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AI Is Reshaping AXP's Risk Approach: Can it Deliver a Real Advantage?

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Key Takeaways

  • AXP integrates AI into credit risk, leveraging its closed-loop network for deep insights.
  • AI models analyze spending, repayment and merchant data to detect risks early.
  • Fraud detection and scalable risk management improve as AXP targets tech-savvy customers.

American Express Company (AXP - Free Report) is quietly making significant changes in how it handles credit risk, with a strong focus on incorporating artificial intelligence (AI) into its decision-making process. The company’s advantage lies in the richness of its closed-loop network, which provides direct insights into the behaviors of both cardholders and merchants. This depth of data not only enhances the effectiveness of AI adoption but also opens up the potential for greater profitability.

The biggest advantage of AI-enhanced risk systems is precision. Rather than depending on outdated credit scores, AXP’s models analyze real-time spending behaviors, repayment patterns and insights at the merchant level. This approach enables the company to identify potential risks earlier and take proactive decisions.

AI is also elevating AXP’s fraud detection capabilities. With advanced pattern recognition, it can identify unusual behavior in just seconds, which helps reduce losses and enhances the overall experience for cardholders. Another key advantage is scalability. As AXP reaches out to younger, tech-savvy customers, AI-driven models allow the company to manage risk effectively across a wider and more varied portfolio. This approach supports growth while maintaining strict credit discipline, something AXP always highlights.

By leveraging AI, AXP is enhancing its ability to evaluate risk, detect anomalies and adapt to a growing customer base. If managed well, these tools could provide a real competitive edge, transforming the company’s risk approach into a lasting advantage in the payments landscape.

How Are Competitors Faring?

Some of AXP’s competitors adopting AI to improve operations include Mastercard Incorporated (MA - Free Report) and PayPal Holdings, Inc. (PYPL - Free Report) .

Mastercard is making significant investments in AI, particularly for cybersecurity and fraud detection. Its Cyber & Intelligence unit powers real-time risk analysis and authentication. Additionally, Mastercard introduced Decision Intelligence Pro and collaborated with Microsoft to use AI to combat scams.

PayPal is actively integrating AI to enhance various aspects of its platform, making everything from checkout processes smoother to creating more dynamic workflows for developers. These AI-driven tools reflect PayPal’s commitment to boosting efficiency, tailoring interactions and enhancing security for both businesses and consumers.

American Express’ Price Performance, Valuation & Estimates

Shares of AXP have risen 29.6% in the year-to-date period against the industry’s decline of 1.7%.

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From a valuation standpoint, American Express trades at a forward price-to-earnings ratio of 22.07X, down from the industry average of 24.62X. AXP carries a Value Score of C.

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The Zacks Consensus Estimate for American Express’ 2025 earnings is pegged at $15.43 per share, implying a 15.6% jump from the year-ago period.

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Image Source: Zacks Investment Research

AXP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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