Being linked together in the Dow Jones Industrial Average (^DJI -0.98%) is no longer the only thing American Express (AXP -0.84%) and Wal-Mart (WMT 0.57%) share in common. The consumer-finance giant has launched a prepaid card, called Bluebird, to be sold in more than 4,000 Wal-Mart stores around the country and online at bluebird.com. The effort signals a departure from AmEx's traditional business of high-fee credit cards that tend to be marketed toward those in upper-income brackets.
Both companies have dabbled in the prepaid market for a little while now, with AmEx offering a similar prepaid card at Target (TGT -0.54%) and Office Depot (ODP 0.35%), and Wal-Mart selling prepaid cards managed by Green Dot (GDOT 0.45%). This new partnership appears to have a much brighter future simply based on the sheer reach and reputation of the two companies.
In a market that consists of more than 7 million users, the prepaid segment of the consumer-finance industry has grown from $12 billion to $57.2 billion in terms of money loaded onto these cards. AmEx and Wal-Mart clearly realize the growth potential, and the new Bluebird card is their attempt to steal some market share.
Being separated from bricks-and-mortar banks has allowed prepaid-card users to use electronic payments without the fees that generally accompany the services-based retail banking sector. What sets this card apart, however, is its complete lack of fees, which is a sharp contrast from both previous prepaid options and traditional bank debit cards. Other important differentiating factors are the lack of a minimum balance requirement and zero overdraft penalties. It will also incorporate the ability to deposit a check onto the card by simply sending an electronic picture of the check.
Green Dot is solely reliant on prepaid card usage for revenue, and that's reflected in the 20% drop its shares experienced today, even though Wal-Mart's contract with Green Dot runs through 2015 with no expressed desire to end the relationship. More well-hedged prepaid offerers, such as Western Union, have fared better since the news was released. Western Union finished down only 0.6% today.
