Eye on Prepaid: AmEx Strikes a Deal With Zynga While Green Dot Signs Dollar Tree

American Express Co. extended the reach of its Serve digital and prepaid card platform with a rewards program it announced on Tuesday with leading online game developer Zynga Inc. The big prepaid card program manager Green Dot Corp., meanwhile, disclosed a distribution deal with Dollar Stores Inc. and the renewal of contracts with Wal-Mart Stores Inc. and PayPal Inc.

Dubbed Zynga Serve Rewards, the AmEx program converts the normally tedious process of applying for a card into a rewards-generating exercise for players of Zynga’s popular FarmVille online game who sign up for and use the new Serve-Zynga cobranded prepaid card. In FarmVille, one of the biggest games on social network Facebook Inc., players cultivate fields and grow and harvest crops on virtual farms. With the new AmEx program, players can plant an interactive “Serve Money Tree” on their farms and gradually build up enough rewards for redemptions.

Once players plant the tree, they will be prompted to take four steps to earn the game’s virtual Farm Cash. The first is signing up to receive a physical Serve-Zynga prepaid card in the mail, or converting an existing Serve account to the new Zynga product, which earns 63 Farm Cash units. The second is adding money for the first time to the Serve account through a bank account, credit or debit card, or cash via Green Dot’s MoneyPak reload product, good for 20 Farm Cash units. The third step is activating the new card, either online or by phone, for 13 units.

The biggest rewards generator is the fourth step, which gives the cardholder 50 Farm Cash units each time he or she spends $25 or more using the card, which is accepted at any U.S. AmEx merchant. At first, only the first five such purchases will qualify for the rewards, though AmEx and Zynga say that as the program expands, all such purchases will earn in-game rewards. Later this year, the two companies also plan to expand Zynga Serve Rewards to some of Zynga’s other big games, including CastleVille and CityVille. (FarmVille players also can earn seven units by periodically “harvesting” their trees.)

Both companies stand to benefit from the program through greater customer activity, but “really, the long-term opportunity goes to AmEx,” says Ben Jackson, a senior analyst at Maynard, Mass.-based Mercator Advisory Group Inc. who researches the prepaid card industry. “They\'re trying to capture a new set of customers. It\'s one of the steps AmEx is taking to say, ‘Prepaid is not just for people who\'ve had trouble with regular banks.’”

Long associated with affluent travelers and button-down business types, AmEx became a big player in digital wallets and prepaid cards after it bought Revolution Money for $300 million in early 2010 and built the Serve platform on its technology. “When you look at the people who are playing FarmVille, a lot of them are kids … who might be customers for a prepaid card and who also eventually will become [holders of] credit cards, charge cards, and those sorts of things,” says Jackson. AmEx, however, could face some reputation risk if its Zynga programs are seen as encouraging irresponsible spending by young people.

Monrovia, Calif.-based Green Dot, meanwhile, is expanding its distribution network by more than 4,300 locations through a new, exclusive pact with discount variety retailer Dollar Tree Inc. Under the deal announced Monday, Dollar Tree will sell general-purpose reloadable prepaid cards and the Green Dot MoneyPak. Green Dot’s own Green Dot Bank will issue the network-branded GPR cards. The company will have about 65,000 locations where its cards are sold upon full rollout of the Dollar Tree program.

At the same time, Green Dot said it had signed a multiyear extension of its agreement with Wal-Mart to manage the No. 1 retailer’s Visa-branded gift card. Green Dot is planning new designs and products for the gift card program, which it has managed since 2007.

Wal-Mart’s various prepaid card programs generated 61% of Green Dot’s operating revenues in 2011, so the Dollar Tree program represents valuable diversification, says Jackson, who notes that Green Dot “has taken a lot of criticism” from analysts over its heavy reliance on one customer.

Green Dot also said that it had signed a multiyear extension of its agreement with PayPal that that enables U.S. consumers to add money to their PayPal accounts using a Green Dot MoneyPak.