INDUSTRY PROFILE – FINANCIAL SERVICES INDUSTRY

The financial services industry plays a vital intermediary role in the world economy, moving funds
from entities with excess funds to those with a need for funds. It includes firms that are engaged in
activities such as investing, lending, insurance, securities trading and securities issuance. Its clients
are individuals, businesses, non-profit organizations and agencies of government.

The financial services industry encompasses companies in one or more of the following lines of
business (Kolakowski, 2017):
• Banking
• Insurance
• Securities Brokerage (or Financial Advisory Services)
• Investment Banking
• Securities Trading
• Investment Management (or Money Management)
• Securities Analysis
• Financial Planning
• Regulatory Agencies and Securities Exchanges
• Public Accounting Firms/Chartered Accountancy Firms
• Financial Information Services
• Financial Consulting

ORGANIZATION PROFILE

American Express is a multinational financial services company which mainly provides charge card
and credit card along with travel- related services to customers and businesses around the world. It is
the world’s largest card issuer by purchase volume and listed as one of the components of Dow Jones’
Industrial Average.

Founded by Henry Wells, William Fargo and John Butterfield in 1850 as a US based Cargo Shipping
Company. In 1882, the company entered the financial services industry by launching a money order
business. The vision of the company is “To provide the world’s best customer experience every
day.” The mission statement is “To become essential to our customers by providing differentiated
products and services to help them achieve their aspirations.”

The Blue Box values of the company include-

 Customer Commitment: The Company strives to develop and maintain

relationships that drive value for its customers.
 Quality: Amex strives to provide innovative and unparalleled products and
services so as to deliver premium value to customers.
 Integrity: Amex strives to uphold the highest standards of integrity while
conducting business operations and focuses on harboring trust based
relationships.
 Teamwork: The Company emphasizes the importance of working together,
across boundaries, to meet the needs of customers and to help the company
grow.
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  Respect: Amex maintains a diverse and inclusive environment, respecting and
embracing interpersonal differences between its employees and customers.
 Good citizenship: The Company serves customers globally and strives to
maintain the highest standards of global citizenship.
 A will to win: Amex showcases a strong will to win in the marketplace and in
all other aspects of its business.
 Personal accountability: The Company holds itself personally accountable
for honoring its commitments.

The integrated model of the company which makes Amex unique is as follows-

The company follows a closed loop network where it acts as the issuer as well as the merchant acquirer
and also provides the network. The closed loop network helps Amex provide end-to-end services and
establish direct contact with card members and vendors.

American
Card Members Merchants
Express

This model is also known as ‘Spend- Centric’ model because it concentrates on generating revenue
primarily by driving spending on cards and secondly by finance charges and fees.

The key customer groups served by American Express are-

 Consumers (who own Amex cards and use them)

 Businesses (Amex corporate consumers who use Amex card for business
spending)
 Merchants (Restaurants, stores, shopping complexes and other establishments
who accept Amex card as a form of payment from their customers)
 Partners (with whom Amex conducts business to provide double membership
services to their consumers)

The various products and services offered by American Express are-

1. Consumer charge cards: Charge cards refer to cards in which card members and
business client is requested to pay the balance in full, each month, failing which a
penalty applies. An annual fee is charged on these cards, and there is no pre-set
spending limit. They carry many benefits and rewards.
American Express offers four types of charge cards-
Green Card: Carries a tagline ‘Modern Simplicity’. Targets affluent,
successful, hardworking, educated and well-travelled individuals of the ages 35-50.
Focuses on promoting the simple pleasures of life, and offers benefits including
membership rewards, lifestyle services and 24/7 customer service.

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 Gold Card: Carries the tagline ‘Enabling More Rewarding Journeys’. Targets
affluent, hardworking and value conscious individuals of the ages 30-40, who value
time spent with loved ones. Focuses on enriching memorable experiences, travel in
particular, and offers the benefits of the Green card along with travel insurance, lounge
access and hotel privileges. It carries a higher fee.
Platinum Card: Carries the tagline ‘Curated to Make Your World More
Special’. Targets highly affluent, cosmopolitan, adventurous and worldly individuals
in their 40s, who seek interesting and unusual experiences. Focuses on enhancing
experiences through specialized and personalized service, and offers the benefits of the
above cards along with high impact travel benefits, elite tier, dining with Amex invitees
and 24/7 emergency support.
Centurion Card: Carries the tagline ‘Uniquely Crafted and Personally
Delivered Globally’. Targets extremely affluent, globally successful, confident
individuals in their 50s, and carries a very high fee. Most premium and exclusive
membership, and application is by invitation only. It offers all the benefits of the above
cards along with end to end airport experience, enhanced hotel privileges, ‘wow’ offers,
access to global events, premium dining, relationship management, 24/7 travel and
concierge service etc.
2. Consumer lending cards: Includes credit card products for consumers, which
allow the card member to finance purchases over time. e.g.- Delta Sky Miles, Jet
Blue, Blue and Blue Cash, Costco.
3. Corporate Card: Includes card products and expense management tools for
business spending by employees of corporate clients. e.g. - Corporate Card,
Purchasing Card, Executive Corporate Card.
4. Small Business Charge: Card products for business spending by proprietors and
employees of small business. Specialized products in this category include the
Plum Card and the Open Gold Card.
5. Small Business Lending: Card Products for small businesses and allows financing
of purchases over time. Prominent small business lending product is Blue for
Business.
6. Co-Brand Cards: American Express has partnered with various companies to
issue co-brand cards, allowing their members to avail benefits of double
membership through the use of one card. Some co-brand cards offered are the
Hilton Honors Card, Starwood Preferred Guest Card etc.
7. Merchant Acquisition: American Express is involved in merchant acquisition and
processing, servicing and settlement, etc. They provide point-of-sale (POS)
marketing and information products and services for merchants.
8. Network Services: American Express offers cost effective, flexible options to
merchants, third-party processors or point-of-sale manufacturers for connecting to
their network for fast and efficient processing of American Express Card member
transactions.
9. Other Services: American Express provides various other services such as
consumer travel related services like trip planning & booking; expense
management products and services; and other fee based services including fraud
prevention services and insurance.

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The various functional departments of American Express are as follows-

 Global Commercial Services: Responsible for providing a wide range of card

programs, expense management tools, consulting services, business financing
and cross- border payments solutions to help corporations manage all aspects
of their business spending from travel and meetings to office supplies and raw
materials.
 Global Consumer Services Group: This department is responsible for all
customer charge and lending products and services, as well as customer travel
and other related services globally.
 Global Merchant and Network Services: This department is responsible for
integrating Amex's merchant-and network-related businesses. This includes
Global Merchant Services, Global Loyalty Coalition and Global Network
Services.
 Global Servicing Network: This department is responsible for providing
customer care services to customers and merchants globally.
 Global Security: This department is responsible for providing protective,
investigative, crisis management, risk assessment and other such services, so
as to protect the Company against losses.
 Global Advertising and Brand Management: This department is responsible
for promoting the Amex brand in an innovative manner, and communicating
the brand values so as to create market demand.
 Global Risk, Banking and Compliance: This Group consists of the
Compliance, Risk Oversight, Regulatory Affairs and Banking teams. They
provide oversight and are also responsible for ensuring that the Company is
operating within the global regulatory framework.
 Global Business Services: This Group is responsible for managing the
Company’s procurement, marketing, and sales operations; real estate; and
partners with business units to execute complex change initiatives.
 Finance: This department provides financial, productive avenues for
investment so as to improve performance while upholding the Company's
commitment to regulatory compliance and financial integrity through strategic
collaboration with internal and external constituents.
 General Counsel’s Organization (GCO): This department is responsible for
managing the legal, compliance and government relations of the Company.
The Corporate Secretary’s Office also reports to this department, and acts as a
link between the employees and the Board of Directors.
 Corporate Affairs and Communication: This department is responsible for
Corporate Social Responsibility (CSR) activities of the Company, as well as
public relations, which include media and employee relations.
 Internal Audit Group: This department is responsible for conducting process,
financial, technology and compliance audits. They also check the Company’s
internal control systems, and suggest improvements.
 Credit and Fraud Risk: This department works to manage the Company’s
credit by analyzing customers’ credit history, and developing models to assess
the overall credit risk. It also functions to prevent and intercept fraudulent
activities.

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  Human Resources: This department is responsible for managing the human
resource of the Company, which includes recruitment and selection; handling
and resolving employee grievances; formulating compensation and incentive
plans; training and development etc.
 American Express Travel and Lifestyle Sciences: The Company provides
travel and related consultancy services to its customers, along with other
support services such as trip booking and planning.
 Technology: This department is responsible for technological innovation and
upkeep for the Company’s external as well as internal customers.

AMERICAN EXPRESS SERVICES INDIA PRIVATE LIMITED (AESIPL)

American Express Services India Private Limited (AESIPL), “The Company” (Earlier known as
American Express Services India Limited, AESIL) is a private limited company incorporated on 31st
August, 1999 under the name ‘Tata Finance American Express Private Limited’ and, in September,
1999, a joint venture agreement was entered into between the Tata Group (a large Indian industrial
conglomerate and promoters of AESIL) and American Express International, Inc. (AEII), following
which AEII acquired stake in AESIL. AESIL functioned as a full-fledged money changer/carried on
primarily the foreign exchange business. In 2002, AESIL became a subsidiary of AEII consequent to
purchase by AEII of the majority stake (all but 100 equity shares of Rs.10 each) from the Tata Group.
In November, 2010, these 100 equity shares were purchased by AEII from the Tata Group and AESIL
became a wholly owned subsidiary of AEII.
In 2003, AESIL discontinued the foreign exchange business and commenced the business of
marketing and distribution of financial products (presently of American Express consumer cards), its
main business.

Besides the above, AESIPL also carries out the following activities:

 Provides database management and audit and compliance support services to American
Express International, Inc.
 Supports the credit and collection activities for American Express consumer and commercial
card products and also provides, to American Express Travel Related Services Company,
Inc., sales promotion and American Express Travelers’ Cheques product awareness in India.
 Engaged in business of soliciting, procuring and distributing insurance as a corporate agent
and marketing and distribution of American Express prepaid foreign exchange travel cards.
AESIPL works on cost plus model. Cost plus pricing is a business pricing strategy that begins with a
calculation of all costs involved in producing or acquiring a product. After the company determines
the cost to market a good, it adds a certain percentage of markup to achieve profit objectives.
AESIPL supports to AEBC and AEII. So whatever expenses are being incurred in AESIPL, they just
put 12.5% profit on that and raise invoice to AEBC and 15% in the case of AEII.

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PRE GST SERVICE FEE INVOICING MODEL

AESIPL (Marketing and

Distribution of AEBC Card and
Compliance and Control Service
of FES Business Outside India)
DL

Centralised
Invoice

AEBC AEII
(Domestic) (Export)
HR Australia

POST GST SERVICE FEE INVOICING MODEL

 Decentralization of Invoicing with self-invoicing from or to different states
for common cost allocation.
 State wise invoicing to AEBC and AEII
 Common cost allocated on the basis of head count
 Reconciliation of HR database, payroll data base and incentive team
employee related data base.

AESIPL
AESIPL Kerala
AESIPL AEII
Madhya
Karnataka
Pradesh
AESIPL AESIPL
Haryana Maharashtra

AESIPL AESIPL
Gujarat Tamil Nadu

AESIPL AESIPL
Chandigarh West Bengal

AESIPL AEBC AESIPL

Delhi
HR Telangana

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COMMON COST ALLOCATION METHOD

SELF INVOICING MODEL

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 GST PROCESS

POD Process TB WD +2
Final TB FTM
TB WD-1 (Service Tax Service Tax Paid
Invoicing
US GAAP Close Liability)

TB WD +2
POA Process Invoicing & Self Final TB FTM (GST
TB WD-1 GST Paid
Invoicing (Excel) Liability)
US GAAP Close
I/O GST

POD Process
WD +7 Process Area Wise
I GAAP Close Final TB FTM State Adj
Cost recon Final I GAAP TB

Annual
POD Process
WD +7 Final TB Self Invoicing Process Area wise Cost Recon Final TB FTM
I GAAP Close FTM entry state wise State adj State Wise
Cost recon overall
GST
Annual

COST CATEGORIZATION

Trial Balance

Chargeable Non Chargeable

Salary Benefits
Data Processing
Legal & Professional
Occupancy & Equipment
Insurance Revenue
Other Operating Expense
Interest on Fixed Deposits
Postage & Distribution
Income Tax
Printing & Stationery
CSR Expense
Recruitment
Telephone
Travel & Conveyance
Service Fee Charge in

GST COMPLIANCES OVERVIEW

GSTR-1 (Statement of Outward Supplies)

GSTR 1 is a monthly return that should be filed by every registered dealer by the 10th of every
month. This return signifies the tax liability of the supplier for the supplies effected during the
previous month.

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GSTR-1A

GSTR-1A allows a registered taxpayer to update the details of sales for GSTR-1 which was filed
earlier. The information comes from the buyer’s GSTR-2 when he modifies any data. We as a seller
may either accept or reject the changes. Changes accepted by you will be automatically reflected in
the GSTR-1.

GSTR-2A

GSTR 2A is a purchase related tax return that is automatically generated for each business by the
GST portal. When a seller files his GSTR-1, the information is captured in GSTR 2A. It takes
information of goods and services which have been purchased in a given month from the seller’s
GSTR-1. We are required to verify and amend the return before filing in on GST Portal.

GSTR-2 (Statement of Inward Supplies)

GSTR-2 needs to be filed by the 15th of every month in relation to supplies received during the
previous month. This return signifies accrual of Input Tax Credit (ITC) from the inputs received during
the previous month. It is auto-populated from the GSTR-1s filed by the corresponding suppliers of
the Taxpayer except for a few fields like imports and purchases from unregistered suppliers.

S. No Form Description Periodicity Due date of filing

1 GSTR-3B Summary of Outward and Inward Monthly 20th of the next
Supplies month
2 GSTR-1 Outward supplies made by taxpayer Monthly 10th of the next
month
3 GSTR-2 Inward supplies received by a taxpayer Monthly 15th of the next
month
4 GSTR-3 Monthly return Monthly 20th of the next
month
5 GSTR-9 Annual Monthly By 31st December
of next FY

GSTR-3 (Consolidated Return)

This is a consolidated return. It needs to be filed by the 20th of every month. It consolidates the
following details

 Outward Supplies (Auto-Populated from GSTR-1)

 Inward Supplies (Auto-Populated from GSTR-2)
 ITC availed
 Tax

GSTR-9 (Annual Return)

GSTR 9 is an annual return to be filed once in a year by the registered taxpayers under GST. It
consists of details regarding the supplies made and received during the year under different tax
heads i.e. CGST, SGST and IGST. It consolidates the information furnished in the monthly/quarterly
returns during the year.

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GSTR-3B

GSTR-3B is a simple return form introduced by the CBEC for July 2017 to March 2018. GSTR-3B
contains details of outward and inward supplies. The tax liability of GSTR-3B must be paid by the last
date of filing GSTR-3B for that month.

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