Amex’s low fraud rate turns on its closed system

American Express maintains a significant advantage in fraud prevention because it operates as a closed-loop system. Unlike Visa or Mastercard, Amex acts as both the card issuer and the payment processor. This means they see both sides of every transaction. They know exactly who the customer is and exactly what the merchant sold. This end-to-end visibility allows them to spot suspicious patterns much faster than competitors who have to piece together data from different banks. For retailers, this translates to lower fraud losses and higher authorization rates. When a lender has a clear view of transaction data, they are less likely to decline a legitimate sale out of caution. This is particularly important for high-ticket merchants in sectors like jewelry, home improvement, or automotive, where a false decline can cost thousands in lost revenue. Amex is currently leveraging this data to expand into new digital payment products, including installment-based options and enhanced checkout experiences. Operators should recognize that while Amex may sometimes have different fee structures, their internal data model offers a layer of security that traditional open-loop cards struggle to match. As fraud becomes more sophisticated with AI, the value of a 'closed' network that controls the full data stream will likely grow, potentially leading to smoother financing approvals for your customers.

Source: Payments Dive

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