In its most recent quarter financial report it became apparent that turning to lending has begun paying off for American Express. During this year’s first quarter loans offered by America Express increased by 16% to reach a figure of $75.8 billion. Analysts had been expecting a figure of $72 billion. Part of the reason why American Express has enhanced its lending efforts is the fact that rivals such as Citigroup and JPMorgan Chase had been eating into its longtime business by cutting acceptance costs and sweetening customer rewards.

According to the chief executive officer of American Express, Stephen Squeri, the financial services company’s customer lending business is expected to keep growing. Squeri has also disclosed that the company’s marketing capabilities and big data analytics will be employed with a view to ensuring the right product mix for its customers.

Bad loans provision

However the growth in the lending business of American Express has not come without costs. This is because the financial institution has had to increase the amount of money set aside for covering souring loans. In the first quarter the provisions for credit losses increased by 35% to reach a figure of $775 million. This was due to a rise in delinquency rates and higher write-offs.

Some of the strategies American Express has employed in order to increase its loan growth has included growing the number of co-brand deals. Last year for instance AmEx inked co-brand deals with Hilton Worldwide Holdings and Marriott International.

Chinese entry

Besides loan growth American Express is also banking on an expansion into China to fuel its growth in the future. Late last month reports indicated that the financial services company had cleared one of the last hurdles that were remaining and was likely to become the first card network from the United States to offer services in the world’s most populous country.

Clearing of the remaining hurdle was announced by the central bank of China which indicated that the application that the card issuer had submitted seeking to clearing and settle domestic card transactions would be formally accepted.

Fierce competition

However this is just a tiny step taken by American Express in trying to get into one of the fastest growing electronic payment markets in the world. The New York-based card issuer intends to form a joint venture with a mobile-payment provider based in China rather than forming an entity that it wholly owns.

Mastercard’s entrance in China will however not be smooth sailing due to the fierce competition it is likely to face. One of its competitors will be Union Pay, a state-owned payments system that is now the biggest card firm in the world with regards to transaction volumes. Additionally the four biggest banks in the globe are also Chinese state-owned firms. Combined these firms have assets worth $11.9 trillion. Assets owned by the next five biggest banks in the world are valued at $11.8 trillion but these financial institutions are located in four different countries – France, the United Kingdom, the United States and Japan. American Express thus has its work cut out.