Payment Methods

Amex Finds Serve No Longer Serves

Amex CEO Ken Chenault said that to grow, sometimes you have to feed on yourself. Yesterday, Amex announced it was doing that by shuttering pieces of its once-vaunted Serve unit. We’ve got the story on what stays and what goes in the context of how just how hard it’s been for this payments giant to fold in large acquisitions and use them to innovate.

Amid the lookback that was the annus horribilis for American Express, and the anticipation that tonight’s earnings will bring, there’s news that one more of Amex’s acquisitions is not working out as planned.

In fact, the serial fate of many of Amex’s deals and partial investments has been playing out like some corporate version of Henry the Eighth’s marital history (behead, beheaded, sold to private investor, written off) … among the detritus has been Harbor Payments and Rearden Commerce (a former investee of Amex and now separate and known as Deem).

In the latest news, the long-standing, more than five-year old push by American Express Co. to shore up its standing among enterprises large and small, and especially among new customers, is likely to be shuttered. 

Bloomberg reported Wednesday (Jan. 20) that the credit card and payments company is “dismantling” its enterprise growth division, which had been put in place at least in part to generate new flows to the company’s revenue line. But in recent months, a slew of executives from the top ranks of that unit have left to make up a departing roster that includes Neal Sample, who headed the division.

Heads will roll, as job cuts should reach about 170 in New York and Florida alone. Other ominous signs abound as projects have been abandoned, and actual physical footprint has shrunk, as the firm closed its enterprise growth office located in Manhattan.  

But one key function remains, according to Bloomberg, and that is the platform that helps issue prepaid debit cards for those people in the United States unable to open bank accounts in the traditional sense.

The elimination of the unit may cheer investors, according to Bloomberg, who indeed want the company to stick to its knitting – i.e. prepaid cards and payments – rather than move “down market,” through a unit that had been created through a slew of acquisitions. 

Among those buys stitched together to create the enterprise growth unit: Amex bought Revolution Money – renamed Serve — from Steve Case, who co-founded America Online, for $300 million. That business in turn governed the issuance of prepaid cards with reloadable functions, which could function in lieu of traditional, or even online, checking accounts.

And yet the effort never took off, amounting to a cost center for the company at large, and reloadable cards never managed to capture, at least for Amex, any industry place of mind or heart. One payments industry research firm, Mercator Advisory, said Amex had a distant sixth place ranking among prepaid card firms, at best. One key hint as to the unit’s dwindling fortunes came as Amex refused to break out results, trends and contribution to the firm at large. 

That’s simply unsustainable in an industry where margins are thin and other companies have already grabbed shelf space and visibility in prepaids, such as Green Dot. Also, growing watchfulness and wariness of the company, and prepaids in general, are on the come from regulators, even as demand grows for the cards, where in the U.S., 8 percent of households do not have bank accounts, and another 20 percent remain outside traditional banking, according to Federal Deposit Insurance Corp. data.  

As recently as last year the enterprise growth unit was meeting internal targets, and P2P adoption had been on the rise, among the prepaid. And, truth be told, the firm is not giving up on the notion of prepaid as a staple of business, as it has a 1 percent cashback tied to purchases through Serve, among the first prepaid rewards systems in the industry.

The loss of Costco as a prime mover in the retail space means that money, time and manpower must be diverted elsewhere, beyond the enterprise growth unit to keep their bread and butter industry afloat. 


Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.


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