Walmart advanced further into the financial services arena lastweek with a new product  it will offer in conjunction withAmerican Express.

Dubbed Bluebird, the prepaid card will provide consumersconcerned with the rising costs of financial services with achecking and debit alternative, according to executives with bothcompanies, which rolled out the new card on Oct. 9.

“Our customers tell us that they're tired of navigating acomplex maze of dos and don'ts to avoid the ever growing list offees found on checking products. Bluebird solves this problem, andwe believe it's the best product on the market to help customersaffordably manage their everyday finances,” said Daniel Eckert,vice president of financial services for Walmart. 

 “The financial services landscape is changing.Technological advances, regulatory changes and evolving consumerneeds are redefining payments ranging from prepaid to checking anddebit,” said Dan Schulman, group president of the Enterprise Growthunit of  American Express. “Bluebird is our solution tohelp consumers who currently may be poorly served by traditionalbanking products. It allows them to easily and safely move, manageand spend their money. 

Walmart already offers a prepaid card through a relationshipwith Green Dot, a product that  Eckert said the retailgiant would continue to offer, but it was clear Bluebird wouldoffer consumers a whole lot more. In addition to being able to usethe card at any location where American Express cards wereaccepted, consumers would be able to use the card at any one of22,000 MoneyPass ATM locations, fee free if the consumerhas  money deposited directly onto the Bluebirdcard.  Consumers will also be able to use a mobile app todeposit money, send money, pay bills to businesses or send money toother Bluebird accounts, the companies said.  

But  while Bluebird may have a number of features thatconsumers may find attractive, it also lacks one that manyconsumers consider crucial.

Money deposited on Bluebird cards will not carry FDIC insurance,according to an executive with American Express.

When asked directly by a reporter in a Oct. 8 webcast andconference call whether or not funds deposited on Bluebird wouldcarry FDIC insurance Schulman ducked the question. He said fundsdeposited with Bluebird on the would be subject to moneytransmittal regulations in all 50 states that required AmericanExpress to back them 100%.

Neither Walmart nor American Express have yet responded toquestions about whether the lack of FDIC insurance might hurtBluebird with consumers or whether the companies might seek FDICinsurance for funds placed with their new service.

Although more recent data is difficult to track down, a 2001survey conducted by Gallup on behalf of the Independent CommunityBankers of America found that 57% of consumers survey consideredhaving FDIC insurance an important factor when deciding where toplace their funds.

The question is significant because Wal-Mart's 2007 effort toobtain a federal bank charter to make loans and take depositsinsured by the FDIC failed in the face of withering opposition from banks and somecredit unions.

Walmart has remained adamant that it is not seeking a bankcharter at the federal or state level.

Reaction to the card among regulators, industry analysts andauthorities ranged from appreciative to muted.  TheConsumer Financial Protection Bureau declined to comment on the newprogram, citing agency policy not to comment on individualproducts. It added that it has not finalized its proposed rule onprepaid cards yet.

Cardhub.com, a website that specializes in evaluating cardoffers from a consumer perspective, named Bluebird the best overallprepaid card citing its low fee structure, ability to provide cardsto family members and ability to use a mobile phone to make checkdeposits, thus avoiding check cashing fees.

“It's clear that the Bluebird Card can be immediately considereda top-tier prepaid card offering,” said CardHub CEO OdysseasPapadimitriou. “The fact that its only major fee is a $2 charge forall but your first monthly ATM withdrawal–which is waived for thoseenrolled in direct deposit–means that it will be among the leastexpensive prepaid cards, depending on how exactly you use it. Theability to load funds via check by taking a picture through Amex'smobile application also makes it one of the few cards suitable tobe an alternative check cashing tool.”

Robert Manning, CEO of the Rochester, N.Y.-based ResponsibleDebt Relief Institute and a critic of previous Walmart efforts toexpand its financial service offerings, described Bluebird as anexpanded or beefed up version of the Green Dot prepaidcard.  Not only does Bluebird offer consumers more waysthey can use the card, it also offers them a broader acceptancenetwork as well as one higher on the ladder of perceived value, henoted.

But he also pointed out that all such prepaid cards in the pasthave had consumer problems that had not been readily seen unlessyou looked at the details. 

“How long can you have money on the card without using it beforethey take it,” Manning asked. “What happens if there is fraud, andyou lose the money on the card?”

For the record, Walmart and American Express said that the fundsput on a Bluebird card will  never be taken and that thefunds enjoy the same fraud protections that funds on regularAmerican Express cards and other American Express prepaid cardproducts have. But one unintended effect of the card might be tomake it more difficult for credit unions and banks to move unbankedpeople into banking relationships.

Michelle Jun, senior attorney with Consumers Union, pointed outthat not all consumers come to prepaid cards for the same reasonand that some prepaid customers may already have bankingrelationships. But for those that don't, having a ready service forpayment transactions that are relatively low cost might make itmore difficult to convince them to open bank or credit unionaccounts.

In addition, some of Bluebird's features, such as the mobiledeposit feature, might make the card hard to match for some creditunions as well, she observed.

 “The way the world is now, consumers need some sort ofrelationship with a full-service financial institution goingforward if they want to finance a car or a home and this service isnot that,” Jun added.