How American Express Can Thrive Whether Customers Use Plastic or Digital Cards

NEW YORK (TheStreet) -- Whether American Express (AXP) users swipe a plastic card at a cash register or scan its digital equivalent on a smartphone makes little difference, Kenneth Chenault says.

The charge-card giant's CEO dismisses concerns that credit card use may decline with the advent of services like Apple (AAPL) Pay, Google (GOOG) Wallet, Samsung (SSNLF) Pay and Android Pay. In fact, its cards are already supported by Apple Pay and will be supported by recently introduced Android Pay as well, the companies have said.

"I don't care if plastic goes away," Chenault said. "That's not what the relevant point is." What is important is keeping the "closed loop" payment system -- in which the New York-based finance company has direct relationships with both merchants and consumers -- that makes the card business valuable.

"I'm excited about the implementation of Apple Pay, even though it's in its early stages," Chenault said at last week's Bernstein conference in New York.  Apple Pay "really acts as a pass-through wallet, where I have the direct relationship with the merchant and the end-user customer. That becomes very, very important -- that direct relationship -- because that gives us the continuing ability to differentiate our products and services."

Christopher Donat, an equity analyst with Sandler O'Neill, concurs with Chenault's assessment of digital payments. Such services are unlikely to disrupt legacy stalwarts like American Express, Visa (V) or MasterCard (MA), he said.

"American Express has their relationship with the customer and the merchant," he said. "Also, when you look at something like Apple Pay, you see a decent overlap between people who have the iPhone 6 and those who have Amex cards."

The expansion into digital payments comes amid a challenging year for American Express. The 165-year-old company is grappling with the loss of its contract to provide branded cards for warehouse retailer Costco -- a 16-year partnership that was one of AmEx's largest. Its shares have dropped 14% this year. By comparison, payment networks Visa  (V) and Mastercard  (MA) have both gained: 5% and 8%, respectively.

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