American Express Co., 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.
Its wallet, which it is expected to launch Monday, is called Serve, the brand Amex gave to the alternative payment provider Revolution Money after buying it in 2009. Serve is not restricted to Amex cardholders; any card brand or bank account can be used to fund Serve transactions, and it works automatically with any merchant that already accepts Amex cards.
"This is not an Amex wallet," said Dan Schulman, American Express' group president for enterprise growth. Serve "allows us to address a larger chunk of the marketplace that we haven't before."
In Serve's current form, "some of this is like PayPal," Schulman said. Users enroll by linking any bank or card account and choosing which to use to fund each payment. They receive a card for use at the point of sale, an account number to use online and an app that allows person-to-person payments from iPhone and Android handsets.
"It's no secret that the world is moving towards digital transactions, and our goal is to be a market leader, and you will see that," Schulman said.
Later this year, Amex will allow third-party developers to connect to Serve using software development kits and open application programming interfaces. This will allow Serve payments to be built into televisions sets, for example.
"As you look out into the future, I think it's highly likely that we have an information overlay that all of us share across our multiple screens," Schulman said.
Consumers can manage any accounts they link to Serve through a payment hierarchy. If a user's bank account is running low, a transaction can instantly move to a credit card, an Amex spokeswoman said.
Consumers can also request multiple cards be linked to a single Serve account. They can fund these cards separately and place restrictions on their use. Amex also plans an app for Research In Motion Ltd.'s BlackBerry handsets.
"My take is that they smoked the market," said Brian Riley, a research director in the bank cards practice at TowerGroup. "It's a tremendous play, and they have developed it at a time when no one expected Amex was going to come out with anything interesting."
In purpose though not in function, Serve resembles a payment system Visa launched last year, called Rightcliq, which focused on e-commerce.
The difference between Rightcliq and Serve is in their business models, Riley said. Rightcliq focuses more on social media, whereas Serve is focused on real-time transactions.
Behind the scenes, when a user makes a payment, Amex acts as a merchant, paying interchange to the card's issuer. Amex charges the retailer an undisclosed, prepaid discounted rate. It would not say what this rate is, but said it is comparable to the interchange rate for a prepaid card.
A user's information is stored encrypted on a server.
Though Amex compares its system to eBay Inc.'s PayPal, experts say it is more a threat to rival card networks and issuers.
"What Amex is trying to do is sign up millions of people, whether they are Amex customers or not," said Gwenn Bezard, co-founder and research director at Aite Group in Boston. "Let's say they succeed and they succeed in a big way: They could have a mobile wallet with millions of Chase customers, millions of Visa and MasterCard and [Bank of America Corp.] customers."
For those issuers and networks, "that would be a nightmarish scenario," Bezard said.
Despite Serve's promise, experts say it has multiple hurdles ahead of it.
Foremost, Amex has to sell the service's appeal to consumers, who already have numerous options for streamlining payments in any of the channels Serve touches.
Bezard said Amex needs to offer consumers a reward to encourage them to sign up.
"Functionality is nice, and cute, but if you can provide any monetary value or rewards to consumers, it could be really powerful," said Bezard.
Amex must also address risk. A major reason that PayPal succeeded in online payments was that it was able to overcome the massive number of fraud attempts against its service.
Amex assumes the liability for Serve transactions. Its spokeswoman said the company will be allocating additional resources to customer service as well.
Observers said Amex's rivals may try to block their cards from working with its service, particularly if it interferes with certain spend-tracking features they pitch.
"It could be that Visa or MasterCard could declare [Serve] a threat to the integrity of their network, and they block" Amex, said Aaron McPherson, a research manager for payments at IDC Financial Insights. "There is no love lost between any of those guys."
Representatives for Visa and MasterCard said they could not provide comment.
Amex said it also plans an eBay-like service to allow Serve users to sell items to one another.
Serve will eventually be better integrated with online merchants, Amex said.
