, increased regulatory oversight and litigation.
−Removed: The management and oversight of multiple vendors increases our operational complexity and governance challenges and decreases our control.
+Added: The confidentiality, integrity, privacy, availability and/or security of data communicated over third-party networks or platforms or held by, or accessible to, third parties, including merchants that accept our cards, payment processors, payment intermediaries and our third-party service providers and business partners, could become compromised, which could lead to operational disruptions, unauthorized use of our data or fraudulent transactions on our cards, as well as costs associated with responding to such an incident, including notification and remediation costs, regulatory investigations and fines, increased regulatory oversight and litigation.
+Added: The management and oversight of multiple service providers increases our operational complexity and governance challenges and decreases our control.
A failure to exercise adequate oversight over service providers, including compliance with service level agreements or regulatory or legal requirements, could result in regulatory actions, fines, litigation, sanctions or economic and reputational harm to us.
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We are also exposed to the risk that a service disruption at a service provider common to our third-party providers could impede their ability to provide services to us.
−Removed: Notwithstanding any attempts to diversify our reliance on third parties, we may not be able to effectively mitigate operational risks relating to our third-party providers’ use of common service providers.
+Added: Notwithstanding any attempts to diversify our reliance on third parties, we may not be able to effectively mitigate operational risks relating to the service providers of our third-party providers.
If we are not able to invest successfully in, and compete at the leading edge of, technological developments across all our businesses, our revenue and profitability could be materially adversely affected.
Our industry is subject to rapid and significant technological changes.
−Removed: In order to compete in our industry, we need to continue to invest in technology across all areas of our business, including in transaction processing, data management and analytics, machine learning and artificial intelligence, customer interactions and communications, open banking and alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement, and risk management and compliance systems.
+Added: In order to compete in our industry, we need to continue to invest in technology across all areas of our business, including in transaction processing, data management and analytics, machine learning and artificial intelligence, customer interactions and communications, open banking and alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement, and risk
+Added: management and compliance systems.
Incorporating new technologies into our products and services, including developing the appropriate governance and controls consistent with regulatory expectations, requires substantial expenditures and takes considerable time, and ultimately may not be successful.
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Consumer and merchant adoption is a key competitive factor and our competitors may develop products, platforms or technologies that become more widely adopted than ours.
−Removed: In addition, we may underestimate the time and expense we must invest in new products and services before they generate significant revenues, if at all.
+Added: In addition, we may underestimate the resources needed and our ability to develop new products and services, particularly beyond our traditional card products and travel-related services.
Our use of artificial intelligence and machine learning is subject to risks related to flaws in our algorithms and datasets that may be insufficient or contain biased information.
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It may take us longer than expected to fully realize the anticipated benefits of these transactions, and those benefits may ultimately be smaller than anticipated or may not be realized at all, which could materially adversely affect our business and operating results, including as a result of write-downs of goodwill and other intangible assets.
+Added: Joint ventures, including our joint venture in China, and minority investments in companies such as American Express Global Business Travel (GBT) inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the joint venture or minority investment, including as a result of being subject to different laws or regulations.
+Added: In addition, we may be dependent on joint venture partners, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours.
+Added: GBT has entered into a business combination agreement with a third party, the consummation of which will result in GBT becoming a public company.
+Added: GBT currently plans to continue to conduct its day-to-day business under its existing name and brand pursuant to a license from us even after it becomes a public company.
+Added: Business decisions or other actions or omissions of a joint venture partner, other shareholders or management of our joint ventures and companies in which we have minority investments may adversely affect the value of our investment, result in litigation or regulatory action against us and otherwise damage our reputation and brand.
+Added: In addition, trade secrets and other proprietary information we may provide to a joint venture may become available to third parties beyond our control.
+Added: The ability to enforce intellectual property and contractual rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions.
We may also face risks with other types of strategic transactions, such as the sale to InComm of the operations relating to our prepaid reloadable and gift card business.
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If such operations are interrupted, suspended or terminated in the future, it could further negatively impact our customers’ experience, result in additional costs, litigation and regulatory action, and harm our business and reputation.
−Removed: Joint ventures, including our GBT JV and our joint venture in China, and minority investments inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the joint venture or minority investment, including as a result of becoming subject to different laws or regulations.
−Removed: In addition, we may be dependent on joint venture partners, controlling shareholders or management who may have business interests, strategies or goals that are inconsistent with ours.
−Removed: For example, trade secrets and other proprietary information we may provide to a joint venture may become available to third parties beyond our control.
−Removed: The ability to enforce intellectual property and contractual rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions.
−Removed: Business decisions or other actions or omissions of the joint venture partner, controlling shareholders or management may adversely affect the value of our investment, result in litigation or regulatory action against us and otherwise damage our reputation and brand.
−Removed: Our success is dependent on maintaining a culture of integrity and respect, the resilience of our colleagues through the pandemic, and upon our executive officers and other key personnel, and misconduct by or loss of key personnel could materially adversely affect our business.
−Removed: We rely upon our key personnel not only for business success, but also to lead with integrity and promote a culture of respect.
−Removed: To the extent our leaders behave in a manner that does not comport with our company’s values, the consequences to our brand and reputation could be severe and could negatively affect our financial condition and results of operations.
+Added: Our success is dependent on maintaining a culture of integrity and respect, the resilience of our colleagues through the pandemic, and upon our executive officers and other key personnel, and misconduct by or loss of personnel could materially adversely affect our business.
+Added: We rely upon our personnel not only for business success, but also to act with integrity and promote a culture of respect.
+Added: To the extent our colleagues behave in a manner that does not comport with our company’s values, the consequences to our brand and reputation could be severe and could negatively affect our financial condition and results of operations.
Our colleagues have had to adapt to rapidly changing conditions during the pandemic, and if we are unable to continue addressing the safety, health and productivity of our colleagues, our business could suffer.
−Removed: The market for qualified individuals is highly competitive, and we may not be able to attract and retain qualified personnel or candidates to replace or succeed members of our senior management team or other key personnel who voluntarily or involuntarily leave the company.
−Removed: Changes in immigration and work permit laws and regulations or the administration or enforcement of such laws or regulations or other changes in the legal or regulatory environment, including as a result of Brexit, can also impair our ability to attract and retain qualified personnel, or to employ such personnel in the location(s) of our choice.
+Added: The pandemic may also have long-term effects on the nature of
+Added: the office environment and remote working, which may result in increased costs and present operational and workplace culture challenges that may also adversely affect our business.
+Added: The market for qualified individuals with diverse perspectives and reflecting the diversity of our communities is highly competitive, and we may not be able to attract and retain such individuals.
+Added: We have and may continue to experience increased costs related to compensation and other benefits necessary to attract and retain qualified personnel.
+Added: Changes in immigration and work permit laws and regulations or the administration or enforcement of such laws or regulations or other changes in the legal or regulatory environment, including as a result of the exit of the United Kingdom from the EU (commonly referred to as Brexit), can also impair our ability to attract and retain qualified personnel, or to employ colleagues in the location(s) of our choice.
Our compensation practices are subject to review and oversight by the Federal Reserve and the compensation practices of AENB are subject to review and oversight by the OCC.
This regulatory review and oversight could further affect our ability to attract and retain our executive officers and other key personnel.
−Removed: The loss of key personnel could materially adversely affect our business.
+Added: Our inability to attract and retain highly skilled, motivated and diverse personnel could materially adversely affect our business and our culture.
+Added: Our operations, business, customers and partners could be materially adversely affected by climate change.
+Added: There are increasing and rapidly evolving concerns over the risks of climate change and related environmental sustainability matters.
+Added: The physical risks of climate change include rising average global temperatures, rising sea levels and an increase in the frequency and severity of extreme weather events and natural disasters.
+Added: Such events and disasters could disrupt our operations or the operations of customers or third parties on which we rely and could result in market volatility or negatively impact our customers’ spending behaviors or ability to pay outstanding loans.
+Added: Additionally, we may face risks related to the transition to a low-carbon economy.
+Added: Changes in consumer preferences, travel patterns and legal requirements could increase expenses or otherwise adversely impact our business, our customers and partners.
+Added: We could also experience increased expenses resulting from strategic planning, litigation and changes to our technology, operations, products and services, as well as reputational harm as a result of negative public sentiment, regulatory scrutiny and reduced stakeholder confidence, due to our response to climate change and our efforts relating to the Advancing Climate Solutions pillar of our ESG strategy.
Legal, Regulatory and Compliance Risks
1 unchanged sentence
We are subject to comprehensive government regulation and supervision in jurisdictions around the world, which significantly affects our business and requires continual enhancement of our compliance efforts.
−Removed: Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with Card Members, partners, merchants, vendors and other third parties.
−Removed: New laws or regulations could similarly affect our business, increase our costs of doing business and require us to change certain of our business practices and invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition.
−Removed: Legislators and regulators around the world are aware of each other’s approaches to the regulation of the payments industry.
+Added: Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with Card Members, partners, merchants, service providers and other third parties.
+Added: New laws or regulations could similarly affect our business, increase our costs of doing business, impact what we are able to charge for, or offer in connection with, our products and services, and require us to change certain of our business practices and invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition.
+Added: Legislators and regulators around the world are aware of each other’s approaches to the regulation of the financial services industry.
Consequently, a development in one country, state or region may influence regulatory approaches in another.
−Removed: To the extent that different regulatory systems impose overlapping or inconsistent requirements on the conduct of our business, we face complexity and additional costs in our compliance efforts.
+Added: In preparation for the completion of Brexit, numerous EU laws and regulations were separately adopted into UK domestic legislation in order to ensure continuity.
+Added: However, the UK plans to evaluate the extent to which these EU-legacy laws and regulations should change going forward and has already indicated some areas where it may take a different approach from the EU.
+Added: To the extent that different regulatory systems impose overlapping or inconsistent requirements on the conduct of our business, we face complexity and additional costs in our compliance efforts, as well as potential regulatory enforcement actions and penalties.
If we fail to satisfy regulatory requirements or maintain our financial holding company status, our financial condition and results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions (such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which could compromise our competitive position.
Additionally, our banking regulators have wide discretion in the examination and the enforcement of applicable banking statutes and regulations and may restrict our ability to engage in certain business activities or acquisitions or require us to maintain more capital.
−Removed: In recent years, legislators and regulators have focused on the operation of card networks, including interchange fees paid to card issuers in payment networks such as Visa and Mastercard and the fees merchants are charged to accept cards.
+Added: Legislators and regulators continue to focus on the operation of card networks, including interchange fees paid to card issuers in payment networks such as Visa and Mastercard and the fees merchants are charged to accept cards.
Even where we are not directly regulated, regulation of bankcard fees significantly negatively impacts the discount revenue derived from our business, including as a result of downward pressure on our discount rate from decreases in competitor pricing in connection with caps on interchange fees.
−Removed: In some cases, regulations also extend to certain aspects of our business, such as network and cobrand arrangements or the terms of card acceptance for merchants, including terms relating to non-discrimination and honor-all-cards.
+Added: In some cases, regulations also extend, or may extend, to certain aspects of our business, such as network and cobrand arrangements, new products or services we may offer, or the terms of card acceptance for merchants, including terms relating to non-discrimination and honor-all-cards.
For example, we have exited our network businesses in the EU and Australia as a result of regulation in those jurisdictions.
−Removed: In addition, there is uncertainty as to when or how interchange fee caps and other provisions of the EU payments legislation might apply when we work with cobrand partners and agents in the EU.
−Removed: In a ruling issued on February 7, 2018, the EU Court of Justice confirmed the validity of the application of the fee caps and other provisions in circumstances where three-party networks issue cards with a cobrand partner or through an agent, although the ruling provided only limited guidance as to when or how the provisions might apply in such circumstances and remains subject to differing interpretations by regulators and participants in cobrand arrangements.
−Removed: As a result, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU.
+Added: In addition, there is uncertainty as to when or how interchange fee caps and other provisions of payments legislation might apply when we work with cobrand partners and agents in the EU and the UK.
+Added: ruling issued on February 7, 2018, the EU Court of Justice confirmed the validity of the application of the fee caps and other provisions in circumstances where three-party networks issue cards with a cobrand partner or through an agent, although the ruling provided only limited guidance as to when or how the provisions might apply in such circumstances and remains subject to differing interpretations by regulators and participants in cobrand arrangements.
+Added: As a result, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU or the UK.
We are subject to certain provisions of the Bank Secrecy Act, as amended by the Patriot Act and the AMLA, with regard to maintaining effective AML programs.
Similar AML requirements apply under the laws of most jurisdictions where we operate.
−Removed: As regulators increase their focus in this area, we are likely to face increased costs related to oversight, supervision and fines and changes to our business practices, including restrictions with respect to the types of products and services we may offer, the countries in which our cards may be used, and the types of customers and merchants who can obtain or accept our cards.
−Removed: Emerging technologies, such as digital currencies, could limit our ability to track the movement of funds.
−Removed: Money laundering, terrorist financing and other illicit activities involving our business could result in enforcement action, and our reputation may suffer due to our customers’ association with certain countries, persons or entities or the existence of any such transactions.
+Added: As regulators increase their focus in this area, new technologies such as digital currencies develop and we introduce new products like checking accounts, we face increased costs related to oversight, supervision and potential fines.
+Added: Our AML programs have become the subject of heightened scrutiny in some countries, including certain Member States in the EU.
+Added: Any errors, failures or delays in complying with AML and counter-terrorist financing laws, perceived deficiencies in our AML programs or association of our business with money laundering, terrorist financing, tax fraud or other illicit activities can give rise to significant supervisory, criminal and civil proceedings and lawsuits, which could result in significant penalties and forfeiture of assets, loss of licenses or restrictions on business activities, or other enforcement actions, and our reputation may suffer due to our customers’ association with certain countries, persons or entities or the existence of any such transactions.
Various regulatory agencies and legislatures are also considering regulations and legislation covering identity theft, account management guidelines, credit bureau reporting, disclosure rules, security and marketing that would impact us directly, in part due to increased scrutiny of our underwriting and account management standards.
−Removed: These new requirements may restrict our ability to issue charge and credit cards or partner with other financial institutions, which could adversely affect our revenue growth.
+Added: Any new requirements may restrict our ability to issue cards or partner with other financial institutions, which could adversely affect our revenue growth.
See “Supervision and Regulation” for more information about certain laws and regulations to which we are subject and their impact on us.
Litigation and regulatory actions could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business.
−Removed: Businesses in the financial services and payments industries have historically been subject to significant legal actions, including class action lawsuits.
+Added: At any given time, we are involved in a number of legal proceedings, including class action lawsuits.
Many of these actions have included claims for substantial compensatory or punitive damages.
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The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions.
−Removed: Given the inherent uncertainties involved in litigation, and the very large or indeterminate
−Removed: damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate liability we may incur from litigation.
−Removed: We have been subject to regulatory actions and may continue to be subject to such actions, including governmental inquiries, investigations and enforcement proceedings, in the event of noncompliance or alleged noncompliance with laws or regulations.
−Removed: External publicity concerning investigations, including those that are narrow in scope, can increase their scope and scale and lead to further regulatory inquiries.
−Removed: Beginning in May 2020, we began responding to a regulatory review led by the OCC and the Department of Justice Civil Division regarding historical sales practices relating to certain small business card sales.
+Added: Given the inherent uncertainties involved in litigation, and the very large or indeterminate damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate liability we may incur from litigation.
+Added: We are also involved at any given time with governmental and regulatory inquiries, investigations and proceedings.
+Added: Regulatory action could subject us to significant fines, penalties or other requirements resulting in Card Member reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our reputation and our brand, all of which could adversely affect our results of operations and financial condition.
+Added: We expect that financial institutions, such as us, will continue to face significant regulatory scrutiny, with regulators taking formal enforcement actions against financial institutions in addition to addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on our activities, among other limitations, that could adversely affect our business.
+Added: In addition, a violation of law or regulation by another financial institution could give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us.
+Added: Further, a single event may give rise to numerous and overlapping investigations and proceedings.
+Added: External publicity concerning investigations can increase the scope and scale of investigations and lead to further regulatory inquiries.
+Added: For example, as previously disclosed, beginning in May 2020, we began responding to a regulatory review led by the OCC and the Department of Justice Civil Division regarding historical sales practices relating to certain small business card sales.
We also conducted an internal review of certain sales from 2015 and 2016 and have taken appropriate disciplinary and remedial actions, including voluntarily providing remediation to certain current and former customers.
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In January 2021, we received a grand jury subpoena from the United States Attorney’s Office for the Eastern District of New York regarding the sales practices for small business cards and a Civil Investigative Demand from the CFPB seeking information on sales practices related to consumers.
−Removed: We are cooperating with all of these inquiries and have continued to enhance our controls related to our sales practices.
+Added: We are cooperating with all of these inquiries into our sales practices and related compliance practices and continue to review and enhance our processes and controls related to our sales practices and business conduct generally.
We do not believe this matter will have a material adverse impact on our business or results of operations.
−Removed: We expect that regulators will continue taking formal enforcement actions against financial institutions in addition to addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on our activities, among other limitations that could adversely affect our business.
−Removed: In addition, a violation of law or regulation by another financial institution could give rise to an investigation by regulators and other governmental agencies of the same or similar practices by us.
−Removed: Further, a single event may give rise to numerous and overlapping investigations and proceedings.
−Removed: Regulatory action could subject us to significant fines, penalties or other requirements resulting in Card Member reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our reputation and our brand, all of which could adversely affect our results of operations and financial condition.
−Removed: Governmental authorities have adopted or proposed measures to provide economic assistance to individual households and businesses, stabilize markets and support economic growth.
−Removed: The future success of these measures is unknown and they may not be sufficient to mitigate the negative impact of the pandemic.
−Removed: Additionally, some measures, such as a suspension of loan payments and encouragement of forbearances, may have a negative impact on our business, results of operations and financial condition.
−Removed: We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions, such as a renewed focus on fair lending laws, and actions governmental authorities take in response to those conditions, including participation in the PPP.
−Removed: Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, substantial monetary damages and damage to our reputation and brand.
−Removed: We are, and have been in the past, a defendant in a number of actions, including legal proceedings and proposed class actions filed by merchants, challenging certain provisions of our card acceptance agreements.
−Removed: See Note 12 to the "Consolidated Financial Statements" for a description of our outstanding material legal proceedings.
+Added: We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions, such as a renewed focus on fair lending laws, and actions governmental authorities take in response to those conditions, including participation in the paycheck protection program.
+Added: Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, changes to our merchant agreements and/or business practices, substantial monetary damages and damage to our reputation and brand.
+Added: We are, and have been in the past, a defendant in a number of actions, including legal proceedings and proposed class actions, challenging certain provisions of our card acceptance agreements.
+Added: See Note 12 to the “Consolidated Financial Statements” for a description of certain outstanding legal proceedings.
An adverse outcome in these proceedings could have a material adverse effect on our business and results of operations, require us to change our merchant agreements in a way that could expose our cards to increased merchant steering and other forms of discrimination that could impair the Card Member experience, result in additional litigation and/or arbitrations, impose substantial monetary damages and damage our reputation and brand.
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Some elements of the capital and liquidity regimes are not yet final and certain developments could significantly impact the requirements applicable to financial institutions.
−Removed: For example, the Basel Committee finalized revisions to the standardized approach for credit risk and operational risk capital requirements.
−Removed: If these revisions are adopted in the United States, we could be required to hold significantly more capital.
−Removed: In addition, it may be necessary for us to hold additional capital because of an increase in the SCB requirement based on the results from a supervisory stress test.
+Added: For example, if the 2017 Basel Committee revisions to the standardized approach for credit risk and operational risk capital requirements are adopted in the United States, we could be required to hold significantly more capital.
+Added: In addition, it may be necessary for us to hold additional capital because of an increase in the SCB requirement based on results from a supervisory stress test.
Compliance with capital adequacy and liquidity rules requires a material investment of resources.
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We are limited in our ability to pay dividends and repurchase capital stock by our regulators, who have broad authority to prohibit any action that would be considered an unsafe or unsound banking practice.
−Removed: For example, the Federal Reserve prohibited share repurchases in the third and fourth quarters of 2020 for all banking organizations participating in CCAR and has limited distributions for the first quarter of 2021.
We are subject to a requirement to submit capital plans to the Federal Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock.
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If we fail to satisfy applicable capital requirements, including the stress capital buffer, our ability to undertake capital actions may be restricted.
−Removed: Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last preceding dividend period of our Series B and Series C preferred stock.
+Added: Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last preceding dividend period of our preferred stock.
American Express Company relies on dividends from its subsidiaries for liquidity, and such dividends may be limited by law, regulation or supervisory policy.
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Legislators and regulators in the United States and other countries in which we operate are increasingly adopting or revising privacy, data protection, data governance, account access and information and cyber security laws, including data localization, authentication and notification laws.
−Removed: As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate data governance, data protection, data transfer and account access mechanisms are in place.
−Removed: Compliance with current or future privacy, data protection, data governance, account access and information and cyber security laws could significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or colleague information and could restrict our ability to fully maximize our closed-loop capability or provide certain products and services, which could materially and adversely affect our profitability.
+Added: As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the
+Added: context of ensuring that adequate data governance, data protection, incident management, resiliency, third party management, data transfer, security controls and account access mechanisms are in place.
+Added: Compliance with current or future privacy, data protection, data governance, resiliency, data transfer, account access and information and cyber security laws could significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or colleague information and could restrict our ability to fully maximize our closed-loop capability or provide certain products and services or work with certain service providers, which could materially and adversely affect our profitability.
Our failure to comply with such laws could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, customer attrition, decreases in the use or acceptance of our cards and damage to our reputation and our brand.
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Operational risk includes, among others, the risk that error or misconduct could result in a material financial misstatement, a failure to monitor a third party’s compliance with regulatory or legal requirements, or a failure to adequately monitor and control access to, or use of, data in our systems we grant to third parties .
−Removed: As processes or organizations are changed, or new products and services are introduced, we may not fully appreciate or identify new operational risks that may arise from such changes.
−Removed: Through human error, fraud or malfeasance, conduct risk can result in harm to customers, broader markets and the company and its employees.
−Removed: Compliance risk arises from the failure to adhere to applicable laws, rules, regulations and internal policies and procedures.
+Added: As processes or organizations are changed, or new products and services are introduced, such as new lending features, debit products and checking accounts, we may not fully appreciate or identify new operational risks that may arise from such changes.
+Added: Through human error, fraud or malfeasance, conduct risk can result in harm to customers, legal liability, fines, sanctions, customer remediation and brand damage.
+Added: Compliance risk arises from violations of, or failure to conform or comply with, laws, rules, regulations, internal policies and procedures, and ethical standards.
We need to continually update and enhance our control environment to address operational and compliance risks.
−Removed: Operational and compliance failures or deficiencies in our control environment can expose us to reputational and legal risks as well as fines,
−Removed: civil money penalties or payment of damages and can lead to diminished business opportunities and diminished ability to expand key operations.
+Added: Operational and compliance failures, deficiencies in our control environment or an inability to maintain an ethical workplace and high standards of business conduct can expose us to reputational and legal risks as well as fines, civil money penalties or payment of damages and can lead to diminished business opportunities and diminished ability to expand key operations.
If we are not able to protect our intellectual property, or successfully defend against any infringement or misappropriation assertions brought against us, our revenue and profitability could be negatively affected.
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While we believe we comply with all applicable VAT and other tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine that we owe additional taxes or apply existing laws and regulations more broadly, which could result in a significant increase in liabilities for taxes and interest in excess of accrued liabilities.
−Removed: New tax legislative initiatives, including increases in the corporate tax rate, may be enacted, impacting our effective tax rate and potentially adversely affecting our tax positions or tax liabilities.
−Removed: In addition, unilateral or multi-jurisdictional actions by various tax authorities, including an increase in tax audit activity, could have an adverse impact on our tax liabilities.
+Added: New tax legislative initiatives, including increases in the corporate tax rate, are currently being considered and may be enacted.
+Added: In addition, new guidelines issued by the Organization for Economic Cooperation and Development (OECD) could have an impact on how multinational enterprises are taxed on their global profits.
+Added: These potential changes could adversely impact our effective tax rate, our tax positions and tax liabilities.
+Added: In addition, actions by tax authorities, including an increase in tax audit activity, could have an adverse impact on our tax liabilities.
Credit, Liquidity and Market Risks
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There may also be risks that exist, or develop in the future, that we have not appropriately identified or mitigated.
−Removed: As regulations and competition continue to evolve, our risk management framework may not always keep sufficient pace with those changes.
+Added: As regulations, technology and competition continue to evolve, our risk management framework may not always keep sufficient pace with those changes.
If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.
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Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons.
−Removed: General economic factors, such as GDP, unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses.
−Removed: A customer’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but
−Removed: also by a customer’s other payment obligations, and increasing leverage can result in a higher risk that customers will default or become delinquent in their obligations to us.
−Removed: Our caution about the potential for a significant downturn in the pace of economic recovery is reflected in the macroeconomic outlook that informs our reserves for credit losses.
−Removed: We rely principally on the customer’s creditworthiness for repayment of loans or receivables and therefore have no other recourse for collection.
−Removed: Our ability to assess creditworthiness may be impaired if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could cause our losses to rise and have a negative impact on our results of operations.
−Removed: Further, our pricing strategies may not offset the negative impact on profitability caused by increases in delinquencies and losses;
+Added: General economic factors, such as gross domestic product, unemployment, inflation and interest rates, may result in greater delinquencies that lead to greater credit losses.
+Added: A customer’s ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but also by a customer’s other payment obligations, and increasing leverage can result in a higher risk that customers will default or become delinquent in their obligations to us.
+Added: Further, our credit performance may be negatively impacted as forbearance and government support programs broadly available during the pandemic come to an end, to the extent customers relied on such programs and stimulus funds to stay current on their obligations to us.
+Added: We rely principally on the customer’s creditworthiness for repayment of loans or receivables and therefore often have no other recourse for collection.
+Added: Our ability to assess creditworthiness may be impaired if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could have a negative impact on our results of operations.
+Added: This may be exacerbated to the extent information we have historically relied upon to make credit decisions does not accurately portray a customer's creditworthiness as a result of forbearance programs or the reported consumer deleveraging that occurred during the pandemic.
+Added: Further, our pricing strategies, particularly for new lending features and non-card lending products, may not offset the negative impact on profitability caused by increases in delinquencies and losses;
thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us.
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The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and commercial agreements.
−Removed: Central banks and global regulators have called for financial market participants to prepare for the discontinuance of the London interbank offered rate (LIBOR) and the establishment of alternative reference rates.
−Removed: Certain of our financial instruments and commercial agreements reference LIBOR, which will need to be amended or otherwise modified to replace LIBOR with an alternative reference rate.
−Removed: Some of those instruments and agreements contain provisions to replace LIBOR as the benchmark following the occurrence of specified transition events.
−Removed: Such provisions may not be sufficient to trigger a change in the benchmark at all times when LIBOR is no longer representative of market interest rates, or that these events will align with similar events in the market generally or in other parts of the financial markets, such as the derivatives market.
−Removed: Alternative reference rates are calculated using components different from those used in the calculation of LIBOR and may fluctuate differently than, and not be representative of, LIBOR.
+Added: Certain of our financial instruments and commercial agreements will need to be amended or otherwise modified to replace references to the London interbank offered rate (LIBOR) with an alternative reference rate, as the LIBOR tenors referenced are expected to be quoted only through June 2023.
+Added: Alternative reference rates, such as the secured overnight financing rate, are calculated using components different from those used in the calculation of LIBOR and may fluctuate differently than, and not be representative of, LIBOR.
In order to compensate for these differences, certain of our financial instruments and commercial agreements allow for a benchmark replacement adjustment.
However, there is no assurance that any benchmark replacement adjustment will be sufficient to produce the economic equivalent of LIBOR, either at the benchmark replacement date or over the life of such instruments and agreements.
−Removed: Uncertainty as to the nature and timing of the potential discontinuance or modification of LIBOR, the replacement of LIBOR with one or more alternative reference rates or other reforms may negatively impact market liquidity, our access to funding and the trading market for our financial instruments.
+Added: Uncertainty as to the replacement of LIBOR with alternative reference rates and the discontinuance of LIBOR generally may negatively impact market liquidity, our access to funding and the trading market for our financial instruments.
Furthermore, the timing of implementation and use of alternative reference rates and corresponding adjustments or other reforms could be subject to disputes, could cause the interest payable on our outstanding financial instruments and commercial agreements to be materially different than expected and may impact the value of such instruments and agreements.
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In some circumstances, we may incur an unattractive cost to raise capital, which could decrease profitability and significantly reduce financial flexibility.
+Added: Additional factors affecting the extent to which we may securitize loans and receivables in the future include the overall credit quality of our loans and receivables, the costs of securitizing our loans and receivables, the demand for credit card asset-backed securities and the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally.
+Added: Our liquidity and cost of funds would also be adversely affected by the occurrence of events that could result in the early amortization of our existing securitization transactions.
For a further discussion of our liquidity and funding needs, see “Consolidated Capital Resources and Liquidity” under “MD&A.”
−Removed: Any reduction in our and our subsidiaries’ credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
−Removed: Rating agencies regularly evaluate us and our subsidiaries, and their ratings of our and our subsidiaries’ long-term and short-term debt and deposits are based on a number of factors, including financial strength, as well as factors not within our control, including conditions affecting the financial services industry generally, and the wider state of the economy.
−Removed: Our and our subsidiaries’ ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we and our subsidiaries are able to obtain funding.
+Added: Any reduction in our credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
+Added: Ratings of our long-term and short-term debt and deposits are based on a number of factors, including financial strength, as well as factors not within our control, including conditions affecting the financial services industry, and the macroeconomic environment.
+Added: Our ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding.
+Added: Our ability to raise funding through the securitization market also depends, in part, on the credit ratings of the securities we issue from our securitization trusts.
+Added: If we are not able to satisfy rating agency requirements to confirm the ratings of our asset-backed securities, it could limit our ability to access the securitization markets.
Adverse currency fluctuations and foreign exchange controls could decrease earnings we receive from our international operations and impact our capital.
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We are exposed to foreign exchange risk from our international operations, and accordingly the revenue we generate outside the United States is subject to unpredictable fluctuations if the values of other currencies change relative to the U.S.
−Removed: dollar (including as a result of Brexit), which could have a material adverse effect on our results of operations.
+Added: dollar, which could have a material adverse effect on our results of operations.
Foreign exchange regulations or capital controls might restrict or prohibit the conversion of other currencies into U.S.
dollars or our ability to transfer them.
−Removed: Political and economic conditions in other countries could also impact the availability of foreign exchange for the payment to us by the local card issuer for obligations arising out of local Card Members’ spending outside such country and for the payment by Card Members who are billed in a currency other than their local currency.
+Added: Political and economic conditions in other countries could also impact the availability of foreign
+Added: exchange for the payment to us by the local card issuer for obligations arising out of local Card Members’ spending outside such country and for the payment by Card Members who are billed in a currency other than their local currency.
Substantial and sudden devaluation of local Card Members’ currency can also affect their ability to make payments to the local issuer of the card in connection with spending outside the local country.
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An inability to accept or maintain deposits due to market demand or regulatory constraints could materially adversely affect our liquidity position and our ability to fund our business.
−Removed: bank subsidiary, AENB, accepts deposits directly from consumers, as well as from individuals through third-party brokerage networks, and uses the proceeds as a source of funding.
−Removed: As of December 31, 2020, we had approximately $86 billion in total U.S.
−Removed: retail deposits, a portion of which had been raised through third-party brokerage networks.
−Removed: We face strong and increasing competition with regard to deposits, and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances.
+Added: bank subsidiary, AENB, accepts deposits and uses the proceeds as a source of funding, with our direct retail deposits becoming a larger proportion of our funding over time.
+Added: We continue to face strong competition with regard to deposits, and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances.
To the extent we offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.