AmEx Exits Prepaid Card Program Management With Platform Sale to InComm

The pending sale by American Express Co. of its Serve technology platform to prepaid card program manager InComm moves AmEx more toward the model used by most other general-purpose prepaid card issuers and still keeps the upscale AmEx brand involved in a business mostly oriented toward moderate- and lower-income consumers, according to one observer.

Under the deal announced on Thursday, InComm, in addition to the Serve technology, will acquire the exclusive distribution rights of AmEx’s general-purpose reloadable prepaid and gift card products in the U.S. InComm also will become the cards’ exclusive program manager and processor, but AmEx will remain the issuer, and its brand will remain on the cards.

Terms of the deal, which the companies expect to close early next year, were not disclosed. Besides gift and consumer GPR prepaid cards—including the Bluebird card sold at Wal-Mart Stores Inc. locations—products covered under the agreement include business-to-business rewards and incentives cards, tax-disbursement cards, and other assets.

AmEx and InComm, which activates AmEx gift cards when they are sold in stores, are no strangers to each other, having had a business relationship for 15 years.

“After considerable deliberation, we have decided to partner with InComm as we start a new chapter for our prepaid business,” Stefan Happ, executive vice president and general manager of AmEx’s Global Prepaid & Alternative Payments unit, said in a statement. “InComm’s expertise and deep knowledge of the industry will be a great asset as we look to bring our best-in-class prepaid and gift card products to even more customers.”

Serve will enhance Atlanta-based InComm’s processing capabilities. AmEx launched Serve as a digital platform centered on a reloadable prepaid card in March 2011 after acquiring the underlying technology the year before from Revolution Money for $300 million. At the time, the AmEx unit that included prepaid was headed by Dan Schulman, now chief executive of PayPal Holdings Inc.

AmEx did not disclose how many prepaid cards it has issued, but they undoubtedly will bring considerable new volume to InComm. “This is a very exciting deal for us, our retail partners, and the new distribution partners this transaction will bring us,” InComm chief executive Brooks Smith said in a statement. “With American Express’s suite of prepaid products, we are adding yet another popular and highly reputable brand to our ever-growing portfolio. Through our 15-year relationship with American Express, which includes being the first to distribute and activate their gift card in retail, we have gained a deep expertise that will allow us to be great stewards for their brand.”

Some observers interpreted the sale as an exit by AmEx, generally perceived as the most upscale payment card brand, from a market mostly for lower and moderate-income consumers. But prepaid card researcher Tim Sloane, vice president, payments innovation at Maynard, Mass.-based Mercator Advisory Group Inc., says that’s not quite true—at least not yet.

“In the announcement, it is AmEx moving operational components over to InComm,” Sloane tells Digital Transactions News. The AmEx cards will continue to exist and the brands will continue to exist, so I see this as AmEx moving toward the Visa/Mastercard model.”

Most issuers of prepaid Visa and Mastercard cards use a program manager such as InComm, NetSpend, or others to manage customer service, compliance with regulations, state licenses, and related matters. AmEx has been doing all those tasks itself.

“There’s a lot of efficiencies in that [program-management] model,” says Sloane. “It cuts a lot of costs out. That’s something InComm already has for its other businesses.”

He adds: “That’s my take. We’ll see in a few months.”