After years of providing financial services, Walmart is becoming a more formidable bank competitor with the addition of American Express's checking account alternative,Bluebird.
The account, which is the first non-Serve card to be built on top of Amex's digital wallet platform, lets users deposit checks by snapping a picture from their smartphones; electronically pay billers; send cash to friends; and do all of the above in a way that is nearly fee free.
Merchants will be charged Amex's prepaid merchant discount rate on the Bluebird transactions.
"The way to think about [Bluebird] right now is that the technology is redefining the way that people can now manage their money. And many traditional structures, like establishing branches all over the country to be able to take somebody's check and put it into their account, are no longer necessary," says Dan Schulman, Amex's group president of enterprise growth. "You can now use a retail footprint that has so many more locations than any bank account and effectively substitute that."
This summer, reports surfaced that Walmart had scuttled Bluebird. Yet the two companies jointly made the announcement in late October, the culmination of months of testing and research.
The retail giant had previously been testing the card in a pilot program launched in late 2011.
Users can sign up for a Bluebird account online or through a smartphone app starting next week, or pay for a $5 set-up kit at any of Walmart's 4,000 stores.
There is an initial $500 load limit at the counter when a customer picks up a Bluebird kit. After that, there is a $1,000 per-day load limit placed on the card, up to $10,000 a month.
Those limits could change as both Amex and Walmart gain customer feedback, said Daniel Eckert, Walmart U.S.'s vice president of financial services, on a call with reporters and industry analysts.
The move strengthens Walmart as a commerce center and adds fuel to the discussion that it eventually will go head to head with banks as a direct competitor, something that banks have feared for years - causing most of Walmart's moves into financial services to be met by rampant speculation.
Some analysts see this as just another stepping stone for Walmart. "I don't think Walmart will ever be satisfied until they become a bank," says Brian Riley, a senior research director in the bank cards and retail banking practice at CEB TowerGroup.
Riley says that around the world, Walmart either operates as a bank, like it does in Mexico and Canada, or works in partnership with a bank, as it does in the U.K.
"A bank gives them a lot of leeway," Riley says. In that case, "they wouldn't need a partner to do something like this. They are their own entity in their back office. It gives them a ton of leeway that I think they need."
Not everyone agrees.
Eckert insists Walmart has no aspirations of becoming a bank in the U.S.
And Aite Group senior analyst Madeline K. Aufseeser says the addition of a bank would only bring Walmart unwanted regulation.
She also says the Bluebird card is just a foreshadowing of what soon all prepaid cards will become - low-cost and chock-full of added-value services.
"Prepaid providers will have to become more efficient and nimble in order to protect margins on the business at the risk of getting squeezed out," says Aufseeser. "The positioning of the product is interesting, as well. I think they are trying to go a little more upmarket with this. They are really trying to make it a combination of a [general purpose, reloadable bank account]. It's really interesting."
She says she still has questions on how Amex will monetize Bluebird.
"I think they think, because of the volume they are going to get through the card, that is going to be it," says Aufseeser. "We didn't talk about merchant-funded offers with them, but ultimately I think that will be part of the strategy - along with what other features they can add to the product that will become income generators."
Regardless, the Bluebird card is apt to appeal to fee-conscious consumers.
The only costs come from adding cash onto the card from a debit card, or withdrawals and declines at out-of-network ATMs and other places. Both fees are $2.
There is also an ATM fee for users who opt out of direct deposit.
Users will be able to deposit cash with payroll direct deposit, remote deposit capture through a smartphone app, using cash at any Walmart register, or by linking a checking, savings, or debit card to the account.
Last week, in apparent preparation for the Bluebird launch, Walmart announced that it was allowing its customers to add cash to prepaid cards from multiple networks at its cash registers. Previously, users had to visit specialized areas of the store called Walmart Money Centers to load cash onto cards.
Now, prepaid card users can put cash into cards backed by Green Dot, InComm's Vanilla Reload Network and First Data's Money Network.
Eckert says the addition of the Bluebird account won't affect any of its other prepaid card relationships.
Bluebird is the first card to be placed on top of Amex's Serve. In February, Schulman said Amex would soon be placing all of its prepaid products on the platform. "We [talked] about the merging of our prepaid platform and our Serve platform together," Schulman said in an interview for this article. "This is probably the best manifestation of that, coming alive into the marketplace, taking all of the multiplicity, the functionality, and capabilities of these two platforms [prepaid and Serve] and creating something unique."
Early next year, Bluebird customers will get access to additional features, such as more options to deposit cash and the ability to write checks.
American Express and Walmart are tapping into a rich source of customers: disaffected, underbanked Americans.