AmEx's Next Conquest: Bank-Issued Cards

As more and more banks focus on providing wealth management products and services to customers, for a number of banks American Express is a "natural brand" to offer them, says Bryan Derman of Glenbrook Partners, a payments strategy consulting firm. American Express caters to wealthy and business clientele and forces Visa and MasterCard to "put some more energy" into that higher-end customer, Derman says.

While the MasterCard settlement was positive, American Express shares floundered on Wednesday after the company warned that business conditions "continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations," CEO Ken Chenault said.

As the credit and housing crisis ricochets throughout the financial services sector, the stocks of the payment processing firms such as MasterCard and Visa have outperformed. Shares of American Express are down roughly 20% this year, while Discover is relatively flat. In comparison, MasterCard's stock has risen 34% this year, while shares of Visa, just three months as a public company, are up roughly 38%.

American Express, like Discover, is looking to provide a more diversified earnings stream, observers say.

While American Express has suffered a bit of a "disadvantage," network services does provide the company with several value propositions to pose to banks, says Craig Maurer, an analyst at Calyon Securities, a unit of Credit Agricole.

"People who use those cards spend more and the banks are able to collect more on interchange because AmEx's average interchange [fee] is a little bit higher," he says. "It's a much more economically protected business for them. There is no credit risk."

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