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11/1/2012 7:30:19 PM
Banks announce new products all the time, but it’s rare that a single new offer is as significant as the Bluebird Prepaid Card from American Express and Walmart. After all, this small piece of plastic provides investors with big insights into the business plans of some of the country’s most high-profile companies and even a sneak peak at the fate of an entire industry.
Amex and Walmart launched the Bluebird Card in early October to great fanfare, largely because it is such an attractive offer. Not only does it buck the trend of prepaid cards charging myriad different small fees with a lone $2 ATM withdrawal charge (which is actually waived if you enroll in direct deposit), but it also offers consumers a number of features that are either rare or nonexistent elsewhere in the prepaid card market. For example, the Bluebird Card doesn’t apply a surcharge to foreign transactions, offers payment protection, and gives you the ability to load funds simply by taking a picture of a check. All things considered, it’s both one of the least expensive prepaid cards on the market and one of the few cards that can be used for each of the primary prepaid card applications: 1) Replacement checking account; 2) Allowance vehicle; and 3) Alternative check cashing tool.
However, much of the excitement surrounding the Bluebird Card’s launch can also be attributed to what it means for the companies involved, either directly or indirectly.
American Express: To Amex, the Bluebird Card is the perfect way to access a sizeable untapped demographic: people who are largely outside the traditional banking system. There are roughly 10 million households in the US that are unbanked and another 24 million that are considered underbanked. Since those consumers are far more likely to open a prepaid card account as a means of cashing checks or paying bills than they are to get a credit card or a traditional checking account, the Bluebird Card enables Amex to get a foot in the door and then cross-sell more lucrative products to the highest performing cardholders. In other words, the Bluebird Card increases the likelihood that American Express, which has historically dealt with high-income people who have excellent credit, will become a full-spectrum issuer that can take on Capital One.
Walmart: Walmart’s overarching strategy is no secret. The retailer wants to give people as many reasons as possible to enter a store with money in their pockets because the odds they’ll buy something in that situation are extremely high. Well, not only is the Bluebird Card currently available in more than 4,000 Walmart stores, but one of the ways that cardholders can load money for free is to do so at Walmart registers.
Green Dot, NetSpend & Co.: Prepaid-specific issuers face an uphill battle trying to compete with the money, reach, and varied product offerings of big banks like American Express, Capital One, and Chase. As more and more of these companies enter the prepaid space, it’s fair to expect them to force out or buy up the prepaid card market’s old guard.
BofA, Citi, Wells & More: In addition to capping the swipe fees that large banks can charge merchants for debit card transactions, the Durbin Amendment sent them searching for unregulated debit card alternatives. Prepaid cards were and continue to be a logical choice as many offer all of the same utilities as a traditional checking account-debit card combo, including the ability pay monthly billers who don’t accept plastic. We’ve seen the likes of Amex and Capital One launch their first prepaid card offerings since the law’s passage, and if they’re successful we should expect even more of the banking world’s big boys to follow suit, especially considering the market’s projected growth over the next few years.
All things considered, the future is bright for American Express, Walmart, and the other big companies involved in the prepaid card market, while the companies that long dominated the space have a decidedly more uncertain future.
Odysseas Papadimitriou, a former Capital One senior director, is the CEO of the credit card comparison website Card Hub.