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Bluebird Prepaid Card

A Joint Venture of Walmart and American Express

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Bluebird Overview: Announced on October 8, 2012, Bluebird is a prepaid card developed by American Express and sold both through Walmart stores and online. Bluebird users can load funds on their cards at Walmart stores and use them wherever American Express cards are accepted.

For Walmart, it represents another attempt to serve the ranks of the unbanked in the United States, an adjunct to its Walmart MoneyCenters. According to Big Insight, a consulting firm, 40% of Walmart customers earn under $35,000 per annum, with the average figure at $51,000.

For Amex, prepaid cards like Bluebird are a departure from that company's long strategic focus on expensive credit cards aimed at high spenders. Bluebird is not its first foray into the prepaid card market, however. It already has similar partnerships with retailers such as bookseller Barnes & Noble and office supply chain Office Depot to offer these cards.

Nonetheless, some observers see Bluebird, because of the potential scale that comes with tapping Walmart's huge customer base (about 140 million Americans visit its stores each week, according to the company), as a major signal that mainstream financial institutions see significant opportunities in attempting to serve lower income demographic categories that either shun or have been shunned by the banking system. Indeed, Walmart's vice president in charge of financial services sees the potential for Bluebird to attract tens of millions of customers who find that traditional checking accounts and debit cards are too expensive relative to the value that they provide. He described the venture as a way to "do good for customers."

Fees: At its launch, Bluebird was free if opened online or via a smartphone app, but a setup kit available in Walmart stores cost $5. Unlike most competing cards, it has no monthly, annual, usage or activation fees. How the company expects to turn a profit on Bluebird is unclear, unless by stimulating yet more merchandise sales to its users.

Walmart already owns a small stake in Green Dot, and utilizes that company to provide the existing Walmart Money Cards. Shares of that company fell 20% on the news of Bluebird, since roughly 66% of that company's revenue comes from its partnership with Walmart. The CEO of Green Dot commented that Bluebird is designed for a different market segment. In a similar vein, Walmart claimed that Bluebird is expected to be a purely incremental business that does not cannibalize its other financial services offerings. No specifics to back these claims were offered by either company.

Sources: "Prepaid Enters Mainstream: Venture Between Wal-Mart and American Express Illustrates Industry Shift," The Wall Street Journal, October 9, 2012. Also, "Walmart and Amex target the unbanked," Financial Times, October 9, 2012, and "Walmart/Amex" in The Lex Column of the same issue.

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