What is the primary function of the American Express system?

The primary function of the American Express system involves various aspects of transaction processing, but one of its critical roles is related to managing card acceptance agreements. American Express operates through a closed-loop system, meaning it directly connects cardholders and merchants without relying on third-party banks for transaction processing.

In managing card acceptance agreements, American Express establishes relationships with merchants to accept their cards, outlines the terms of acceptance, and delineates how merchant fees are assessed. This function is vital because it enables American Express to ensure compliance, quality of service, and security within its transaction ecosystem.

Although processing online payments, providing credit card rewards, and managing customer loyalty programs are also significant functions of the American Express system, they fall under broader operational strategies. The management of card acceptance agreements serves as the foundational layer that enables these other functions to occur, hence highlighting its primacy in the overall framework of American Express's operations.