Last week, we reported
that Generation Y members are not as enamored with credit unions as older CU members. One reason is the number of alternative banking and banking-like products that are emerging on the market. As more people turn to the Web for everything from conversation to currency, online services like PayPal
and Web-loadable pre-paid cards like Netspend
are making it easier than ever to access and spend money without the benefit of banking.
This week, American Express is the newest company to throw it’s virtual wallet into the alternative banking arena with the launch of Serve. Serve is the perfect banking alternative for the 21st century, allowing customers to transfer money to others and make payments from their mobile phones. It’s apparently aimed at customers who use cash, checks, and debit cards rather than traditional credit cards. This from CNN Money:
“Mobile payments are a new direction for AmEx as it tries to get a toehold in a rapidly growing market. Research firm Generator Research expects mobile payments to reach $633 billion annually by 2014, with 490 million customers using them.
“AmEx's Serve is meant to capture some of that burgeoning market. It also puts the bank squarely in competition with e-payment king PayPal. Serve grew out of technology AmEx picked up last year through its $300 million acquisition of Revolution Money, a PayPal rival that focused on person-to-person payments.”
Visa introduced a similar peer-to-peer payment alternative a few weeks ago, and Google announced it is partnering with MasterCardfor new banking technology for the Android. What will make these services successful (other than their novelty factor) is convenience and lower fees. According to BankInnovation.net:
“To lure in people to Serve, AmEx, for one, said it's dropping "most consumer fees" for the first six months. After the that time elapses, the fees will include:
- Putting money into a Serve account: 2.9% + 30c/per load, discounted to 0% for cash, debit and ACH; and
- ATM cash withdrawal (after first one each month free): $2.00.
“In addition, Serve won't have fees for a number of financial services actions, including: opening an account, monthly fees, P2P transactions, establishing up to four sub-accounts and widget usage.”
Given the pressure on banks to raise fees to make up shortfalls from other revenue sources, this doesn’t look so bad. In fact, it’s competitive with what most banks have indicated they will start charging for ATM fees. And you can’t beat the convenience. Banks are going to need to find a way to compete in the e-wallet business to stay ahead of these new competitors.