DFS Discover Financial Services

In a bid to establish user-friendly online payment functionality, last week American Express Co. (AXP) announced its alliance with Transaction Network Services (TNS) to launch a new payment service provider solution – American Express Payment Gateway – which would offer a single platform for all-sized merchants. This service has been initially launched in the US, UK, Australia and Mexico.

The new solution will enable quick and easy eCommerce facilities through a secure pathway, thereby averting fraudulent practices and keeping card data security intact. The latest solution paves the way for global payment acceptance with multi-currency enablement in over 120 global currencies and major local acquirer connectivity.

The solution will also deliver value-added services such as Accertify’s fraud management solution, which was launched in 2007 and acquired by AmEx in November 2010. American Express Payment Gateway also has the capability to verify the authenticity of the cardholder with the help of TNS’ tokenization solution.

We believe that the American Express Payment Gateway’s secure payment service solution should be able to provide incremental business opportunities to AmEx, as it complements the merchants’ payment needs on a broader scale. Generating this service solution with the help of TNS further enables a superior quality security initiative, which is needed in the rapidly evolving eCommerce field.

Earnings Review

Meanwhile, AmEx is scheduled to release is first quarter 2012 earnings results after the closing bell on April 18, 2012. The Zacks Consensus Estimate for the first quarter is currently pegged at $1.00 per share, up about 3% year over year. Of the 19 firms covering the stock, 2 raised their estimates in the last 30 days, while no downward revision was witnessed.

Fundamentally, AmEx has been driving its growth profile through improved credit quality. Alongside, the company has been upgrading its digital payment platform through strategic alliances, which will not only expand the company’s card membership base but will also help it penetrate the unexplored market and tap the upcoming opportunities in the field of eCommerce.

These factors are also strengthening AmEx’s competitive leverage against arch rivals such as Discover Financial Services (DFS), MasterCard Inc. (MA) and Visa Inc. (V).

Although increasing regulatory compliances, low interest rates and higher expenses are weighing on the net interest income and margins, our long view on AmEx remains firm. Hence, based on the company’s strong long-term organic growth drivers, the Zacks Rank for AmEx currently stands at #2, implying a short-term Buy and a long-term Neutral stance.

 
AMER EXPRESS CO (AXP): Free Stock Analysis Report
 
DISCOVER FIN SV (DFS): Free Stock Analysis Report
 
MASTERCARD INC (MA): Free Stock Analysis Report
 
VISA INC-A (V): Free Stock Analysis Report
 
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