Test Drive

Kicking the tires of the new Bluebird prepaid card

By Cary Whaley

Like any true payments geek, I revel in a chance to get under the hood of new payment offerings and take them for a test drive. So when American Express announced that its new prepaid card, called Bluebird, was available exclusively at Wal-Mart Stores, I drove to the nearest megastore, purchased a $1 Bluebird starter kit and went home to set it up.

– First impressions: The packaging is rather striking, but more so are the hefty promises it makes. Positioned as “a checking and debit alternative,” the card offers direct deposits, surcharge-free ATM access through the MoneyPass network, bill payment and simplified online account management.

But that’s not all: The card features American Express member service and allows you to deposit checks via your smartphone, purchase protection (replacing merchandise accidentally damaged or stolen within 90 days of a purchase by a Bluebird card) and even establish subaccounts for family members. There are added benefits, too, such as roadside assistance (pay as you go), entertainment assistance (i.e., event booking) and fraud protection (offered on most bank-issued credit and debit cards).

– Second impressions: The fees are reasonable. There is no annual or monthly fee and no fees for most services—overdrafts, direct deposit, deposits/reloads via smartphone, billpay, foreign exchange, dormancy and customer service, to be exact. That’s certainly an attention-grabber. In fact, the only published fees are for adding money at a Wal-Mart ($1) or through a debit card ($2, loading from a card, such as a Green Dot Moneypack card that costs $5), and for out-of-network ATM transactions ($2, not including the ATM surcharge).

But while the Bluebird is a nice feather in the cap for Wal-Mart and American Express, it isn’t without limitations. The first limitation is a big one. Buried on Bluebird’s website is this statement: “Funds in your Account or Sub-Account are not insured by the Federal Deposit Insurance Corporation.” For many consumers that may be a deal-breaker, although some might expect that with companies as large as Wal-Mart and American Express behind the product their money will be safe.

The second limitation further clips Bluebird’s wings: You cannot directly deposit federal payments on the card. That rules out federal government wages, tax refunds and benefits (e.g., Social Security). And while you can deposit checks onto the card, you can’t write them against funds on the card.

– Third impressions: There was a lot of operational clumsiness in the product. I had to wait five minutes while the cashier and manager figured out how to scan and process the purchase from the card’s starter kit. During the card’s registration, my address could not be verified, so I had to call in and wait for customer service to take my call and verify address (another 50 minutes). Then I had to wait for my permanent card to arrive (seven days) as the starter card is very limited. And when I attempted to “link” my bank account to the Bluebird card, the website mentioned that funds transfers will generally be available within five business days after my request.

In a digital age, that’s a lot of waiting. And a lot of starts and stops that may put consumers off, which is a good thing for proponents of the traditional deposit suite.

Implications for community banks

Nevertheless prepaid offerings like Bluebird provide an alternative—albeit a clumsy one—to the traditional checking account and extend the concept of “free checking” to omit the charging of overdraft fees.

To compete with Bluebird and other prepaid cards, community banks should emphasize the premium features that come standard with a traditional checking account, like FDIC insurance (emphasizing the peace of mind it provides). They should also highlight the ability to deposit funds into checking accounts at no cost with immediate availability of some, and usually, all funds. The fraud protection that is mandatory under Regulation E should be featured as well.

Community banks also need to carefully evaluate some of the key product differences, such as consumer remote check deposit, and member benefits (roadside assistance, points, travel/entertainment assistance, etc.) for their appeal. There are other services, such as identity protection, that can be built into deposit products.

Finally, and perhaps most importantly, community banks need to ensure that their deposit product suite can serve the needs of the growing population that has no intention of ever writing a check. While the absence of checks will be a limitation for many consumers (myself included), there is a generation of consumers who don’t see the value in a check, and certainly don’t want to pay for its infrastructure. For those customers, community banks should consider offering prepaid cards, or developing a checkless alternative to the traditional checking account to meet that segment’s need.

My overall impression? The Bluebird card is no Thunderbird, but it certainly should prompt community bankers to re-examine and perhaps fine-tune their deposit suite. endmark

Cary Whaley is ICBA’s vice president of payment and technology policy.