American Express seems to be trying to create a new niche with its prepaid card. You might call it a low-fee prepaid card, a term that--until now anyways--would've been considered an oxymoron.

Prepaid cards from the likes of industry leaders Green Dot and NetSpend are known for their rich array of fees, which have attracted the attention of law enforcement authorities in Florida and consumer advocates. These cards are typically found at Walmart, CVS, Rite Aid and 7-Eleven. The new American Express card sports a paucity of fees and can be purchased over the Internet. You can buy it to maintain funds monthly and load it via a bank accounts, all without paying any fees. There is, however, a fee for a cash reload.

The company just might be onto something. Despite their complex fees, prepaid cards have been enjoying heady growth as of late, becoming the fastest growing payment method in the United States. For people inclined to use prepaid cards, the idea of a low-fee card might prove really attractive. But while it's consumer-optimized, the card isn't necessarily merchant-optimized. Prepaid cards are not covered by Dodd-Frank's Durbin Amendment and therefore will not be subject to the draconian interchange fee cuts that banks are girding for now.

Still, it might be in the bank's best interests to reduce the interchange fee at least a little, to grease the wheels of merchant adoption. American Express carries some of the highest merchant fees of course. All in all, American Express has a lot to gain from the prepaid card--if it gets the service right.

For more:
- here's an article from CNNMoney

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