Mercator Perspectives

AAA and Target: The Versatility of the American Express Brand for Prepaid

AmEx has come alive in prepaid and expanded well beyond the boundaries of the gift card segment where its prepaid success began. By leveraging its brand, AmEx is going where the others have feared to tread; up market.

It began the voyage beyond gift with the PASS teen card product, however this solution was tied down because the only funding source was from an AmEx account. We now have word that American Express has launched two GPR related initiatives, a pilot with Target and the AAA Prepaid Membership Card hitting the market this summer. While there are few details available regarding the Target pilot, given the demographic of Target customers, this prepaid product is certainly shooting for adoption well outside the traditional unbanked & underserved market,

Mercator Advisory Group, while recognizing the valuable contribution prepaid cards can make towards the goal of financial inclusion, has long stated that there are even greater volume opportunities for prepaid up market – and at the moment American Express has that market to itself. Discover, should it wake up to the opportunity, has a similar position in the mid-market, and this is still targeting an audience well above the current unbanked and underserved target market.

The American Express brand is typically associated with service, safety, rewards, and travel – all attributes that align extremely well with the AAA member. While it has yet to be seen how many AAA members will activate the AmEx prepaid card, it appears the marketing incentives have been put in place with a $25 gift card for an initial load of $200 or more and a cash back offer.

Of course, pretty much any program manager could establish a similar relationship with a significant brand. For example, Netspend has announced that it will partner with BET on a prepaid product. The difference here, beside the obvious demographic one, is that this BET/Netspend relationship is relatively one sided since BET provides the more recognizable brand and the market access / channel. BET is, in essence, looking for a product partner and not a partner that adds gravitas relative to the financial solution. While American Express may not necessarily have aligned well with the BET demographic, American Express brings significant value into the equation for both Target and AAA because its brand is a trusted financial services and payment card supplier.

So American Express will now look for partners with a large customer base that aligns with the American Express brand. I expect the prepaid industry will see several new innovations come out of American Express as it makes its way into the GPR market, since they can use their brand to create different value propositions than the existing prepaid participants. In particular, it will be interesting to see what other assets American Express brings to the table with its prepaid offerings. It has a significant corporate presence (corporate cards), a leading rewards program, Travel (Amex Travel Related Services), Small Business relationships (OPEN), and a wealth of merchant relationships (co-branded cards). American Express is officially the first major financial institution to be positioned as a GPR game changer. I wonder who’s next?

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