American Express Takes On PayPal in Online Payments War

29.03.2011
American Express has announced plans to enter the online payments market and thereby compete directly with PayPal.

AmEx says the new Serve offering, which it claims is "money re-imagined," is built around and . However, perhaps crucially for its immediate success, it also incorporates features of a prepaid credit card.

PayPal has seen a variety of competitors, from to Visa's more recent announcement that . Indeed, 2011 is shaping up to be an . However, no competitor has so far shifted the lumbering giant from its No. 1 spot as the king of online payments, although this is largely enforced by its partnership with eBay.

In most ways, Serve is virtually identical to PayPal. Even the fees are mirrored. Once a user has opened a Serve account they can load it with money from various sources, including credit cards and bank accounts. Assuming the money comes via Automated Clearing House (ACH) from a bank or via a debit card, loading the account is free of charge. If it comes from a credit card, each loading transaction is charged at 2.9 percent of the total, plus 30 cents per transaction.

However, for the next six months these charges are being waived, presumably to entice PayPal members to make the move. That'll be an uphill struggle although all users are automatically issued with a card, accepted anywhere an Amex card is, and as such can make cash withdrawals at ATMs. (The first withdrawal each month is free but there's a $2 charge after that).

From a merchant point of view, receiving money for goods or services via a Serve transfer incurs the same charge as PayPal--2.9 percent, plus a 30 cents per transaction charge. As for merchant fees for card transactions on or offline, Amex says "merchants who accept American Express cards will pay a prepaid discount rate for transactions made both in stores and online." Expect those info packs with door and window stickers to start arriving soon.