American Express: A Leader in the Payments Network Industry

American Express, a top holding in Berkshire Hathaway`s portfolio, is a card issuer with a market cap of $171 billion and a unique business model. It runs a payments network that links customers and retailers to speed up the processing of transactions. This high-margin activity generates annual fees, interest income, and discount revenue from merchants. Amex`s unique business model has developed competitive strengths, including strong brand recognition and network effects. It targets a affluent customer base and offers higher annual fees due to its premium card offerings. The company`s two-sided payments platform, with 144 million cards in circulation and 80 million merchant acceptance locations, benefits both consumers and merchants. Investors should test the strength of a moat by examining if a company`s advantage can be easily replicated.