American Express Goes After Debit Card Market

American Express has long been a powerhouse in the credit card market. Recently, it has ventured into other financial products like savings accounts. Now the credit card powerhouse, tired of being shut out of the lucrative debit card market, is offering a new product called Serve, which is a form of a debit card.

How it Works

If you are an avid online shopper, you’ll recognize the concept that American Express is offering with its Serve account. Essentially, it is an electronic wallet like PayPal. The Serve account is linked to a funding account, which is either a checking or savings account or a credit card.

The Serve account can be used for making online purchases, shopping in brick-and mortar stores via a plastic card, or sending money to another person. Serve is also a payment processor for businesses to process credit cards. Money is moved from the funding account to the Serve account at the user’s discretion.

Mobile Payments

Another feature of the Serve account is mobile payments. In much the same way as PayPal allows transfers from smartphone to smartphone, by either bumping the two phones together or using the mobile app, Serve offers an option for payments to be made from one smartphone user to another.

The Benefits

The primary benefit of using Serve, PayPal and other electronic wallets is that they keep the credit card or funding account information confidential. Say a Serve account holder makes an online purchase. When it comes time to check out, the user enters the Serve account information as the payment option. If hackers were to get their hands on the account information, they would not gain access to the Serve user’s full bank account or credit line.

Serve could benefit retailers, too. American Express charges merchants a 2.5% fee on every purchase made with its credit card. But, according to Bloomberg News, Serve payments will “generally” be charged at a lower rate.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.