An indication that the prepaid card industry is in transition can be found in how American Express Co. is marketing its new financial services product, Bluebird. No mention is made in its advertising that Bluebird is a prepaid card. Instead, AmEx characterizes Bluebird as a "checking and debit alternative."
Bluebird is the result of a partnership between AmEx and Wal-Mart Stores Inc. The solution involves online, mobile app and physical card components. Features of Bluebird include a checking account with online bill payment capability, sub-accounts for the disbursement and management of childrens' allowances for example, and mobile remote deposit capture (RDC) for the depositing of physical checks.
In an Oct. 8, 2012, conference call, Dan Schulman, Group President, Enterprise Growth at AmEx, said Bluebird is a "first of a kind" product that brings together the best of prepaid, debit and checking. He called it a comprehensive service for consumers who either don't have access to traditional banking, are underbanked or, just as importantly, are "unhappily banked in some way."
Consumers can enroll in Bluebird online or in-person at over 4,000 Wal-Mart locations in the United States. The in-store process is akin to the purchase of reload packs for the prepaid cards of Wal-Mart's other prominent partner, Green Dot Corp. Consumers buy a $5 set-up kit that includes a temporary Bluebird "starter card."
At checkout, the starter card can be loaded with between $1 and $500. Registration is completed online, and consumers are then mailed personalized Bluebird cards. Once consumers have the permanent cards in hand, they are afforded a daily load limit of $1,000.
The Bluebird card can be used to withdraw cash at 22,000 ATMs nationwide – a network that is approximately 35 percent larger than the next biggest ATM network, Shulman said. Withdrawals are free via AmEx's ATM network if the cardholder has enrolled in direct deposit; if not, cardholders are charged $2 per withdrawal.
In the conference call, Daniel Eckert, Vice President of Financial Services for Walmart U.S., said the big-box retailer's partnership with AmEx resulted from customers "frustrated with the complex maze of dos and don'ts just to avoid fees with traditional checking accounts." For AmEx, the partnership afforded the card brand an opportunity to "move beyond our traditional consumer set," Schulman said.
Madeline K. Aufseeser, Senior Analyst at Aite Group LLC, believes Bluebird will make the general purpose reloadable (GPR) card market more competitive. However, the program may not quite live up to the hype.
Aufseeser said other providers charge minimal fees for cardholders who sign up for direct deposit. She noted that Green Dot and other competitors are working on mobile RDC solutions of their own. And Bluebird's mobile RDC offering – accessed via the mobile app currently available only on Apple Inc. iPhones – comes with a catch.
"You can use the remote deposit capture feature, but then when are the funds actually available?" Aufseeser said. She added that the deposited funds are not instantly available to cardholders because the funds must be cleared and settled first.
The advantage AmEx holds over other GPR card providers is that it is not subject to the debit card interchange price caps imposed by the Durbin Amendment to the 2010 Dodd-Frank Act, according to Aufseeser. She said AmEx is exempt because Durbin offers a carve-out for three-party networks. AmEx is a three-party network because it acts as the card issuer and acquirer (with the consumer making up the third part of the network).
"[AmEx] owns the relationship with the cardholder and on the other side they are also acting as the acquirer and own that relationship as well," Aufseeser said.
Four-party networks, on the other hand, are not exempt from Durbin regulations. Visa Inc. and MasterCard Worldwide operate four-party networks, "where you've got the issuer and consumer on one side and the acquirer and the merchant on the other," Aufseeser noted.
With Bluebird, AmEx is now in direct competition in Wal-Mart stores with the Green Dot-powered MoneyCard. The last several months have been rough on Green Dot's stock. In late July, the Monrovia-based GPR card company issued an earnings reforecast that warned investors of impending threats to its bottom line. In response to the news, Green Dot's stock plummeted 60 percent.
Green Dot's stock fell another 20 percent with the Bluebird launch in October. When the topic of Green Dot was brought up in the conference call, Eckhart would only say that Wal-Mart's relationship with the company is "terrific" and represents the "single biggest program in the United States in that segment in the marketplace."
Aufseeser could not say if Green Dot had foreknowledge of Bluebird when it issued its July reforecast and warned of new in-store competition from other prepaid card providers. But she was certain that when Green Dot relies on its Wal-Mart partnership for over 60 percent of its revenue, that the inevitable change to that relationship brought on by market forces makes Green Dot's revenues "a little bit risky." 
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