American Express
ALTERNATIVE NAME/S: Amex
DETAILS:
On 18th March 1850, Wells & Company, Butterfield, Wasson & Company, and Livingston, Fargo & Company (all express companies operating in the northeastern United States) set up a joint company: American Express.The owners of the parent companies then became the partners and directors of the new association, but the main driving force came from two: Henry Wells and William G. Fargo. At first each of the owners kept his original company name, carrying out American Express business in their local areas. With total capital of $150,000, all the main shareholders were personally responsible for American Express debts.
In 1852, the board rejected a proposal by Wells and Fargo to extend business into California. Gold mining in the area was thriving and huge quantities of gold were being freighted out, so Wells and Fargo took the initiative and independently set up Wells Fargo & Company. Soon, Wells Fargo was the leading express company in the Western US, working closely with American Express, their territories divided by the Missouri River.
In spite of teething problems, American Express grew and was soon carrying valuable consignments of all kinds. By 1854, the capitalization of the company had increased to $750,000 and its reputation for reliability had been established.
In 1856, reflecting the company’s success, a headquarters was established on Jay and Hudson Street in New York, where the newly constructed office block was the largest privately owned building in the city. By 1859, the company was turning over millions of dollars, and expansion programmes included the introduction of new express routes, agencies and depots.
During the Civil War, the company supported the Union with humanitarian acts: delivering clothing and medicine, free of charge, to Kansas. To encourage their employees to volunteer for the army, American Express promised to keep them on at half pay, a policy that operated until the draft began. The company delivered supplies to the army and private parcels were even carried into combat areas. In a joint exercise with other express companies, American Express managed to collect the voting slips of soldiers in the field for the presidential election of 1864.
By this time, American Express had 890 offices, employed 1,500 people, was operating in more than ten states and claimed that ‘every man’s door therein is, or can be, reached by American Express’. The company monopolized the transport of goods, currency and securities throughout New York State and, in 1874, set up new headquarters at 65 Broadway. The company also played an important part in the economic development of the state of Michigan.
Thanks to the Universal Postal Union*, the largest free service performed by American Express was the forwarding of mail to tourists, who could give their address as ‘care of American Express,’ without ever having had a transaction with the company.
In 1882, American Express diversified further and began selling money orders. The U S Post Office began to issue postal orders in 1864, which badly hit the American Express money-shipping business, so, in competition with the government, a foolproof money order, the amount of which could not be altered (perforated sections of the order were torn off to the appropriate point), was developed.
American Express marketed this with a guarantee that if the order were lost or fraudulently cashed, the company would reimburse the customer. In the first six weeks, nearly twelve thousand orders were sold through company offices, railway stations and in pharmacies.
J C Fargo, then President of American Express, went on a trip to Europe and found that, in more remote areas, his letters of credit were ‘no more use than wet wrapping paper’. In 1891, he set up a European department and created a type of negotiable currency that could be used in payment abroad and would also be guaranteed against loss: the travelers’ cheque.
Traders around the world were happy to take the new cheques because American Express guaranteed to redeem them even if they were fraudulently cashed, so long as the proper care had been taken by those who had cashed them. The cheque became a popular way of carrying money and, in the first year, $9,120 worth of cheques were sold. By 1913, this had grown to $32,000,000, with sales into billions of dollars by the 1950’s.
By 1915, American Express operated on both steam and electric railroads, water and stagecoach lines, on a network covering a distance of 61,500 miles. The company set up a banking subsidiary with offices all over the globe and, during the 1920’s, they moved into the tourist market with round-the-world cruises and one of the first air travel arrangements: from London to Zurich.
The American Express Card was introduced in 1958. At first it was unprofitable but, by 1967, cardholders numbered more than two million, and charges made against the cards came to more than a billion dollars, making it the world’s leading travel and entertainment credit card.
American Express continued to grow and diversify. In 1968, the firm took over the Firemen’s Fund Insurance Company, which became one of its biggest subsidiaries and, in 1971, the magazine ‘Travel and Leisure’ was launched. Then, in 1981, the data processing firm, First Data Resources and the brokerage house, Shearson, Loeb, Rhoades, joined the organisation, followed by Investor Diversified Services three years later.In 1986, the American Express headquarters were moved to the World Financial Center in New York.
ONELINER: American Express
OTHER CONNECTIONS: John Butterfield, a founder of American Express, was also a founder of the Overland Mail Company, which eventually subcontracted the delivery of express mail on the Central Route to the Pony Express*.
BIBLIOGRAPHY:
Alden Hatch, ‘American Express: A Century of Service’, Doubleday & Company, Inc., Garden City, New York, 1950.
Peter Z Grossman, ‘American Express: the Unofficial History’, New York, Crown, 1987.