AmEx, Lianlin Tie Up - Analyst Blog


Yesterday, American Express Co. ( AXP ) (AmEx) announced its collaboration with China's mobile phone company - Lianlin Group - so that the latter can now use AmEx's Serve technology in China.

Serve is AmEx's next generation technology that aids eCommerce through the products and services that the mobile and card companies develop. Accordingly, through this partnership, Lianlin has acquired the licence to use AmEx's Serve.

The alliance is an extended relationship management between the two companies as AmEx has also made an equity investment in Lianlian Pay Inc., which is an overseas company of the Lianlian Group.

With the help of Serve, Lianlin can now empower itself with a new digital wallet, which will enable the Chinese company to help its 300 million mobile phone accounts to refill mobile minutes, pay bills and purchase products and services. Additionally, Lianlin's vast network of over 300,000 small business agents further allows both the companies to help penetrate Serve across Chinese markets.

Hence, Serve will drive AmEx and Lianlin's efficiencies as digital partners, thereby closely connecting its merchants with a high-speed payment solution, and consequently complying with the next generation needs. On the other hand, AmEx is expected to expand its eCommerce opportunities by extending its services in China besides accelerating cross-border payments.

While other global card giants are unable to penetrate successfully in rapidly and radically growing Chinese eCommerce market given the stringent fiscal and monetary policies in the country, AmEx has been able to make a significant advancement. In September last year, AmEx had also entered into a joint venture with Tencent Holdings Ltd., which has allowed AmEx to help provide cross-border purchases to Tencent's online payment unit - Tenpay.

Furthermore, AmEx also issues credit cards in China through Industrial and Commercial Bank of China, China International Trust and Investment Corporation, China Merchants Bank and Bank of China. Even the alliance with Lianlin attempts to be a well-fit in AmEx's operational and competitive growth.

Additionally, we believe these efforts are not only helping AmEx improve its operating leverage and reduce time-gap to reach out to its merchants but are also crucial for maintaining its competitive strength against arch rivals, such as MasterCard Inc. ( MA ), Visa Inc. ( V ) and Discover Financial Services ( DFS ), in the card industry. Hence, such collaborations in the growth markets and diversifying into eCommerce are crucial for AmEx in order to expand its revenue base.

Overall, we believe that the collaboration is expected to bolster the operating and competitive leverage for both Lianlin and AmEx and will be a positive step for their fundamental growth.

Currently, the shares of AmEx carry a Zacks Rank of #3, implying a short-term Hold and a long-term 'Neutral' stance.

AMER EXPRESS CO ( AXP ): Free Stock Analysis Report
DISCOVER FIN SV ( DFS ): Free Stock Analysis Report

MASTERCARD INC ( MA ): Free Stock Analysis Report
VISA INC-A ( V ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AXP , DFS , MA , V

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