Amex Taking Prepaid Expansion To Colleges

American Express Co. is expanding its prepaid payments business through a partnership with CardSmith LLC, which develops and manages campus ID card programs for colleges.

Amex will provide a reloadable prepaid account option on students' ID cards, which can be used for buying on-campus meals, checking library books and other functions. With the prepaid account, students will be able to use the cards to pay for purchases at any merchant that accepts Amex.

"The cards will have multiple loading options, including financial aid disbursement," an Amex spokesperson wrote in an email on June 30.

Like the general purpose prepaid card Amex announced in June (see story),  the payment accounts on the ID cards will not have fees for monthly maintenance, activation, balance inquiries, alerts and foreign currency. However, it will charge a fee for ATM withdrawals after the first withdrawal of each month, which will be free.

Amex has been pushing prepaid products in an effort to grow its business beyond the traditional credit and charge cards it issues to higher-end customers. It is testing the sale of co-branded reloadable prepaid cards with Target Corp. through some of the retailer's stores (see story) and recently unveiled its own Amex-branded prepaid card, which is currently only available online. It also has a partnership with AAA Southern New England in which the automobile club's members can activate a prepaid account on their membership cards (see story).

"We especially see opportunity where we can enhance functionality in the cards consumers already have in their wallets by adding the ability to make payments," the spokesperson wrote.

CardSmith, of Doylestown, Pa., has campus ID programs with Southwestern Oregon Community College, Florida State College at Jacksonville, Jacksonville University and others.

The Amex spokesperson said the company will be announcing partner institutions for the prepaid account feature in the coming months.

Aite Senior Analyst Ben Jackson says there are several other campus card programs like this, including the Rock Dollars Program at Slippery Rock University, which is a restricted authorization network that runs on the Pulse/Discover network.

“There are also closed-loop versions that are in use at universities and even some elementary and secondary schools for things like school lunch programs,” he says, noting that since these cards are not credit cards, they avoid the restrictions that come with marketing credit cards to college students and on college campuses.

Jackson add that’s the deal could give Amex new cardholders in the future.  Jackson adds that the deal could give Amex new cardholders in the future. “The advantage for a company like American Express is that it gets the company a chance to introduce the brand to new customers in an environment where they are nearly a captive audience,” says Jackson. “They also get to build a brand relationship that may encourage students who have a positive experience with the card to choose American Express in the future when they need a credit card.”