Is Amex Abandoning The Unbanked and Prepaid? Almost Certainly Not!

by Tim Sloane 0

 This article from Bloomberg assumes that the sale by American Express of its prepaid operations to InComm, is indicative that Amex is shifting away from down-market customers:

“American Express Co. is selling its prepaid-card technology to InComm Holdings Inc. as the lender continues its shift away from down-market customers.

InComm, which is backed by private equity firm Warburg Pincus, will also become the exclusive program manager and processor for AmEx’s prepaid products, which include gift cards, business-to-business rewards, tax disbursements and reloadable cards, the companies said Thursday in a statement that didn’t include terms. The deal is expected to be completed in early 2018.”

Mercator also had the opportunity to talk to Scott Meyerhoff at InComm and as a result we expect that this shift of responsibility will increase the Amex product’s competitiveness and can result in even greater market penetration. In essence, Amex has shifted its prepaid model to more closely reflect that of its competitors. Amex has introduced a program manager into the prepaid business model that already has significant expertise and volume. InComm has far more resources than Amex that are focused specifically on prepaid financial services that target those “down-market customers” Bloomberg identified, from reload networks to Scan & Pay services for paying bills. So InComm is positioned to add new services to the Amex product and is also positioned to leverage its economies of scale. This announcement suggests that American Express has decided to entrust InComm with the stewardship of the Amex brand to boost the brand’s value to this market segment, not abandon it.

Not only does this add value for Amex, but viewing this transaction from the other perspective, InComm now has another brand, another platform and business model to deploy as it looks to expand.

The key issues critical to the success of the American Express prepaid products are primarily associated with how current Amex partners for Bluebird and Serve will respond to this change, which includes WalMart and Blackhawk. While InComm has a long standing relationship with WalMart, Blackhawk is a fierce competitor that also operates a distribution network. How Blackhawk responds to this shift could impact significant volume for the Amex Gift Card product, but then refusing to distribute the Amex product may also impact Blackhawk’s business since the Amex brand has real prestige that rubs off on those retailers that display the Amex brand on their J-hooks. This will be an interesting jousting match to watch!

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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