In an effort to tap the emerging contactless payments market, American Express Company ( AXP - Analyst Report ) is moving to EMV (Europay, Mastercard and Visa) chip-based technology. The company plans to begin issuing EMV-compliant cards in the U.S. in the latter half this year. The new offering is expected to benefit its cardholders in U.S., ranging from merchants and processors to the issuers.

AmEx is slated to work in coalition with other industry players to bring about “interoperability” not only across the U.S. but also in other countries. The company hopes to improvise and support chip-based technology, thus aiding “chip and PIN, chip and Signature, contactless and mobile transactions.”

The company has chalked out its requirements in three stages that will be executed over the next couple of years. By April 2013, AmEx intends to install processors that will support its EMV chip-based contact, contactless and mobile transactions. Following this, in October 2013, the company will facilitate its merchants with PCI Data Security Standard (DSS) at the point-of sale where 75% of its transactions take place, which will be eligible for processing through AmEx’s EMV technology.

The company also plans to introduce a Fraud Liability Shift policy to safeguard the interests of both the merchants and AmEx cardholders by October 2015, allowing a time frame of two years for fuel merchants.

Over the years, AmEx has been striving towards the implementation of innovative technology. With the Serve payment service already to its credit, it extends its leadership into the rapidly growing person-to-person (P2P) mobile payment platform.

The company has also initiated many strategic alliances with Bank of China, Morgan Stanley ( MS - Analyst Report ) , Verizon ( VZ - Analyst Report ) , AOL Inc. ( AOL - Snapshot Report ) , Facebook ( FB - Analyst Report ) and initiated a number of inorganic expansions to improve its technological platform.

AmEx’s prime competitors, MasterCard Inc. ( MA - Analyst Report ) and Visa Inc. ( V - Analyst Report ) , are equally proactive when it comes to the implementation of the latest technologies. MasterCard has initiated talks with C-SAM, a non-U.S. based provider of turnkey solutions to bring a White Label Mobile Wallet solution, whereas Visa recently came out with an innovative online payment management tool for small businesses as it unveiled the Visa Payment Controls.

AmEx currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also retain our long-term Neutral recommendation on its shares.