Ladies and gentlemen, thank you for standing by and welcome to the American Express Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session. [Operator Instructions] And I’ll now turn the meeting over to our host, Head of Investor Relations, Mr. Edmund Reese. Please go ahead, sir.

Thank you, Lori. Welcome. We appreciate all of you joining us for today's call. The discussion contains certain forward-looking statements about the company's future financial performance and business prospects, which are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's presentation slides and in the company's reports on file with the Securities and Exchange Commission. The discussion today also contains certain non-GAAP financial measures. Information relating to comparable GAAP financial measures may be found in the third quarter 2018 earnings release and presentation slides, as well as the earnings materials from prior periods that may be discussed, all of which are posted on our website at ir.americanexpress.com. We encourage you to review that information in conjunction with today's discussion. Today's discussion will begin with Steve Squeri, Chairman and CEO, who will start the call with some remarks about the company's progress and results; and then, Jeff Campbell, Chief Financial Officer, will provide a more detailed review of Q3 financial performance. Once Jeff completes his remarks, we will move to a Q&A session on the quarter's results, with both Steve and Jeff. With that, let me turn it over to Steve.

Thanks, Edmund and good afternoon, everyone. I'll start with some of the key highlights from the third quarter results we released earlier this afternoon. From there, I'll give an overview of the year-to-date results. And before turning it over to Jeff for a more detailed discussion of our financial performance, I’ll provide a quick progress report on the four strategic imperatives that we focused the organization on at the beginning of the year. In the third quarter, we saw a continued momentum in our business that was in line with the strong growth of the first half. Adjusted revenues grew 10% and we delivered EPS of $1.88. I feel really good about the company's performance. We’ve had several quarters of high revenue growth and in fact this marks the sixth consecutive quarter with adjusted revenue growth of at least 8%. Our growth has been broad based, driven by a well balanced mix of card member spending, fees and loans and spread across geographies, businesses and customer segments. We have continued to control our operating expenses and that provides the flexibility to make investments in our brand, customer benefits and digital capabilities. As I reflect on the first nine months of the year, I see very consistent and positive trends. We generated a healthy level of top line revenue growth and delivered strong bottom line results each quarter. Year-to-date, our revenue growth is 10% and our earnings per share growth is slightly higher than that, after adjusting for the tax act of 2017. We're gaining spending and lending share in almost all the countries in which we operate. At the same time, our customer engagement expenses, which are composed of rewards, card member services and marketing are growing a little faster than revenue. We are seeing very good payback from the…

Well, thanks, Steve and good afternoon, everyone. It’s good to be here today to talk about another quarter of steady and consistent revenue and earnings growth. But to get right into our summary financials on slide 3. Third quarter revenues of $10.1 billion grew 10% on an FX adjusted basis, with this growth again driven by a well balanced mix of growth across discount revenue, fee revenue and net interest income. I would point out that the FX adjusted growth rate now exceeds our reported growth of 9%, given the strengthening of the US dollar against the major currencies in which we operate. This 10% revenue growth then drove net income of $1.7 billion, up 22% from a year ago and earnings per share was $1.88 for the quarter, up 25% from the prior year. Our shares outstanding were down 2% from the prior year, a little less than recent quarters due to the suspension of our share repurchases in the first half of the year, which resulted from the one-time impact of the tax act last December. We are now back within our targeted capital level range and as a result, resumed share buybacks this quarter. All in, these are results we feel really good about. Looking at the details of our performance, I’ll start with billed business, which you see several reviews of on slides 4 through 6. Starting on slide 4, our FX adjusted total billings growth accelerated sequentially to 10% in Q3. More significantly, as you can see on the top right, our proprietary business, which makes up 80% or the majority of our total billings, was up 12%, maintaining very strong growth levels. The remaining 15% of our overall billings, which come from our network business, GNS, continues to see the expected impact of regulation…

Thank you, Jeff. Before we open up the lines for Q&, I'll ask those in the queue to please limit yourself to just one question. Thank you for your cooperation and with that, the operator will now open up the line for questions. Operator?

[Operator Instructions] Our first question is from the line of Sanjay Sakhrani with KBW.

[Technical Difficulty] And it seems like the growth is diverse and accelerated –

Hey, Sanjay. You cut out for a minute, so would you mind starting again?

Absolutely. Okay. Good. So the revenues have been consistently surpassing your expectations this year and it seems like the growth is diverse and accelerating. Could you guys talk about where specifically the outperformance is coming from, is it macro, is it investments, is it a favorable competitive environment and what gives you the confidence that it's going to persist? And then just on a related note, on the discount rate, Jeff, you mentioned that you expected to not be down as much as you guys envisioned. So what would be the trajectory going forward, given there's not as many of these partnership discounts or anything else sort of affecting that number?

So, Sanjay, let me sort of start out and maybe get the first part of the question. Look, what we have really focused on, and not just this year, but over the last couple of years, is we've really focused in on investing. We've invested in value for our card members. We've really invested in value propositions and we've certainly invested in coverage. And Jeff will talk about sort of discount rate, but you've seen discount revenue. But when you look at the -- you look at our growth, it's across the board. You've got double digit growth in every billing segment that we report with the exception of GNS, which has the issues as we wind down Australia, wind down Europe, but whether it's small and middle market in the US, even large and global accounts, certainly, international, both consumer and small business was really high double digit and double digit growth rates and with SME up in the 20% and US consumer as well and, look, we continue to grow our lending book judiciously, not only in the US, but in international. So, I think, we’ve spoken in times that, maybe from an organic perspective, there is a little bit of the economy, but certainly, we believe that the investments that we're making are really driving this sustainable, what we believe, is sustainable growth. And we believe our value propositions are resonating with what would be our traditional customers and what I think a lot of people are surprised at as millennials. And so it really is across the board growth.

The only thing I'd add on that, Sanjay and then I’ll talk about discount rate is, we did talk going actually all the way back to the January call, about the fact that late in last year's fourth quarter, we did see a noticeable uptick in what we would call organic growth and we really can't particularly attribute that last little uptick to anything other than the economy and it’s sustained itself this year, though not further accelerated. So, there's a modest boost from economic growth, but I think all of the factors Steve talked about are the much larger drivers for us. On discount rate, Sanjay, you have enough history to know that for many years, we used to talk about a 2 to 3 basis point a year decline and this average, discount rate due to mix, people hitting volume triggers, et cetera. In fact, if you look at history, it was used in more 1 to 2. And then for a couple of years now, we've said because of [indiscernible], because of regulation in Europe and Australia, because of a few strategic agreements we've done, that has driven it down an unusual amount, but all those you see this quarter are beginning to fade. Now, I'm not going to give you guidance for the future beyond that, because I think Steve and I have been very clear this year that our focus is on driving discount revenue growth and so we're going to make decisions sometimes that leverage our integrated business model, if we think they're going to drive discount revenue growth and we're not going to worry about the average discount rate. What I would say is, we feel good within any given category of merchants about the stability of the rates and about where we are.

Our next question is from the line of Don Fandetti with Wells Fargo.

If I look at sort of forecasted revenue estimates, they’re probably around a seven handle, yet you guys are doing a 9, 10. And so I guess the question is, on sustainability. So you talked a little bit about billed business, but you're facing tougher comps on proprietary, yet easier on GNS. I guess, my question is, can your billed business growth accelerate or is it more likely that we've peaked out here.

Well, I’ll make a few comments and then Steve you can add. Look, I think, Steve and I couldn’t have been clear about the focus we have on sustaining the kind of revenue growth that you have now seen for six consecutive quarters. And of course, that revenue growth is coming from a mixture of great billings growth, steady loan growth, steady growth in all the fees that we generate and the key to sustaining the overall revenue growth we have is we see a long runway to sustain growth in all three areas. So I would say, we're not particularly trying to drive or forecast or suggest acceleration from where we are. We feel really good about the share and scale gains that we're getting with our performance right now and that's what we’re focused on sustaining.

Yeah. Look, I think what we have said is, we have lots of great investment opportunities and we're going to take advantage of those investment opportunities and those opportunities are not only within our commercial business and consumer business, but they’re broad based. And so what you will continue to see us do is investing in card acquisition and you will continue to see a focus on investing and coverage. And we believe that, as we have invested in coverage here in the United States, it has made a huge difference and you’re seeing that play out in discount, you've seen that play out in billed business growth and you’ve seen that played out in discount revenue growth and we're not at where we want to be, even in the United States at this particular point in time, as we've said, we want to get to virtual parity coverage by the end of 2019. And so, you will continue to see us focus there and you continue to see us focus internationally on coverage, which there is a relationship between improved coverage and driving billed business and the more billed business if you think about our spend centric model, then you actually can drive -- continue to drive the revenue growth that we're also getting from lending. So bottom line is, we're going to be investing for share and for scale, as we continue moving forward.

And our next question is from Jill Shea with Citi.

Related to billed business from large and corporate customers, you saw some accelerating trends there. Can you just speak to the strength and how should we think about growth going forward and then perhaps also touch on airline in US T&E and the strength that you saw this quarter and how we should think about the outlook going forward there?

Yeah. I think for large and global, it was a particularly good quarter. I think, there are some -- we will have some grow over issues as we move forward. But what you're seeing is a little bit more diversification in terms of we're getting some more B2B within that space. But we also continue to see our large corporates and our global accounts continue to spend in the T&E space. So we're really happy with the sort of the double digit growth. It's not something that we've experienced in quite a while. In fact, if you go back a few quarters, you saw this sort of at a 2% level, at a negative level and we've had that uptick, partially due our focus on B2B, but also due to increased T&E spending with our large and corporate accounts.

And our next question is from the line of Betsy Graseck with Morgan Stanley.

I just wanted to change conversation a little bit and talk about the very fast loan growth that you’ve been generating with strong credit quality. A little bit of an uptick in net charge-offs, but not that much. And related to how you're thinking about reserving as we go into the CECL world, really the question has to do with the fact that you've got obviously a lot of transactors, does that mean that you could potentially pull back on some of the reserving that you're doing and drive that into even faster loan growth or potentially buybacks or is that not part of the equation and if you could speak a little bit to how you're thinking about the new accounting world and when we'd be getting some information with regard to how that's going to impact you would be helpful?

So let me first just remind you, we're now four years into growing a little faster than the industry, because of our unique focus on capturing a bigger share of our own customers’ borrowing behaviors, which frankly we've historically under penetrated and that's why we have sixty percent of our loan growth coming from our existing customer base. I point out if take that growth out, you'd be growing at about at the industry. It's why four years into this exercise, we still buy quite a stretch the best in class credit metrics and credit has consistently performed. As we have told people, it would, so we feel really good about the growth and we actually think we have a very, very long runway to continue to grow a little faster than the industry. On CECL, Betsy, I'm afraid, I'm not going to give you a lot of insights that are much different from what others have said. If you look at our card lending look, I would suggest that you are liable to see larger reserves that are somewhere in the range of what you've heard others talk about somewhere in the 10%, 20%, maybe a little higher percent range. What is unique about us, as you point out, is we are the only financial institution in the world that has a really large charge card franchise that obviously has some different dynamics in the CECL world. Frankly, we're still working through that partly because of our uniqueness. There's a lot to work through with regulators and auditors and accounting authorities. The net of all that, we’ll have to see. I guess I will go on record as saying we're one of the great majority of financial institutions who think that there is incredible complexity to this accounting standard. There's probably also some pro-cyclicality which may be the opposite of what the regulators set out to accomplish when they went down this path. And, we'll have to see what that means overall. We’d also hope, but boy, it's way too early to say that this is a pure accounting change, which you would think shouldn't effect ratings, shouldn't affect capital requirements, although there are certainly no commitments out there right now from the Fed or the rating agencies to in fact take that approach. So, I think there's still a lot of discussion to have on this, Betsy. And I actually see that discussion growing a little bit in the industry as well as in DC. I will say like most other institutions, in 2019, we'll be running parallel and that's really when we'll be able to give people more specific insights.

And we'll go next to David Togut with Evercore ISI. Please go ahead.

Hi, good evening. This is Anthony Cyganovich on behalf of David Togut. Do you expect to reduce merchant discount rates further in Europe as PST 2 [ph] goes into effect in Continental Europe next year which may promote more ACH based payment?

So, look, as we look at Europe, as you know we're outside of the regulation but our competitors aren't and so we still have a premium. Our business in Europe is very different. It is a corporate card SME, really high end consumer business which merchants value and when you look at that business, that's a business that's grown in the high high-double digits at this particular point for us all across the board, international and in Europe. So I don't see that happening and I don't see us having actually the exact same coverage needs that we do in the United States, but what we will do is we will use discount rate as a tool to provide coverage where we need coverage whether that be B2B, where there is a different value equation. And remember again here is where the integrated model helps us out because we have both sides of that equation and especially in Europe because we're not able to use sort of the same models we have in the United States and as we need small merchants, we may run our own what I’d call our own theoretical ARPU program here from a pricing perspective, but other than that I don't see us -- I see us maintaining that premium. And again I wouldn't look at that as it relates and we don't share this obviously but I wouldn’t look at that as it relates to the discount rate in Europe. I would look at us using that discount rate as a tool to get coverage when and where we need it.

We have a question from Bob Napoli with William Blair. Please go ahead.

Thank you. And nice job on the quarter. The international semi and consumer businesses continued to grow at a very high rate. What is specifically driving that? I think it's still relatively small relative to the opportunity. Are we early days and what is driving that and if I could, the Amazon program, how are you going to manage that with all the other SMB programs, small business programs you have in the US? How does that fit in and compete with your other programs.

Let me go with the second one first here. I think we'll be launching the Amazon product soon. And we have a range of – look, we have a range of small business products. We have a Delta co-brand, a Hilton co-brand, a Marriott co-brand, a Lowe's co-brand and now we have an Amazon c-brand and in addition to proprietary products and the proprietary products whether those be cash back with charge products or what have you and a lot of our customers actually use multiple products. You will see small businesses that use a corporate card product, you will see small businesses that use a Marriott product and use an Amex simply cash product. And I think the beauty of the Amazon and Delta, Marriott and so forth and so on is that we provide small businesses the opportunity to use the variety of products that meet their needs and meets their rewards needs and spending needs and so forth. And so our view is I'd rather have that sort of arsenal of products all under the American Express umbrella than certainly have to compete there. And it'll be -- you may see customers that have our small business product today, also get the Amazon product just like they also got to Marriott product. And so I just think it's one of the ways that we will continue to drive our billings and drive our position in commercial payments in the US. As far as your first question, when you look at the SME segment internationally and then I'll get into consumer, when you look at the SME segment internationally which is a relatively newer segment that is being penetrated here is the vantages of global scale. What we're able to do is leverage our global infrastructure, leverage our…

Our next question is from James Friedman with Susquehanna.

Hi. Let me echo the congratulations. It’s James at Susquehanna. Since you called it out Steve, I just wanted to probe about the trend in the leverage and the margin trajectory especially with regard to card member services. Just kind of philosophically I realize you conclude that it's a good area of investment but I'm just getting questions from investors at what point will it likely stabilize because 30% is a pretty big ticket? Thank you.

Let me make a financial comment, Steve and then you can cover on the strategy. One caution James and one for you and really for everyone is we pull different levers at different times in different geographies and different parts of our business. And one of the reasons why we flipped a while back to talking broadly about card member engagement costs which includes rewards, which includes business development, payments to partners, traditional marketing and it includes cost of card member services, although I would point out that's by far the smallest component is because at different times the growth rates are going to vary across those three depending on what we think is going to produce best return. So I encourage you to look in many ways across all three of those categories, but we've been pretty clear today that, look, those have been growing a little faster than revenue. But we actually feel great about the revenue growth that that's generating. We feel great about the platform that provides a pretty steady double digit EPS growth and we think it is allowing us to build scale and relevance in a way that quite frankly we haven’t in a number of years.

I think it really gets down to how we inject value and I think Jeff is right. I mean, we look at multiple levers to do that and I think as we continue to get more customers, as we continue to get more of their billings, it provides that platform to do more things with them as we continue to develop more and more products and services. So again our strategy here is really about more share, really about more relevance and really about more scale and we believe that's the right lever for us to pull at this particular point in time.

And we go to Moshe Orenbuch with Credit Suisse. Please go ahead.

Great. Thanks. Wanted to talk about the reserving, because obviously very strong results both in -- somewhat in Q2, but even more so in Q3 and you did lower your expectations for the full year. How do we think about it going into ’19 just because the portfolio is obviously growing at a fairly high rate and while credit ratios are good, the dollar amounts of both delinquencies and loss are growing? And I guess how do we think about that into ’19?

Well, you know, we will have to give you a, of course, much more thorough answer in 90 days when we are on the January call and will provide a lot of commentary on 2019. But, look, I’d make a few comments. As you very well understand, provision is affected by a lot of things including sequential rates of growth in your loan. So in a world though where, let's say, our loan growth in 2019 roughly looks like where it is today. I think what you're seeing in our trends of late is we're getting past some of the more dramatic seasoning that we had to get go through and we're starting to get to the point where your provision growth will begin to asymptote down, all else being equal, towards your loan growth rate. Now we are growing loans in the mid-teens, so that tells you that you should expect the provision to at least grow at that level even as we maintain the kind of credit performance that we've had. But we feel really good about the economics we've been getting from four years of growing lender a little faster than the industry but I think we can do this in the current kind of economic climate for many years to come.

Our next question is from the line of Rick Shane with JPMorgan. Please go ahead.

Guys, thanks for taking my question. You guys have articulated and really executed on a wallet share driven loan growth strategy. I am curious if there are any differences in how season customers build balances and if there is any more sort of concentration in terms of transaction, higher utilization initially or how we think about season in future growth given that this portfolio could be constructed a little bit differently.

I think, Rick, the thing that I always keep trying to bring people back to is, historically our customers don't think of American Express as a place to do their borrowing on a card and that's why Doug Buckminster, Steve, myself, we talk a lot about the statistic in the US consumer segment which is where most of our lending is, that we capture roughly 50% of our customers spending behaviors and only 25% of their borrowing behavior. So what we have consistently worked at now for the last few years is trying to do lots of different things in marketing and product and pricing, in incentives to try to change that mindset and that's why 60% of our loan growth is coming from our existing customers, it's why we're able to keep credit metrics at the levels that I was just talking about in response to Moshe's question and it's why we think we can keep at this for a long time.

The only thing I would say is that and I've said this before in meetings and at our analysts calls and so forth it is important for us to have a broader relationship with our customers and if they're going to go and borrow money someplace else, that also provides the possibility of them spending someplace else as well. So it really is important, which is why it is important for us from a small business perspective to continue to talk about and expand what we're doing with small businesses whether that’d be cross border payments, whether that be merchant financing, 90 day working capital loans and things like that because they do have other options and it really is important especially in a world where things are still accessible from a digital perspective that they don't look at us as a one trick pony and that they're looking at us as a source of their -- and look, this applies from a small business perspective and a consumer perspective as a source of their working capital needs and that's what we're really trying to do and so that's why the sort of messaging. And you see this a little bit with some of our advertising. When you look at it and you see somebody applying for a loan, a small loan online as they're watching TV, so you're going to continue to see us expand what we're doing with our customers.

Got it. And again I'm just sort of curious, presumably a seasoned American Express customer has a different balance build behavior than a millennial and that totally makes sense. I'm trying to understand what the implications are in terms of future growth if we should think about how those loans season and then no judgments one way or the other, better, worse, fast or slower but how we think about the difference in terms of how that initial entry behavior translates into long term performance.

I guess, Rick, I am going to come back to, remember the diversity of our product portfolio US, international, consumer, small business, lots of different cards, people borrow on the platinum card, they borrow on every day cards, those kinds of generalizations. I am just not sure we -- frankly we don't look at the world that way because of the diversity of our base. I'm just going to come back to, we see a long runway to continue what we're doing here.

Thank you. Our next question is from Mark DeVries with Barclays. Please go ahead.

Thanks. Coming back to the topic of the relationship between your revenue growth, engagement expenses and the EPS, I think you indicated given the faster engagement expense, you were saying EPS growth adjusted for the tax benefits, it's slightly ahead of the revenue growth and I think you know the Amex of all, kind of reliably expect that a mid to high single digit revenue growth to translate into kind of a mid-teens EPS growth. Would you expect to widen back out to that kind of relationship over time or do you see that kind of margin pressure persisting?

Well, Mark, it’s a very good question and let me just maybe be clear with everyone. So Steve and I were very clear on the call that we are focused on sustaining the kind of high levels of revenue growth we have. We think we have a good runway to do that and we think it's a great basis to produce double digit EPS growth. If you look at Q2 and Q3, though, just to look at some actual results and there's a little complexity to the taking out the impact of the Tax Act. But if you do take the impact of the Tax Act out, you see 9% to 10% EPS growth in those two quarters and you see 10% to 12% EPS growth excluding the impact of the tax. In history, to your point, 2012 to 2014 we were getting very little revenue growth, 4%, frankly losing share, losing some scale. But we’ve squeezed 11% EPS growth out of that. Pre-crisis, you saw some numbers like that. We don't think that's the right way to run the company in the current competitive and regulatory environment. We don't think that produces the kind of sustainable foundation. It’s going to build scale and relevance and share that will allow us to really sustain double digital EPS growth.

The Amex of old, the Amex of today, from a numbers perspective, we're in a very different environment as Jeff just said. We're in a different environment competitively, we're in a different environment from a regulatory perspective. We're in different mindset too though and I think that mindset that we have is it is really important that we continue to grow our share and we continue to grow our relevance and scale. And you don't need any more proof of that than what we've been doing from a coverage perspective and just how important it is. And what we've been doing from a value injection perspective with our card members and so we're going to continue to do that as well as continue to build capabilities so that we can expand our relationships with them. So we believe the right way to win is to really focus in as we both said, on higher revenue growth with a narrowing of that revenue and that EPS number, but just to point out, it is with a lot higher revenue growth.

And we go to Bill Carcache with Nomura. Your line is open.

Thank you. Good evening. Hi, Steve and Jeff. I had a follow up on Moshe's question earlier. Credit has held up much better than many expected with Amex never really facing the severe normalization headwinds that some of your lend centric competitors did. Can you help us understand the role that your closed loop things like machine learning and other technologies have played in driving your strong credit performance and maybe speak to the extent to which you think those assets provide you guys with an edge over your competitor swap rate in an open loop environment?

Other than if you look at sort of blip during the credit crisis, the financial crisis, the closed loops is a secret sauce. It is the secret sauce from a fraud perspective, it is a secret sauce from an underwriting perspective, it's a secret sauce from a targeting perspective upfront and who you acquire. And reality is that good credit starts right at the beginning of the funnel in terms of who you're targeting, who you're letting in, how much money you're lending and all of that is all about sort of how we continue to invest in our machine learning capabilities and our data capabilities and all that's really powered by the closed loop and all the data that we have. So it has been a tremendous advantage for us from day one. The other thing I will add on this is that the other thing that's really important within the closed loop which absolutely has nothing to do with the closed loop is preset spending limit. And so when we look at our machine learning capability, it also helps to drive just how we set that no preset spending limit. And one of the huge advantages that we have is in small business space because in the small business space, small businesses use credit card products as a form of working capital whether it’s charge or whether it's lending and to be able to set a no preset spending limit where we are dynamically determining what the level of spend is based upon data from millions of small businesses and historical data and so forth is a huge advantage to us as well. So, look, there's many models that are out there in this business. There is a PayPal model, Visa, MasterCard model, there is JPMorgan Chase model. Our model is unique and the uniqueness is, it’s integrated. That integration gives you the closed loop, the closed loop gives you data, it gives you relationships on either side and it gives you the ability to have the -- to play with the economics which becomes even more important down the road from a B2B perspective. So closed loop is key for us.

Our next question is from the line of Jeff Cantwell with Guggenheim Securities. Please go ahead.

Can you talk a little more about today's announcement with PayPal? I guess what I'm curious about is how much opportunity is there for Amex card holders who might be interested in using Amex rewards points for purchases at the PayPal merchants online. Maybe tell us why this is something where you think you'll see a lot of demand from your card holders. Just a related question. How eager are Amex card holders to add their Amex cards to the PayPal wallet through the mobile app or the website and then start to spend via the wallet? I'm really just trying to get a framework for how incremental this might be for you.

So, look, I think what you saw today really is a multifaceted expansion of our relationship with PayPal our relationship with PayPal goes way back. They are a huge partner of ours from a acquiring merchant perspective, they're a leader in the digital space. I think that's very, very clear. My perspective is it always made sense for us to sort of expand our relationship with them and, look, Dan and the team are really great to work with. I have a long term relationship with Dan. We worked really well together here. And the teams as we went through this what we tried to think about is ways we could add incremental value to American Express, ways we could add incremental value to our merchants, ways we could add incremental value to PayPal and ways we could add incremental value to our card members. And so when you think about sort of this integration within the app or within the wallet, the one thing that you realize is, the more seamless you can make things, the easier it is for your card members, your customers to transact. I mean when you think about merchants, for example, one of the things that they look for is to make sure that they don't use shopping carts and that they make sure it is easy as possible online and not shopping carts in the supermarket but online and what we wanted to make sure is that we can make it as seamless as possible for our card members to be loaded in their card into PayPal because PayPal offers us a tremendous expansion of our network today. And so, to be able to make those millions of merchants of available to our court members in a more seamless way is a win-win for everybody. It's a win-win for merchants, it's a win-win for us, it's a win-win for PayPal, it’s a win-win for card members. As far as you know the American Express pay with points and how many card members will use those points at PayPal merchants, this is the most valuable bank of points anywhere in the world bar none. It’ a behemoth and the reality is that we are looking for more ubiquity. Our card members use points for a variety of things at a variety of places and this just expands that ubiquity. And it is going to be good for merchants, it's going to be good for our card members. Can I put a number around it? I can't put a number around it, but the reality is I think this will be an uptick in points burn. I think this will be an uptick in card member satisfaction. I think it's going to be an uptick in merchant satisfaction as well so we're really pleased with this and obviously there will be more announcements as we move along from a timing perspective and what have you. But we're really excited about this expansion of strategic partnership.

Thank you. And now the last question comes from the line of Chris Donat with Sandler O'Neill. Please go ahead.

Good afternoon. Thanks for tucking me in. Wanted to ask one strategic question on a piece of the revenue that you haven't touched upon much today is the annual fees because with the platinum and gold cards you’ve seen some increases and Jeff mentioned some increase or some growth in Japan and Australia on the fees. Just wondering if you're strategically thinking about fee increases being more likely in the future. It seemed like that was something -- there was some hesitancy around in past years, but it seems like there's more appetite among consumers for higher fees. And I'm also wondering if there's also more trade off on some of your member services with that too.

So if you look at it right, our card members are looking for value and our experiences is that card members will pay for value and so what you’ve seen is, lots of value injection and that value injection takes many forms. I mean, when we look at card member engagement cost, you look at some fixed cost which could be your allowances and things like that which get consumed as people go through, but they don't get charged on the variable basis. You look at rewards cost and you look at deals we may do with some of our merchant partners where both of us can bring value to that equation as well. And so our belief is, if you are bringing value, you should charge for that value and there's no better proof in the pudding than when in a very, very difficult competitive environment with the launch Chase Sapphire, we put in a $100 increase in our in our platinum card and so attrition goes down and so our acquisition go up and so more acquisition go up from a millennial perspective as well and reality is, that’s all due to value. People will pay for value and American Express is known as a brand that does provide value and so where we have opportunities to raise our fees, we will raise our fees and we did that just with the gold card, we've done that in various international markets, but we’ve injected value and when you inject value, the other benefit of injecting value is people who use the card more. When they use the card more, they spend more. When they spend more, you give them an opportunity to revolve more. So it's a virtuous cycle as far as we're concerned and we're going to continue to pursue that strategy as well.

Thank you, Chris, for that call. With that, we will bring the call to an end. Thank you, Steve, thank you, Jeff, thank you to those of you on the phone. The IR team will be available for any follow-up questions after the call. Operator, back to you.