Banks latest Walmart worry: New prepaid card


Walmart has long inspired fear in banks, as it has long sought to make inroads in consumer banking.

There were sighs of relief when the retail giant gave up on its latest attempt to acquire a consumer banking license a few years ago, but no one ever thought the company would simply give up on its designs to provide more financial services at lower cost to its millions of customers.

The company's latest attempt is its new Bluebird prepaid card, which it has launched with American Express and which is obviously moving downstream. While those without a bank would appear to be the natural market for such a card, both companies are aiming it also at Walmart customers who may be less inclined to see value in their traditional bank. There will be no account minimums or overdraft charges and customers can use the card at ATMs and wherever American Express cards are accepted.

At some point, customers will be able to write checks against the account. The funds of course are not FDIC insured, but that likely will not be a detriment, as it hasn't held back other prepaid cards.

You would have to wonder if Walmart might try some interesting discount and rewards-type marketing programs around the card. Other retailers have also targeted banks with such cards, aiming to play off the general displeasure with banks and the perception that fees are going up. Broadly speaking, this is an attempt to disintermediate banks at the low-end of the consumer market. Banks will have to figure out just how much these accounts mean to them.

For more:
- here's an overview from the Washington Post
here's a Breakingview's look at the interchange fee implications


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