Can American Express Thrive in the BNPL Era or Just Survive?

American Express (AXP) is strategically adapting to the Buy Now Pay Later (BNPL) trend by integrating its 'Plan It' feature into its existing card ecosystem, enabling cardholders to break down purchases while retaining rewards. This approach, leveraging its closed-loop model, has resulted in 98% spend retention and a 7% year-over-year network volume increase in Q2 2025. Despite a 2.9% year-to-date share decline and trading at a forward P/E of 18.4x (below industry average), AXP projects a 14.3% jump in 2025 EPS, signaling its intent to lead rather than merely withstand disruption in the evolving payments landscape.

Analysis

American Express (AXP) is strategically navigating the Buy Now, Pay Later (BNPL) disruption by integrating installment payment functionality, branded as 'Plan It', directly into its core credit card ecosystem rather than launching a standalone product. This approach leverages its closed-loop business model and premium brand reputation, resulting in robust customer loyalty evidenced by a 98% spend retention rate. The strategy is translating into solid top-line growth, with network volume increasing 7% year-over-year in the second quarter of 2025. Despite this operational strength and a consensus earnings estimate projecting 14.3% growth for 2025, AXP's stock has underperformed, declining 2.9% year-to-date against the industry's 3.8% gain. This market lag has resulted in a potentially attractive valuation, with the stock trading at a forward price-to-earnings ratio of 18.4x, below the industry average of 20.6x. While AXP's growth is steady, it faces intense competition from BNPL-native firms like Affirm, which reported significantly faster growth with a 36% year-over-year increase in gross merchandise volume.

Key Decisions for Investors

• Investors should note the divergence between AXP's strong fundamental performance, including 7% volume growth and 98% spend retention, and its negative year-to-date stock performance of -2.9%, which could signal a value opportunity given its below-industry forward P/E of 18.4x.
• The primary consideration is whether to allocate capital to AXP's stable, integrated growth model within the BNPL space or to higher-growth, potentially more volatile pure-play competitors like Affirm.
• Closely monitor upcoming earnings releases to validate that the company's BNPL strategy and network growth are on track to deliver the projected 14.3% earnings per share increase for 2025, as this is a critical catalyst for potential share price appreciation.
• The Zacks Rank #3 (Hold) suggests a neutral short-term stance, so it may be prudent to await further evidence of earnings momentum before significantly increasing exposure.