Chenault Says AmEx’s ‘Agnostic’ Serve Is Better Than Google Wallet

American Express Co.’s top executive on June 1 poked proverbial holes in Google Inc.’s new mobile wallet, arguing in favor of a competing payments system his company is testing.

Google Wallet faces an uphill battle because it relies on specific types of smartphones and will require many retailers to upgrade their payment terminals to use it, AmEx Chairman and Chief Executive Ken Chenault said during a presentation at the Sanford C. Bernstein & Co. LLC Strategic Decisions Conference in New York.

AmEx’s Serve alternative payment service sidesteps those issues because it is compatible with any merchant that already accepts AmEx cards, Chenault argued.

“We are device-agnostic,” he said. “We are also agnostic relative to funding. You can fund from any source.”

Chenault added that he does not “underestimate the power of Google” and its partners.

Google last week announced it is working with Citigroup Inc., MasterCard Inc., Sprint Nextel Corp. and other companies on a service that allows consumers to make payments from a mobile application on phones using Google’s Android operating system (see story).

Using a technology embedded in some smartphones called Near Field Communication, consumers can pay for purchases by tapping their phones against a retailer’s payment terminal.

Initially, consumers may fund transactions only from certain MasterCard-branded cards issued by Citi, though Google Wallet also includes a Google-branded prepaid account users may fund using an existing debit or credit card. Google says it plans to work with other banks.

The service, which Google is testing now in New York and San Francisco, also initially is limited to the consumers with the Nexus S, the only Android smartphone that contains an NFC chip. The service requires that merchants have terminals capable of “reading” information passed from the phone’s NFC chip.

“They are reliant on NFC technology,” Chenault said. “The one thing you want to be careful about with merchants is you’ve got to convince them to switch out their existing terminals or do it side by side.”

AmEx announced its Serve service in March (see story). Serve is a virtual account that works similar to PayPal Inc.’s alternative payments service. Customers may link any existing bank or card account to fund it and can use Serve to make purchases online or, by using an attached card, at the point of sale.

“We at least have a merchant network that we can leverage immediately,” Chenault said.

AmEx has been testing Serve with merchants in Eugene, Ore. (see story). Chenault would not provide specific findings from the pilot but said the company has been encouraged by the progress it has made.

“We’re going to ramp up the marketing more because we’ve been pleased with the progress that we’ve seen thus far in Eugene, Ore.,” Chenault said.

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