Walmart advanced further into the financial services arena last week with a new product it will offer in conjunction with American Express.
Dubbed Bluebird, the prepaid card will provide consumers concerned with the rising costs of financial services with a checking and debit alternative, according to executives with both companies, which rolled out the new card on Oct. 9.
“Our customers tell us that they’re tired of navigating a complex maze of dos and don’ts to avoid the ever growing list of fees found on checking products. Bluebird solves this problem, and we believe it’s the best product on the market to help customers affordably 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 consumer needs are redefining payments ranging from prepaid to checking and debit,” said Dan Schulman, group president of the Enterprise Growth unit of American Express. “Bluebird is our solution to help consumers who currently may be poorly served by traditional banking products. It allows them to easily and safely move, manage and spend their money.
Walmart already offers a prepaid card through a relationship with Green Dot, a product that Eckert said the retail giant would continue to offer, but it was clear Bluebird would offer consumers a whole lot more. In addition to being able to use the card at any location where American Express cards were accepted, consumers would be able to use the card at any one of 22,000 MoneyPass ATM locations, fee free if the consumer has money deposited directly onto the Bluebird card. Consumers will also be able to use a mobile app to deposit money, send money, pay bills to businesses or send money to other Bluebird accounts, the companies said.
But while Bluebird may have a number of features that consumers may find attractive, it also lacks one that many consumers 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 and conference call whether or not funds deposited on Bluebird would carry FDIC insurance Schulman ducked the question. He said funds deposited with Bluebird on the would be subject to money transmittal regulations in all 50 states that required American Express to back them 100%.
Neither Walmart nor American Express have yet responded to questions about whether the lack of FDIC insurance might hurt Bluebird with consumers or whether the companies might seek FDIC insurance for funds placed with their new service.
Although more recent data is difficult to track down, a 2001 survey conducted by Gallup on behalf of the Independent Community Bankers of America found that 57% of consumers survey considered having FDIC insurance an important factor when deciding where to place their funds.
The question is significant because Wal-Mart’s 2007 effort to obtain a federal bank charter to make loans and take deposits insured by the FDIC failed in the face of withering opposition from banks and some credit unions.
Walmart has remained adamant that it is not seeking a bank charter at the federal or state level.
Reaction to the card among regulators, industry analysts and authorities ranged from appreciative to muted. The Consumer Financial Protection Bureau declined to comment on the new program, citing agency policy not to comment on individual products. It added that it has not finalized its proposed rule on prepaid cards yet.
Cardhub.com, a website that specializes in evaluating card offers from a consumer perspective, named Bluebird the best overall prepaid card citing its low fee structure, ability to provide cards to family members and ability to use a mobile phone to make check deposits, thus avoiding check cashing fees.
“It’s clear that the Bluebird Card can be immediately considered a top-tier prepaid card offering,” said CardHub CEO Odysseas Papadimitriou. “The fact that its only major fee is a $2 charge for all but your first monthly ATM withdrawal–which is waived for those enrolled in direct deposit–means that it will be among the least expensive prepaid cards, depending on how exactly you use it. The ability to load funds via check by taking a picture through Amex’s mobile application also makes it one of the few cards suitable to be an alternative check cashing tool.”
Robert Manning, CEO of the Rochester, N.Y.-based Responsible Debt Relief Institute and a critic of previous Walmart efforts to expand its financial service offerings, described Bluebird as an expanded or beefed up version of the Green Dot prepaid card. Not only does Bluebird offer consumers more ways they can use the card, it also offers them a broader acceptance network as well as one higher on the ladder of perceived value, he noted.
But he also pointed out that all such prepaid cards in the past have had consumer problems that had not been readily seen unless you looked at the details.
“How long can you have money on the card without using it before they take it,” Manning asked. “What happens if there is fraud, and you lose the money on the card?”
For the record, Walmart and American Express said that the funds put on a Bluebird card will never be taken and that the funds enjoy the same fraud protections that funds on regular American Express cards and other American Express prepaid card products have. But one unintended effect of the card might be to make it more difficult for credit unions and banks to move unbanked people into banking relationships.
Michelle Jun, senior attorney with Consumers Union, pointed out that not all consumers come to prepaid cards for the same reason and that some prepaid customers may already have banking relationships. But for those that don’t, having a ready service for payment transactions that are relatively low cost might make it more difficult to convince them to open bank or credit union accounts.
In addition, some of Bluebird’s features, such as the mobile deposit feature, might make the card hard to match for some credit unions as well, she observed.
“The way the world is now, consumers need some sort of relationship with a full-service financial institution going forward if they want to finance a car or a home and this service is not that,” Jun added.