Will American Express's New E-Wallet Product Succeed?

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American Express has defined itself over the years as having a very well-defined niche. It catered to the high-end credit crowd with premium credit and charge cards. That makes its announcement today of its decision to enter the e-wallet market somewhat surprising. Does this represent a departure from its historic focus on high-end clients or an attempt to keep up with emerging payment technology so that it isn't left behind?

Amex will run its new offering through a new site called Serve.com, which can also be accessed through mobile applications. The technology comes in large part through its acquisition of Revolution Money in 2010. Here's how it works, from the press release:

Consumers set up an online account at Serve.com or through a smartphone app. Funds can be added from bank accounts, debit cards, credit and charge cards, or other Serve accounts. Customers can use those accounts to send and receive money to friends, pay bills and make purchases online. Serve bridges online and offline commerce - each customer will be issued a Serve reloadable prepaid card linked to their Serve account that can be used at any merchant or ATM that accepts American Express cards.

This sounds essentially like Amex will be providing debit accounts that allow customers to transfer money in a variety of ways electronically. Of course, this will come at some cost:

There are only two fees for consumers and we are waiving the fee to put money into the Serve account for the next six (6) months. The two fees are:

  • Putting money into a Serve account: 2.9% + 30c/per load, discounted to 0% for cash, debit and ACH.
  • ATM cash withdrawal (after first one each month free): $2.00

Unlike some other products in the market, Serve has no fees to open an account, no monthly fees, no fees for P2P transactions, no fees to set up sub-accounts (up to four accounts) and no fees to use the widgets.

The company is targeting other electronic payment tools like PayPal and debit cards offered by its big competitors Visa and MasterCard. Its fees appear to be reasonable compared to the rest of the market.

This strategy does look like a somewhat new direction for Amex in more than one way. Obviously, it's a big technology play. Amex wants to have an offering that puts it at the front-edge of the electronic payment market. But it also appears that Amex intends to make Serve available to most consumers -- not just high end customers. That decision probably makes sense, as there's little credit risk, since accounts will be pre-paid. This represents an expansion from the firm's usual niche to a very broad base of consumers.

It's hard to know at this time how competitive the new platform will be. In the press release, Amex announces several partnerships, with companies including Ticketmaster and Concur. The Ticketmaster partnership could be a significant one if the vendor really does push out Serve. It has a virtual monopoly on event ticketing, so a huge number of customers could potentially be exposed to the platform. Concur is a small business expense reporting service, which implies that Amex hopes Serve will catch on with business clients. The business card market is one where the company has had a great deal of success over the years.

Amex appears to have a well thought out strategy for this new product. But it won't be a cinch to break into a market that has been around for a while. E-payment services are still relatively new, however. So Amex can't be counted out yet. Leveraging its relationships with some big merchants will also help. But this is a very new business on several levels for the company. The product is available to a broader range of customers, includes new technology, and represents the company's first debit-like offering.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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