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.
Costco's business made up 8 percent of American Express's total sales worldwide in 2014 and 20% of its card-member loan portfolio, according to a company report to shareholders. The retailer will now issue branded cards through Citigroup (C) and use Visa's payment network.
Still, Chenault said he's confident there are ample opportunities for new branded-card partnerships, highlighting one with Charles Schwab launched in March. The company renewed partnerships with Delta (DAL), Starwood (HOT), British Airways, Cathay Pacific and Iberia, he noted.
"We were able to demonstrate with the signing of Charles Schwab that we have the capacity to do co-brand deals," he said. "There are going to be a range, as you know, of co-brand deals that will be coming up over the next 12 to 18 months. I think it's very positive that we have visibility and we understand where we stand with our existing co-brand partners that we were able to renew those deals."
Such partnerships make up just under 30% of American Express's total purchasing volume, but expenses have been rising due to increased rewards programs and membership deals. Expenses related to promotions and rewards for card members jumped 7% in 2014, up $476 million from the previous year.
"There could be some things that partially replace Costco, but right now AmEx is making incremental moves," Donat said. "It will take a few years to replace the net interest income from the lending side, as well as their discount revenue." Donat estimates that AmEx lost about $82 billion of its $1 trillion billing revenues with the Costco account.
"Schwab is a step in the right direction, but they are going to have a lot more steps to take," he said.