American Express Co.'s latest play at the less affluent, its nearly fee-free prepaid card, looks less complementary to its digital wallet, Serve, and more cannibalistic.
The New York company's new products have enough in common that customers may see little difference between them. Both can be funded from multiple sources, both function like a normal prepaid account at the point of sale, and both are designed to appeal to consumers who would not normally consider themselves prospects for an Amex card.
Amex will be in trouble "if the end user says, 'this is all a commodity, it's all the same thing, except that this one has two bells or whistles that I can take or leave,' " said Ben Jackson, senior analyst in the prepaid advisory service at Mercator Advisory Group in Maynard, Mass. "They have to do something to sort of keep these things from becoming commodities."
Amex launched Serve in March as a digital wallet for the masses. 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.
Shortly thereafter, in June, the company unveiled the American Express Prepaid Card to garner additional transaction volume.
The only real difference is the form factor — Serve is built around a smartphone application — and some added functions that Serve has, such as person-to-person payments and sub accounts.
Surprisingly, Amex executives said it designed the products to be this similar.
However, they stressed that although the American Express Prepaid Card is a finished product, Serve is still in development. In time, Amex said, its digital wallet will have enough added features to look like a more distinct product.
Serve "is really just a migration path," said Dan Schulman, American Express' group president for enterprise growth. "It's definitely not a digital prepaid product. That's for sure."
He said some are not thinking about Serve in the right context. It's a platform, not a card, and it is designed to be adaptable to customer demands and regulatory mandates, he said.
"Serve will have numerous applications and products," said Schulman. The current form is "release 1.0, with release 1.1 coming up in the next several weeks. In this next release you can have the software widget that will allow any consumer to become a seller as well as a buyer of things."
Charitable donations and couponing functions are also in the works, he said.
Amex is heavily invested in both digital and prepaid.
In April, Amex said it had hired MasterCard Inc. veteran Laura Kelly to be its senior vice president in charge of developing and marketing new prepaid products. Prior to joining Amex, she was MasterCard's executive vice president of global prepaid product solutions.
Last year, Amex bought Serve, which at the time was named Revolution Money, for $300 million. It also bought the security technology provider Accertify Inc. for roughly $150 million in November.
Amex has also dabbled in the prepaid market with various gift card programs and recent marketing partnerships, including ones with Target Corp. and AAA.
"One of the big learnings of the recession is that [American Express] has to stop coloring within the lines, and step out of their space a little bit," said Brian Riley, a research director in the bank cards practice at TowerGroup.
Another industry watcher agreed that Amex is in uncharted waters with both Serve and its new prepaid card.
"Nobody has a lot of experience with mobile," said Gwenn Bezard, a co-founder and research director at Aite Group. "At the end of the day, everyone is trying things."
