AMEX at SXSW: Trying to go from exclusive to…

AUSTIN — American Express is reaching out to lower income people and folks dissatisfied with the way they bank or handle money. The financial giant attended South by Southwest this week to help stress that mission.

The stats aren't pretty:

Americans pay about $89 billion in fees and interest seeking money orders, pawnbrokers, payday loans or to go cash a check.

One of four children in the U.S. live in financially "under-banked" households.

Nearly half of all Americans live payday-to-payday, without the ability to raise $2,000 in 30 days should an emergency strike.

"You're like one car accident way from real trouble," says Dan Schulman.

Schulman is the American Express group president for enterprise growth, and in an interview cited statistics like these to shine the spotlight on the need for "financial inclusion."

At SXSW, AMEX unveiled plans to open a Financial Innovation Lab in June that, among other things, will give academics and technologists an opportunity to collaborate in the areas of savings and credit building.

American Express Ventures announced a separate initiative to fund startups working toward the financial inclusion goal. Schulman says a huge number of startups are investigating alternative credit scoring methods, different ways of encouraging savings, and fresh ways to access capital.

AMEX also showed the movie trailer for an upcoming documentary it is backing called Spent: Looking for Change. It is from Davis Guggenheim, the filmmaker behind The Inconvenient Truth and Waiting for Superman. Though details are still sketchy, AMEX plans to heavily tap into social media to encourage people to watch it.

"The saying that it's expensive to be poor — you see it right in your face," Schulman told me. "The less money that you have the more it costs you to manage and move it. And it's incredibly inconvenient as well."

Consider an all-too-common scenario in which someone stands in line for 45 minutes to get a check cashed. The c! heck-cashing place takes a 2% to 5% cut before handing the person his or her cash. The money is needed to pay bills, but you're not encouraged to send cash in the mail. So now the person must stand in line someplace else and purchase a money order. That's not cheap either, maybe $11 for the money order used to pay a $50 cable bill. Lop on another 5% to 15% if you have to wire money somewhere.

"It's practically a part-time job to manage your money, and incredibly expensive," Schulman says. "Why can't we use technology to completely redefine an alternative to traditional banking? This isn't about the un-banked, it's about reimagining financial services."

AMEX has spent 2 ½ years creating a software platform (in connection with retailers), as it attempts to move AMEX from being an exclusive brand to an inclusive brand, Schulman says.

About a year-and-a-half ago, American Express teamed with Walmart on an alternative checking/debit solution called Bluebird. More recently AMEX launched a reloadable prepay account called Serve that lets consumers deposit checks or cash, take pictures of a check to make a deposit, and engage in other financial transactions for free.

"Effectively cashiers become almost like a bank teller," Schulman says. "All the things that you used to do through a bank branch you can now either do electronically or at a retail location. And once that money is on that digital account, then you can take it (out) any number of ways."

Electronic bill pay is included in the service, Schulman says, and customers can make withdrawals by swiping a card too, as with an ATM. You can reserve a portion of your money for future purchases, and through the service can have your money automatically categorized (food, housing, entertainment, etc.). AMEX will supply a budget, and send alerts if you exceed the amount of money you've designated for a particular spending category.

"That paradigm that it is expensive to be poor — we're trying to explode it," he says.

Wh! ile AMEX ! is targeting the under-banked, unbanked, or unhappily banked," Schulman admits that AMEX isn't doing this for purely altruistic reasons.

AMEX primarily makes money when people use their card or tap a phone to make a payment at some merchant. The prepaid rate is lower than with a standard American Express card, Schulman says, but AMEX makes "our fair margin on it."

Why choose SXSW to make the big push? "At its best (SXSW) is taking big thinkers, product developers, technologists (and) focusing on an issue we can try and solve out there. And financial inclusion is one of the big problems in the world right now…it affects 2 ½ billion people. And technology can be the hero in this story."