On Wednesday, American Express Co. (AXP) (AmEx) expanded its digital payment services by partnering with a leading mobile payment processing service – Payfone, in a strategic alliance whereby the latter will integrate its advanced mobile authorization and payment services with AmEx’s Serve.
Serve is a digital payment service, launched by AmEx about a fortnight ago, using which customers can transfer funds online and also through their mobile phones. Currently, the service is available to the company’s consumers in the US, while an international launch is forecasted in 2012.
Serve is the outcome of AmEx’s technology generated from its $ 300 million acquisition of Revolution Money last year. The latter is also an arch rival of Ebay Inc. (EBAY) PayPal person-to-person (P2P) e-payment services, while core services of Serve are similar to PayPal.
Serve accounts facilitate online payments through mobile phones and at the merchants who accept AmEx’s cards. The accounts are user-friendly and can be funded from a bank account, debit, credit or charge cards, or by receiving money from another Serve account. These accounts can be accessed by Apple’s iOS operating system and Android applications, at Serve.com and also through Facebook, on the mobile phones.
On the other hand, Payfone operates on a unique IP that focuses on steering the merchant sales conversion and earning revenues while ensuring an anti-fraud processing by checking with the carrier upfront, thereby delivering an authentic payment service.
Hence, the Serve-Payfone combination is based on providing the choice of a high grade and best value to its consumers while also enabling the mobile operators to participate in the transaction flow and benefit from an entirely new revenue source.
Additionally, Serve operates with any US bank, debit or credit account, including cards from AmEx and its peers such as Visa Inc. (V), MasterCard Inc. (MA) and Discover Financial Services (DFS). Therefore, the Serve-Payfone will have the capability to deliver their services across financial institutions and mobile operators, thereby enhancing its competitive and operating leverage in the long run.
Moreover, currently the P2P payment platform through mobile is growing rapidly, given the flexibility of time and easy fund transfers. According to Generator Research, over 490 million customers are anticipated to use mobile payments by 2014 resulting in an annual market growth of $ 633 billion.
Currently, though there are 5 billion global mobile phone users, only 2 billion of them use credit cards. This again leaves a big gap to be bridged, which widens the scope of growth for card companies.
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