American Express ( AXP ) is a world leading financial services firm offering consumers charge and credit card-based payment products along with travel services to consumers and businesses across the globe. American Express has just recently launched a digital payment and commerce platform called, Serve which brings it in direct competition with EBay's e-wallet service, PayPal. Visa ( V ) also released a personal payments service and MasterCard ( MA ) should launch a personal payments.
How it Works
Serve offers consumers prepaid accounts that can be funded by debit, credit, charge card, bank account or transfers from other Serve accounts. Serve customers can shop online and can even send money to each other via smartphones. Serve (prepaid) accounts can be accessed via Serve Apple iOS and Android applications, via serve.com and through Facebook. Serve accounts come with a plastic card, which, like any American Express charge or credit card, can be used at any brink-and-mortar retailer that accepts American Express.
Fills Debit CardVoid
American Express payment products portfolio has historically been at a disadvantage due to the absence of a debit card product. American Express issues charge and credit cards but not debit cards, which are linked with the consumers' checking accounts.
Due to the volatile and high interest rates often in excess of 18% (annualized) on credit card debt, consumers have been using less credit in the recent years. Simultaneously, debit cards, which facilitate the payment process but come with no corresponding interest expense, have grown sharply. In the U.S. alone, spending on debit cards grew by 15% in 2010, compared to 6.3% for credit cards. With Serve, American Express can now address consumers who would have otherwise used debit cards or checking accounts for their day-to-day expenses.
Mobile Device Revolution
While mobile payment is still in a nascent stage, given over 4.8 billion mobile phone users worldwide, the opportunity is tremendous. Mobile payment users grew 70% to 73.4 million in 2009 and are expected to breach 190 million by 2012.
With such growth in the number of mobile phone users, it doesn't come as a surprise that the transactions via mobile phones are expected to breach $110 billion by 2013 ATM cash withdrawals will cost $2 per withdrawal with the first withdrawal every calendar month as free.
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