Card Networks Like Visa and Mastercard Don't Take Credit Losses. American Express Does. Here's Why That Matters for the Stock.
Visa and Mastercard operate capital-light open-loop payment networks with ~60% operating margins and avoid credit risk, commanding higher valuations than American Express. Amex runs a closed-loop system as both processor and card issuer, holding $215 billion in card balances and taking on credit losses ($3.3 billion in provisions over nine months). Despite lower valuation multiples, Amex is a high-quality company targeting affluent customers with the lowest net charge-off rates in its peer group, and has outperformed the S&P 500 over five years.
