• Checking account will pay a 0.50% annual yield
• AmEx is trying to appeal to the younger generations with an all-digital banking service
On Tuesday, American Express Co (NYSE: AXP) launched its first all-digital consumer checking account as the company aims to broaden its appeal to younger generations amid the emergence of digital banking services.
The AmEx Rewards Checking, the no-fee, no minimum balance account, will be available to its U.S. non-business credit card customers, Eva Reda, the executive vice president and general manager for consumer banking at AmEx, said.
The company that provides reward points on each transaction said the checking account would come with a debit card, and customers can earn one point for every $2 spent, with a 0.50% annual yield on balances, AmEx said in a statement.
The largest banks in the U.S. typically offer interest rates of 0.01%.
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“The reason we are putting together this really nice APY and the rewards is to absolutely maximize the loyalty we can get from those customers,” Reda said. “The time just feels right based on where customers’ heads are, who’s using the product and how mass this sort of a solution is quickly becoming.”
Focus on Gen Z and digital banking
American Express is currently focusing on adding more millennials and Gen Z customers, as among all the new accounts it added last year, around 60% of those came from those age cohorts.
The company, in recent research, found that younger customers like to use their debit cards as a substitute for cash for spendings like ride share services or paying for cups of coffee.
“Our members want more banking products and services from us,” said Eva Reda, general manager of AmEx’s consumer banking products. “And they want more from their checking account.”
Moreover, with evolving digital banking market and increasing popularity of fintech startups and neobanks, the traditional banking sector is trying new ways to retain its customers by launching new offerings.
“There is no question in my mind that some portion of our customer base are going to decide this is their primary account, and others who are going to try it out and start out with this as their second or their third account,” Reda said.
New product categories
AmEx entered into the “Buy Now Pay Later” sector in 2017 and launched its “Pay it Plan it” program for purchases above $100, offering a fixed interest rate.
Last year, the company partnered with Opy, the U.S. subsidiary of Australian fintech Openpay, to meet the demand for options to finance large purchases, like healthcare and automotive segments, over more extended periods.
Previously, other banks used AmEx’s network for their own debit cards. However, on the verge to attract more customers AmEx unveiled its first-ever proprietary debit card in October as part of a new digital checking account for small businesses.
Picture Credit: American Express