Better Payments Stock for the Long Haul: American Express or Visa?

If you are looking at American Express (NYSE: AXP) and comparing it to Visa (NYSE: V), you are essentially comparing the high end to the mass market. Both companies have appeal as businesses over the long haul, depending on your personal investment approach. However, one is likely to have more opportunities to grow than the other. Here's what you need to consider as you decide between American Express and Visa.

What does Visa do?

Visa is a finance industry middleman. It charges a small, per-transaction fee to connect buyers and sellers. Other companies actually issue the credit cards and debit cards that carry the Visa logo. The issuer of the card assumes the financial risk associated with financing transactions, since a credit card is effectively a revolving line of credit.

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The small fees that Visa collects add up to big numbers. In the fiscal second quarter of 2026, Visa handled 66.1 billion transactions, up 9% from the previous year. That pushed revenues up 17%, with adjusted earnings jumping 20%.

What does American Express do?

American Express also processes transactions, earning a small fee each time one of its cards is used. However, American Express uses a closed-loop model, so it is the issuer of its cards. That means it assumes the financial risk of the revolving credit facilities offered to American Express card customers. It seeks to control that risk by focusing on wealthier customers who are likely to be more resilient in the face of financial adversity.

In the first quarter of 2026, American Express cardmember spending rose 10%, boosting the company's revenue by 11%. Adjusted earnings rose 15%. American Express is doing fairly well right now, but not as well as Visa. And the performance difference is important.

The high end versus the mass market

With a focus on wealthier customers, American Express has a smaller customer base to serve. Visa, by contrast, can provide transaction services to consumers from the high end to the low end, noting that there are far more customers who are not wealthy than those who are. That partly helps explain the differing financial results.

However, there's another key factor to consider. Both companies are benefiting from the ongoing transition from cash to card payments. By focusing on the high end, American Express is likely already serving most of its potential market. But if there's a recession, customer spending at the high end is likely to remain resilient, even if long-term growth is likely to be limited by the size of the customer pool it targets. That probably gives American Express a leg up on banks that issues Visa branded cards.

Visa, on the other hand, is likely to see its customer base and transaction volume continue to expand as more and more consumers shift toward card payments. The growth of online shopping almost guarantees that consumers will need a credit or debit card. And since the banks issuing the cards bear the financial risk, Visa can grow its volume with little downside. To be fair, a recession might lead to lower transaction volume, but that would likely be just a temporary hit as volume growth continues to expand over the long term.

What kind of business are you looking to own?

American Express is both a financial institution and a transaction processor. It might be a good fit for investors who don't want to own a bank, but still want some exposure to the financial industry. And the focus on the high-end of the market provides the business with material resilience. But you still need to be willing to take on the risk that American Express customers will fail to pay their bills.

Visa lets you sidestep that risk by focusing only on earning processing fees. And its willingness to serve any customer, from the high end to the low end, opens up a larger long-term growth opportunity. There is some risk of volume declines during economic downturns, but it's limited because Visa isn't making short-term consumer loans.

Visa's price-to-earnings ratio of 28x is above American Express' 20x, so American Express is the "cheaper" stock on an absolute level. But Visa's P/E is below its own five-year average, while American Express' P/E is above its longer-term average. For investors with a growth focus, Visa, which looks like it is on sale relative to its own history, is likely the more attractive option.

American Express is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express and Visa. The Motley Fool has a disclosure policy.