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, allowing cardholders to convert purchases into monthly installments within its existing ecosystem. This proactive approach has contributed to a 7% year-over-year network volume growth in Q2 2025 and 98% spend retention, with its closed-loop model poised to generate increased interest income from BNPL. While AXP's stock is down 2.9% year-to-date against an industry rise, its forward P/E of 18.4x is below the industry average, and analysts project a 14.3% earnings jump for 2025, indicating a strong position to leverage, rather than be disrupted by, the evolving payments landscape.

Analysis

American Express is strategically adapting to the Buy Now Pay Later (BNPL) trend not by launching a standalone competitor, but by integrating BNPL functionality directly into its core card ecosystem via the 'Plan It' feature. This approach leverages its established brand trust and rewards programs, contributing to an exceptionally high 98% spend retention rate. The strategy is yielding tangible results, with network volume growing 7% year-over-year in the second quarter of 2025, comparable to PayPal's 6% payment volume growth in the same period, though lagging the hyper-growth of pure-play BNPL firms like Affirm. Despite this operational strength and a consensus earnings forecast projecting a 14.3% jump in 2025, AXP's stock has underperformed, declining 2.9% year-to-date against the industry's 3.8% gain. This market performance disconnect creates a compelling valuation case, as the stock trades at a forward price-to-earnings ratio of 18.4x, a discount to the industry average of 20.6x. The company's closed-loop business model is also well-positioned to directly capture increased interest income as installment payments become more prevalent.

Key Decisions for Investors

• Investors should consider the disconnect between American Express's strong fundamental execution, including 7% network volume growth and 14.3% projected earnings growth, and its recent stock underperformance, which may signal a value opportunity.
• Monitor the growth metrics of BNPL pure-plays like Affirm, whose 36% gross merchandise volume growth highlights a more aggressive expansion that could challenge AXP's market share in specific consumer segments.
• Given the stock's valuation discount to the industry at a forward P/E of 18.4x, investors with a bullish outlook on the longevity of integrated financial ecosystems over standalone fintech solutions might view the current share price as an attractive entry point.