--American Express, Wal-Mart Stores selling a new prepaid
card
--Called first of its kind
--Said to be 'more affordable' way to control expenses
(Adds quotes from conference in paragraphs two-five).
By Andrew R. Johnson
American Express Co. (AXP) and Wal-Mart Stores Inc. (WMT) said
Monday they are selling a new prepaid card in the retailer's stores
and online that they say is cheaper than traditional debit cards
and checking accounts in a bid to capture new revenue.
"This really is a first of its kind out in the marketplace,"
said Dan Schulman, president of American Express' enterprise growth
group, on a conference call.
"We believe Americans should have a better and more affordable
way to control their expenses," said Daniel Eckert, vice president
of financial services for Wal-Mart U.S.
While saying the card is a boon to users, neither company would
disclose the benefits to themselves. But Mr. Eckert did say: "We
serve a large swath of the US population ... and customers may
think of Wal-Mart first for their shopping transactions and their
financial transactions."
Many of Wal-Mart's customers are low income, living
paycheck-to-paycheck, and turning to the retailer to cash their
checks on a monthly basis. With the card, called Bluebird, Wal-Mart
has a financial-service customers can tap into and then do their
shopping. Right now money can only be added at Wal-Mart
registers.
The companies first began testing Bluebird late last year, and
have since fine-tuned the product based on customer feedback.
"Bluebird is our solution to help consumers who currently may be
poorly served by traditional banking products," Mr. Schulman said.
"It allows them to easily and safely move, manage, and spend their
money."
Prepaid cards function like traditional debit cards and can be
used to make purchases at brick-and-mortar merchants and online
retailers. However, they do not come with a checking account, and
in some cases lack some of the regulatory protections afforded to
users of checking and debit cards.
Traditionally sold by alternative financial-services companies
such as Green Dot Corp. (GDOT), NetSpend Holdings Inc. (NTSP) and
Western Union Co. (WU), the market has recently attracted a slew of
mainstream lenders, including American Express, J.P. Morgan Chase
& Co. (JPM), U.S. Bancorp (USB) and Regions Financial Corp.
(RF), as they look for additional revenue sources amid fee limits
on other products.
American Express and Wal-Mart said their product contains the
same fraud protections and product features as other traditional
card products, and carries significantly lower fees than competing
prepaid offerings. For example, the Bluebird card doesn't have a
monthly maintenance fee, annual fee or activation fee, while other
prepaid cards can carry fees of $5 or more a month, in addition to
activation fees and charges for talking to a customer-service
representative, checking balances at automated teller machines and
other activities.
"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," Mr. Eckert said.
Bluebird, which American Express first disclosed in March, is
the latest effort by both companies to attract new customers.
American Express, traditionally a lender of credit cards to
affluent borrowers, last year launched a new prepaid card as part
of an aggressive push to appeal to a wider swath of consumers. It
has since struck deals to sell its new products in stores like
Office Depot (ODP), Target Corp. (TGT) and other stores.
Wal-Mart has long been a major player in alternative financial
services. It already offers its own prepaid card in stores and
online called the MoneyCard, which is managed by Green Dot, a
third-party vendor that also offers prepaid cards in stores and
supermarkets under its own name.
Green Dot's shares have been under pressure this year as it has
faced more competition from traditional lenders encroaching on its
market. Its shares were down 18% at $10.51 in early trading Monday
after American Express and Wal-Mart made their announcement.
American Express' shares were up 0.2% at $58.65 and Wal-Mart's
shares were up 0.4% at $75.46 in early trading.
-Karen Talley contributed to this article
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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