American Express Company AXP

The business

American Express issues the card and owns the network it settles on. The closed loop is the whole thing. Merchants pay a discount rate on every purchase, cardmembers pay an annual fee for the lounge and the credits, and revolving balances pay interest on top. Almost nobody else collects all three on the same transaction.

The fee has become the engine. Amex spent five years refreshing Platinum and Gold, raising the price each time, and packing the card with statement credits the customer has to remember to claim. It works because that customer is affluent and busy, which is also why write-offs sit at 2.0% instead of where a general-purpose issuer's sit. The moat is the loop itself: merchants accept a higher rate because the spend is worth more per swipe.