Walmart's Bluebird Card Makes It a Tougher Competitor to Banks

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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 Monday, 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.

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.

Around the world, he says, 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 going 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 Monday. "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.

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Comments (8)
By any other name, this functionally is a checking account, and should be regulated as such.
Posted by david529 | Tuesday, October 09 2012 at 11:16AM ET
Good point... Still, Amex is a bank and as such is regulated.

Sean Sposito, Technology Reporter, American Banker
Posted by Sean Sposito | Tuesday, October 09 2012 at 12:09PM ET
This ia a good initiative by Walmart.However there are several red alerts to be visualised by the regulators to protect the banking aspects, charges, deaults,if any and over spending .The regulators are not to dilute any standards of supervision and control.
Posted by Prof S P Garg | Friday, October 12 2012 at 1:14AM ET
Walmart is changing its composition from retail to commercial centre and may be later on as a financial powerhouse .This ia a good initiative by Walmart.However there are several red alerts to be visualised by the regulators to protect the banking aspects, charges, deaults,if any and over spending .The regulators are not to dilute any standards of supervision and control.
In India, the government with its vasrious reformative initiatives, have opened the doors for FDIs .Walmart is already present in a different modeof CASH AND CARRY.They may plan now differently for strategic considerations and future aspects.
The customer is the King; this aspect all retailers and financial institutions must keep in mind.Provide Delight and joyful Experience.
Posted by Prof S P Garg | Friday, October 12 2012 at 1:22AM ET
I believe if Walmart wants to be a bank and essentially turn cashiers into tellers and their retail stores into banks, they need to play on the same playing field as the banks. Our country was built on competition but being one store for all lacks the variety and ingenuity that a variety of consumers need and want. Believe Walmart is NOT the be all and end all to me. They are limited in choices and you buy what they have or you go somewhere else. Best to do one thing well that do a number of things poorly. IMO - that is what Walmart does (many things poorly).
Posted by pdf95499336 | Friday, October 12 2012 at 3:12PM ET
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