“Serve” Plunges American Express (NYSE:AXP) to Greater Heights



The famous financial services company American Express (NYSE:AXP), is shining like always. The company is well known for the introduction of new exclusive clubs found on cardholders. Besides this, the company also has extraordinary success rates in all other departments like prepaid gift cards and co-branded cards. As for now, the company (NYSE:AXP) has plans to reach a faraway audience, i.e. people who still don’t use their traditional bank accounts and specifically their credit cards.


In other words, the company is expanding their business for the underbanked population. Whereas, American Express’ (NYSE:AXP) Serve has been around the market for some time and has given a tough competition to its rivals, from Wal-Mart to Bank of America. The new Amex’s (NYSE:AXP) Serve is a reloadable prepaid card account which can be used like any other credit card. The card comes with a combined checking account and users can perform free online bill payments and free ATM transactions at more than 24,000 locations.


However, the main reason behind the popularity of American Express’ (NYSE:AXP) Serve is that it’s the cheapest card of its type. In fact, customers will have to pay only a monthly account fee of $1 per month, and this can also be waived, if the accounts have at least $500 at the end of each month’s statement. Moreover, users can transfer money via cash to their accounts at a number of locations (more than 27,000) including places like Wal-Mart, CVS, 7-Eleven, etc.


In contrast with Amex (NYSE:AXP), several rival companies charge different amounts, like Green Dot charges about $8.95 monthly fee and the famous Western Unions deducts $2.95 per month with ATM charges of $1.95 including several other charges. So, one might think: how will the company (NYSE:AXP) generate enough profits with $1 per month fee, and a fee which can easily be waived? If the company (NYSE:AXP) did manage to get 5 million Serve customers, it would mean at the end of the year the company (NYSE:AXP) would only generate 60 million dollars.


However, Amex (NYSE:AXP) has some other plans, like some big companies Amex already charges higher swipe fees at retailers. So, we can say American Express (NYSE:AXP) right now is currently depending on more and more customers using their credit cards. According to a rough estimate Amex (NYSE:AXP) charges 3.5% swipe charges whereas, MasterCard and Visa charge about 2-3%, so if an Amex (NYSE:AXP) customer spends $250 using a credit card he provides the company $8.75 per month.


In fact, the idea actually seems to work. Reports suggest that the company is now planning to add more users for the Serve card, and of course this would not happen if the plan was not working. So we can see that the company (NYSE:AXP) is betting it all on their credit card business. They may generate a larger revenue in coming times.