American Express will certainly suffer when its 16-year cobranding deal with Costco ends in 2016, but its executives will spend the next year building up the card brand's digital payment products to create enough opportunities to ease the company's short-term pain and guarantee its long-term health.

"The payments industry is going through accelerated change, new technology is driving changes in consumer behavior and there is a convergence between online and offline channels," said Kenneth Chenault, chairman and CEO of American Express, during a conference call to discuss the end of the Costco relationship, which is scheduled for March 31, 2016.

"It is not easy to see a longstanding partnership end, but when the numbers no longer add up it is necessary," Chenault said. "There are other opportunities. Amex is nothing if not resourceful."

Amex will mix its technology with marketing programs built around loyalty, cash-back and other services, Chenault said.

Amex's technology initiatives include the establishment of technology hubs to attract hundreds of employees from outside the payments industry. The goal of this strategy is to bring in fresh ideas from people more accustomed to a working in startups.

The card brand also plans to use its OptBlue program, which allows acquirers to make fees flexible for small businesses, and its involvement with Apple Pay as levers for growth. Amex's Serve prepaid account is also embedded in Softcard, an Apple Pay competitor.

Amex also has other avenues to offset the loss of the Costco relationship, including non-Costco spending from Costco card users. More than 70% of the spending from the Costco Amex cards takes place outside of Costco, Amex reports, adding it would approach these customers with alternative Amex products. Amex did the same thing in Canada, where it lost the Costco contract in 2014, and said it's pleased with the results, though it did not provide details.

The high amount of non-Costco purchases suggests the Costco consumer base is higher end and valuable, said Ken Paterson, vice president of research operations and director of the credit advisory service at Mercator Advisory Group. "70% is remarkable. It shows how desirable these consumers are," he said.

In addition to giving Amex a lifeline, mobile commerce options provide flexibility for merchants, which no longer require a singular branded relationships with card issuers similar to the Amex/Costco partnership, said Richard Crone, a payments consultant.

"If Costco is able to have a mobile wallet, it allows consumers to put different payment types into it," Crone said, adding this also gives the merchant more control over customer data. "It's aggregate or be aggregated."

Additionally, there's also a finite number of big-box retailers, giving these merchants added leverage with card issuers, Paterson said.

"There aren't many opportunities in that space," Paterson said. "It's sort of a zero-sum game."

Amex's executives did not rule out the possibility that acceptance at Costco may linger beyond the 2016 end-of-service date due to transition issues. Analysts estimate the Costco relationship is worth about 15 cents per share to Amex.

The loss piles onto other economic challenges facing Amex, including economic conditions in the European Union and the stronger dollar, said Jeffrey Campbell, Amex's CFO, during the conference call.

The loss of Costco and the cost of investments in marketing and product development to offset the end of the Costco relationship will cause "unevenness" in performance, and could cause earnings per share growth to temporarily flatten. The company's outlook for 2016 is "complex," though Amex anticipates a return to growth by that time, Campbell said.

Amex has already lost the Costco account in Canada, and Chenault said the U.S. relationship was ending because the two companies could not come to terms on an extension. Costco did not return a request for comment by deadline.

Chenault and Campbell suggested increasing competition for cobranded cards was making the economics of the deals more challenging, though they did not provide details of the Costco negotiation or terms of the other recent negotiations. "The cost of renewing our cobranded relationships has increasedÂ…we have seen this dynamic play out at different times as contracts have come up or are renewable," Chenault said.

Amex is approaching its cobranding partners early, often well before the contracts expire, in part to get a sense of the economic outlook for cobranded cards, Chenault said. "We did this knowing it could have a near-term financial impact but it could also provide clarity about the programs going forward," he said.

The early negotiations have resulted in some wins for Amex, which has renewed its contracts with Starwood, Delta Airlines and Café Pacific.

"The fact that we were able to re-sign these merchants speaks to the fact that we can compete in cobranding," Chenault said. "There will be some cobrands where we can compete, and that is what we did with Delta and Starwood."

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