UPDATE: American Express and Zowi Launch Cobaltcard for Young Adults

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American Express Co. is targeting Cobaltcard -- a pre-loaded, no-fee card introduced last week -- at 13- to 22-year-olds looking to make online purchases.

Developed with Zowi Corp., an online payment services firm, Cobaltcard combines money management tools with the ease of a debit card. It is available only through the Zowi-created site at www.cobaltcard.com.

"What we're looking to do is serve an underserved market that right now has no easy, convenient way to spend online, and also we're looking to displace cash when they decide to spend offline," said Larry Sharnak, senior vice president of consumer lending at American Express, New York.

The stored-value payment card marks American Express' first partnership with Zowi, San Francisco, in which it has also taken a minor stake. Other backers of the Cobaltcard include General Electric Co.'s NBC, Allegis Capital and Crosspoint Venture Partners.

Young adults spend more than $140 billion a year, according to Forrester Research, Cambridge, MA. Visa International and PocketCard Inc. have similar cards aimed at young consumers.

A key feature of the American Express-Zowi collaboration is an attempt to restrict access to sites not suitable for minors.

"This card has targeted acceptance, and we've done everything to filter out what we call sites that are not appropriate for young adults," said Randall Chesler, president/CEO of Zowi, San Francisco. "So, therefore, they can't go and use this card at those places."

"This targeted acceptance is an effort to help," Chesler said. "It's not meant to be a filter. It's not perfect, but it's a way to give some protection. We're not making value judgments."

While the competition's marketing targets both parents and teens, American Express said it remains focused on the user.

To underscore this emphasis, the financial marketer convinced MTV to include the Cobaltcard in "Road Rules," a TV show that highlights the travel adventures of young adults.

As part of the deal, the Cobaltcard will feature in the season finale of "Road Rules" that airs Oct. 23 on MTV.

In this episode, the participants will use Cobaltcard as their only instrument to budget their spending and buy supplies. The winning team will split $100,000 to spend online through their Cobaltcards.

TV spots on MTV will support the card. In addition, American Express will run ads on popular teen sites such as teen.com, MTV.com, UGO.com and Snowball.com.

But Cobaltcard faces rivalry not only from Visa Bucks and PocketCard, but also from other Web sites, such as DoughNet.com, RocketCash.com and iCanBuy.com. These sites allow young adults to open accounts and shop online, without credit cards, at merchants located on their sites.

"The downside to those particular products is that they're only good at a handful of [online] merchants that will accept those accounts," Zowi's Chesler said. "Cobaltcard is good at millions of merchants that accept American Express."

The Cobaltcard allows users to load money by transferring from a personal checking account or by having parents move funds from their bank accounts or credit cards. The rechargeable card has a minimum load of $20 and maximum of $2,000.

Applicants younger than 16 years old need parental approval before opening Cobaltcard accounts. Those between 16 and 17 years old may open accounts with cash infusion from an individual checking account, but their parents will be informed that a Cobaltcard membership has been made.

New cardholders receive the Cobaltcard in seven to 10 days. Cardholders then can buy online by selecting the American Express payment type and entering the Cobaltcard number instead of a credit card number on the retailer's transaction page.

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