One of the things that surprised me in the US is that people
still pay most of their bills by writing and mailing checks. This is good business for the Postal Service, which needs some normal postal traffic, but not so much for retailers, utility companies, and banks. According to the Federal Reserve, Americans paid $48 billion using checks in 2010. Another interesting fact: An FDIC study found, “Approximately 7.7% of all U.S. households, or 17 million Americans, were considered 'unbanked,' meaning they did not have any sort of a checking or savings account.” Those people use check cashing services
and pawn shops for financial transactions. They pay everything else with cash or prepaid credit cards.
In Europe, it is almost impossible to pay a bill with cash or a check. Utilities insist they get your bank account number and set up direct payment. If you want to pay another way, they require a substantial initial deposit. Most “checking” accounts have no checks -- just a debit card and a statement that comes every month.
American Express wants to change the way many Americans pay
their bills. It has set up two distinct services to attract customers, mostly the ones who don’t have a traditional Amex card in their wallets. The first is Serve, an online payment service that offers all the bells and whistles that made PayPal famous, but with some interesting additions.
Amex has worked out agreements with Verizon and Sprint to
include Serve as a standard app in their smartphones, and it has introduced a Facebook app that allows users to pay each other within Facebook without fees. Serve also lets users pay most bills online by interfacing with utilities and retailers, all without a bank account.
The company is betting on its reputation for good customer service and satisfaction. “There's a large segment of the population that would love to be an American Express customer but for whatever reason felt they couldn't qualify and therefore didn't apply, or did apply and just didn't have the credit history to be able to do that,” Dan Schulman, manager of its enterprise growth group, told the Wall Street Journal.
Serve also comes with a physical card, which is accepted everywhere Amex is welcome. It can be funded with checking accounts, debit cards, and credit cards, including those from other companies.
The second service Amex is rolling out is Pass, a reloadable card for teens. The card, which is managed by parents and includes a photograph, allows teens to spend their pocket money securely without the risk of using cash. Parents can control and verify what their children do with their money.
Last year, I wrote a blog titled “Why Electronic Cash Never Worked.” I believe the new cash will be the smartphone,
and services such as PayPal, Google Wallet, and Serve are trying to get the biggest piece of that pie. My advice: Use all of them! Try to use each for a different type of transaction. This way, the companies can’t build a complete profile of your spending habits without exchanging information with one another. Of course, if you make all payments from the same smartphone, the phone company knows the sites you use to shop and pay your bills.
The use of checks is declining, but some people still want a paper trail for their bills. We’ll have to wait and see if initiatives such as Serve can change the way people pay their bills.