American Express Co. is positioning its undisclosed investment in mobile-payments company Payfone Inc. as the next step in adding additional functionality to the card brand’s new Serve digital wallet product.
The partnership, announced April 13, will enable consumers to make purchases from online merchants and within smartphone applications using their mobile-phone number at checkout. Consumers can link the phone number to a number of payment methods, including directly to their phone bill or to a Serve account.
“When we introduced Serve, we said we were going to be constantly enhancing the platform,” Dan Schulman, AmEx group president for enterprise growth, tells PaymentsSource. “We are going to look for new capabilities and look to do things in a different way with companies in different ecosystems.”
New York-based Payfone authorizes and processes its transactions using the same intercarrier roaming network as the mobile operators, according to the company’s website. The network enables a customer from one mobile carrier to access services from another carrier using the same handset.
Payfone sends consumers who choose to pay with their phone number a one-time text message containing a personal identification number they must enter to complete the transaction. Additional purchases through Payfone do not require a PIN because the company is able to tie the phone’s SIM card, device identification number and location into the account using the roaming network.
Payfone’s system has international reach, which AmEx believes will help it with Serve’s international rollout, Schulman says. “[Payfone] will enable us to work with carriers across the world and into their billing infrastructure,” he says.
AmEx believes Serve can help the company enter developing economies such as India, where credit and charge cards are a small part of the payments infrastructure and there is a move to mobile payments, Schulman says. “The partnership gives us the ability to enter a market that we might not have been able to access beforehand,” he says.
AmEx intends to roll out Serve to several key international markets by the end of the year, Schulman says.
To use Serve, users first 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 application that supports person-to-person payments from iPhone and Android handsets (
AmEx is the sixth company to invest in Payfone, which also has secured funding from BlackBerry Partners Fund G.P. Inc., Opus Capital, RRE Ventures LLC, Rogers Ventures and Verizon Investment Management Corp.
Payfone views AmEx’s investment as a way to access merchants already associated with the card brand, Rodger Desai, company co-founder and CEO, tells PaymentsSource. “The investments that we have are from companies in the ecosystem that make mobile payments work,” he adds.
Serve’s new mobile-payment capability could help merchants build sales activity because not all consumers use traditional forms of payment for a number of reasons, says Beth Robertson, the director of payments research at Javelin Strategy and Research.
“Having that option is great for the younger consumer and bringing in the underbanked,” she says. “Expanding into global markets will help because mobile devices are common where other payment forms are less common.”
AmEx’s challenge will be to drive adoption for Serve against competing alternative payments services, Robertson says. “The Payfone option is certainly one way to add additional value in offering a new alternative," she says. “But how will they compete with PayPal and traditional payment methods in [developed] global markets?”
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