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 that already have a multitude of mainstream and alternative payment products from which to choose. The product’s benefit to merchants is clear: Because it is tied to a prepaid card, Serve costs them less to accept 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 is not yet obvious, says James Van Dyke, president of Javelin Strategy and Research in Pleasanton, Calif.
“There is a tendency in alternative payments to have really cool payment systems looking for a problem,” he says. “We see problems represented in the form of payments needs particularly with Gen-Y.”
Laura Barger, an AmEx marketing manager in charge of the project, says Serve addresses this by offering to address as many payments needs as possible, and each consumer that uses Serve may favor the product for different reasons.
Besides having a prepaid card, Serve has a smartphone application for account management and a Facebook app called “Pay Me Fool” for person-to-person payments.
The New York-based company has begun reaching out to local farmer’s markets, University of Oregon students and community charities.
“I think, as a company, we are working with messaging” and conveying the incentives of using Serve, Barger says. “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, she says.
AmEx already has encountered skeptics within Serve’s target audience.
“Why are they putting this out here, now?” asks William Breninghouse, a small-business owner in Eugene, Ore., who holds leadership positions in several local economic organizations. “Do we need another way to exchange our money?”
Breninghouse says he found AmEx’s promotion of Serve in Eugene, including at a table at the most recent Eugene Saturday Market, to be overwhelming, and he says he just does not see Serve’s purpose.
“I’m the kind of person that doesn’t react to that” heavy-handed approach, Breninghouse says. “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.”
During an earnings call with investors last week, analysts expressed concerns about the expenses behind AmEx’s push with Serve. 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,” says 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. So it’s Serve … [and] all of the other technology investments that they are making. It’s the reinvestment in the business: How much of it is permanent verses how much of it is discretionary?”
Still, AmEx’s push in Eugene may prove to be the right test bed for Serve, says Brian Riley, research director in the bank cards practice at TowerGroup.
“You have early adopters” in Eugene, he says. “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?”
