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American Express, going against its image as a brand for the elite, is launching a digital wallet that would make it the payment choice for the masses — in person, online and in mobile.
March 28
American Express Co. is hitting the streets in Eugene, Ore., to promote Serve, its digital wallet for those consumers who are turned off by the elite branding of its main product line.
To succeed, Serve must win over consumers who already have numerous mainstream and alternative payment products to pick from. Serve's benefit to merchants is clear: Since it is tied to a prepaid card, Serve costs them less than Amex credit cards do. The benefit is also clear to Amex, which is aiming to attract a wider audience.
But Serve's case for consumers isn't yet obvious, said James Van Dyke, the president of Javelin Strategy and Research in Pleasanton, Calif.
"There is a tendency in alternative payments to have really cool payments systems looking for a problem," he said. "We see problems represented in the form of payments needs particularly with Gen Y."
Laura Barger, an American Express marketing manager in charge of the project, said that Serve addresses this by offering to accommodate as many payments needs as possible — each consumer that uses Serve may favor the product for different reasons.
In addition to having a prepaid card, Serve has a smartphone app for account management and a Facebook app called Pay Me Fool for person-to-person payments.
The New York company has begun reaching out to local farmer's markets, University of Oregon students and area charities.
"I think, as a company, we are working with messaging" and conveying the benefits of using Serve, she said. "So for some of the people that might not be sold on the virtual aspect of alternative payments, the real hope is that all of these aspects get you comfortable with" the digital wallet.
University of Oregon senior Tim West said he likes Serve.
"I can see it being useful for rent," he said. "The lease is in my roommate's name, and to [pay him] online with my bank I have to go through a series of hoops. … I have already told him to sign up for Serve."
Others in Serve's target audience expressed skepticism.
"Why are they putting this out here, now?" said William Breninghouse, a small-business owner in Eugene who holds leadership positions in several local economic organizations. "Do we need another way to exchange our money?"
He said he found Amex's promotion of Serve, including at a table at the most recent Eugene Saturday Market, to be overwhelming. Breninghouse said he just doesn't see Serve's purpose.
"I'm the kind of person that doesn't react to that" heavy-handed approach, he said. "If you ask me a couple of times, maybe, but if you ask me seven or eight times — I'm not inclined to do it."
On an earnings call with investors last week, analysts expressed concerns about the cost of the Amex's Serve promotion. The product stems from its $300 million acquisition of Revolution Money in 2009.
"You have a cheap stock and it's because people question whether Serve, as well as [American Express'] other stuff, will turn into profitability," said John Stilmar, who follows credit card issuers for SunTrust Robinson Humphrey in Atlanta. "American Express' expense base is very high relative to its historic levels."
Brian Riley, research director in the bank cards practice at TowerGroup, said Amex's campaign in Eugene may prove instructive for Serve.
"You have early adopters" in Eugene, he said. "That group is very receptive to different types of strategies. The market is hot and the question is where are you are going to find that use case?"
