story by Kim Souza
It’s been about two months since Wal-Mart Stores Inc. and American Express launched Bluebird, a prepaid debit card promising lower fees with the hopes of wooing unbanked and underbanked consumers alike.
The expected overall market for prepaid debit cards is between $75 billion and $80 billion loaded in 2012. This market totaled $57.2 billion in 2011, according to the Mercator Advisory Group.
While no Bluebird sales data has been released, analysts and consumers give the card mixed reviews.
Wal-Mart notes the product was developed for millions of Americans who are looking for advanced capabilities such as deposits by smartphone, mobile bill pay, no minimum balance, nor any account maintenance fees.
Traditional banks have been told by regulators over the past several years to reach out to this unbanked market, but a recent report from the Federal Deposit Insurance Corp. found major gaps in traditional banking services still exist. Only 37% of banks across the country actively market the unbanked and underbanked consumers, according the FDIC report.
Industry veterans say a vast array of prepaid debit cards have emerged in recent years to fill the void, but most are heavy on fees and short on perks. They say from early observations, Bluebird is a bird of another feather.
“We are excited about this successful and disruptive product because it gives customers a worry-free, better option,” said Sarah Spencer, Wal-Mart spokeswoman.
On the surface the card looks very much like a modern checking account, without the actual checks and associated fees. The account is administered by American Express. Wal-Mart sells the cards and also provides customers with thousands of locations where they can make deposits and withdrawals.
Bluebird expects to add check-writing options in the first quarter of 2013.
The earliest reviews cited Bluebird as a serious threat to bankers and mighty challenger for traditional checking accounts particularly for those institutions charging hefty maintenance fees.
Richard Barrington, senior financial analyst with Moneyrate.com, notes Bluebird offers “caveats as well as kudos for consumers.”
He said there is no interest earned with Bluebird and they don’t help build credit in anyway. The deposits loaded on Bluebird cards are also not insured by the FDIC like traditional bank deposits.
“Still, the Walmart Bluebird card deserves credit for legitimately attempting to provide a service to consumers. This is in sharp contrast to the spate of celebrity-sponsored prepaid cards that have come out over the past few years. The exorbitant fees many of those celebrity-sponsored cards charged made them nothing more than a blatant rip-off,” Barrington said.
Credit/debit card watchdog site, Cardhub.com says Bluebird brings a lot to the table with minimal fees and customer perks that American Express is known for, which is why the site named Bluebird its choice for “Best Prepaid Card in 2012”.
Wal-Mart says the product was shaped from customer feedback who said they were not getting the value they expected from traditional checking accounts and debit services because of increasingly higher fees. The retailer tested the product in California before launching it across its 4,000 U.S. stores in October.
Other prepaid cards, including Wal-Mart’s own branded product, have targeted the unbanked, which according to the FDIC is roughly 8.2% of the adult population or 10 million adults.
Ben Jackson, senior analyst with Mercator Advisory Group, says Bluebird goes after another demographic — the underbanked. The FDIC estimates the underbanked at 20.1% of the population or 24 million adults.
He said the lower fees could resonate well with some consumers who are more apt to overdraw traditional checking accounts.
“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 U.S.
A public blog that compares prepaid cards had a handful of negative posts on the customer service side of the Bluebird card. The most common angst with the card was call center service and length of time to get some deposits credited to the account.
Bloggers noted on Dec. 17 their calls were not answered. The bloggers say they spent 30 minutes on hold and then were asked to leave messages, which were not returned. One of the bloggers says he has been trying to recover money on his card for more than two weeks and customer service has been no help.
Jackson said he personally got a Bluebird card to test it for himself and found the call center service to be below par.
“The operators appeared to be reading from a script,” Jackson said. “The centers also appear to be offshore and the attendants unable to adequately field and answer questions beyond the basic explanation of how the card works.”
Jackson admits there is likely a slight learning curve on the customer service piece of any new product. But said given the known potential appeal for the product the customer service should be better than it is.
“BlueBird’s website has no online customer service form so I have spent conservatively 10 hours in the past week on hold and on the phone with their people. The worse customer service I have ever experienced,” Cassandra Godfrey blogged on Dec. 5.
One of the perks Bluebird touts is remote deposit, but Jackson said card users need to be aware those funds are not available for a minimum of 7 days.
“This is spelled out in the account terms, and when I tested the remote deposit via their cell phone app on the 10th of the month my account wasn’t credited until the 17th, which is a long lead time by any standard,” Jackson said.
The Bluebird site says remote deposits should be available in five days, but it could up to 30 days.
Godfrey wrote that she loaded $250 on the card to purchase books and Christmas gifts, eight days later the funds were still not available. She has since closed the account, saying “there is nothing more frustrating that not being able to access your money.”
Jackson understands the need for a few days lead time given there is some fraud risk associated with remote deposits.
“Someone could capture and send the remote deposit image via their cell phone and then run to a local check cashing agency and get the funds, effectively rendering the Bluebird deposit void. American Express will want a couple of days to clear the check before giving credit, but they are taking substantially more time. They are using that money without paying any interest to the Bluebird cardholder,” he said.
Local banks who have personal relationships with their customers would be more likely to give immediate credit for remote deposits, which are growing in popularity, according to Jackson.
Spencer said there are other ways to load the cards including, payroll direct deposit, using cash at any Walmart register, or by linking a checking, savings, or debit card to the account.
While Wal-Mart has waived the uploading fees at their stores, there is a $2 charge to transfer money from another debit card. There is also a daily limit of $100 on transfers from a debit card.
Some critics say this product is another arrow in Wal-Mart’s banking quiver as the mega retailer continues to blur the lines between merchandiser and banker.
American Banker writes, “After years of providing financial services, Wal-Mart is becoming a more formidable bank competitor with the addition of the American Express checking account alternative, Bluebird.”
According to American Banker, some analysts see Bluebird as another stepping stone for Wal-Mart. Brian Riley, senior research director at CEB Towergroup, told American Banker Wal-Mart wouldn’t be satisfied until it becomes a bank.
Around the world, he says, Wal-Mart 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.
Jackson doesn’t think Wal-Mart is interested in becoming a bank.
“Bluebird is another product for their shelves. They do not want the regulation and oversight that comes with being a bank in the United States. They are in touch with what their customers need and try to provide it when at all possible,” he said.
Dan Schulman, group president Enterprise Growth for American Express, says they worked with Wal-Mart to engineer a product that “rights many of the wrongs that plague the market today.”