In its digital payments strategy, American Express is placing more bets on cash. The card network plans to add a free cash reload option for its Serve prepaid digital wallet, reducing its reliance on Green Dot's MoneyPak reload cards.

Amex is also adding several features that broaden the functions of the Serve account, and plans a $1 monthly fee that can be waived with direct deposits. Amex expects to launch its free cash-load option in November at 7-Eleven and CVS stores through a partnership with InComm.

"The Serve product is targeted at the underbanked … and this consumer segment has a need and a wish to use many payment forms to put funds onto our digital Serve account," says Stefan Happ, senior vice president and general manager of online and mobile at Amex.

Amex's other planned changes for Serve include direct deposit, bill pay, mobile check capture, personal financial management tools and a linked reserve or savings account. Amex plans to add the $1 monthly fee in December, and the fee can be waived if customers use direct deposit or add $500 or more to the account each month.

The changes bring Serve more in line with a full-featured bank account and reflect the way consumers use the Serve digital wallet, which comes with a linked prepaid card. The $1 fee also maintains Amex's practice of pricing its prepaid products well below what rivals charge.

For cash loads, Amex already supports InComm's Vanilla Reload product, which has a fee of up to $3.95. Green Dot's MoneyPak costs up to $4.95 depending on where it is purchased. Amex's free cash-load option doesn't replace any of the existing choices, but it is priced to undercut them.

"In most instances it costs between $3 and $5 to put your hard-earned cash on a prepaid card," Happ says. "I would rather put cash on the account for free instead of paying a fee and I'd guess there are more consumers like me."

Green Dot, for its part, has also been working to aggressively beat its rivals' pricing. Its GoBank account, launched in January, lets consumers choose to pay $0 to $9 a month. For its standard prepaid card, Green Dot charges $5.95 a month but waives the fee for users who load at least $1,000 or make 30 purchases in a billing cycle.

When Amex first began working with Green Dot as a funding mechanism for its Serve account — despite seeing Green Dot's prepaid product line as competition — the card network found the cash-load option to be extremely popular.

"We were amazed how many people use cash as an inflow mechanism–straight cash," Happ said last June during SourceMedia's Mobile Banking and Commerce Summit. "Our only cash inflow [method] is actually enabled by what we used to think of as a competitor."

InComm has already helped PayPal in a similar initiative. PayPal, which also allows cash loads from Green Dot MoneyPak cards, in December launched the PayPal My Cash Card, a single-use reload prepaid products for converting cash into online funds. The PayPal My Cash Card, an InComm product, costs $3.95 and allows PayPal to directly reach more merchants than it could previously, PayPal said when the product debuted.

PayPal allows users to load funds in a variety of ways, including MoneyGram kiosks and Outerwall's Coinstar kiosks, which allow the funds from counted coins to be deposited directly into PayPal accounts.

These methods not only target cash-based consumers without traditional bank accounts, but also banked consumers wanting to budget their money.

InComm's technology can determine if the consumer swipes a Serve prepaid card at the point of sale and waives its fees for the load. It does not require the user to visit a website to link the cash-load card to the stored-value account.

"We're eliminating that second step for the consumer, making it easier for the consumer," says Jeff Lewis, vice president and general manager of the financial services division at InComm.

Amex's latest moves indicate that it sees a broad potential audience for Serve, says Madeline Aufseeser, a senior analyst at the Aite Group who covers debit card issuing, marketing and processing.

"The marketplace for prepaid cardholders is a mass market population at this point," Aufseeser says. The cash reload launch "isn't targeted; it's all about adding utility."

The new cash reload option "helps Amex Serve stand further apart of others in the marketplace," she says. Because the cash reload feature is free, it sets Amex's Serve to compete with Green Dot, she adds. 

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