Article

Amex Bluebird evolves into a 'virtual bank'

Now offering FDIC insurance and paper checks, the prepaid is looking like an online bank with ATM branches.

March 27, 2013 by James Wester

American Express and Walmart are expanding Bluebird, the companies' virtual alternative to bank accounts, making the service seem more like a bank and less like a hopped-up prepaid account.

According to an announcement from Walmart, Bluebird account enhancements include FDIC insurance and the option to order paper checks. Other changes include the availability of the equivalent of a cashier's check (without the cashier) and an increase in the amount of money a consumer can add to an account. Bluebird account holders can now add up to $100,000 annually.

A more viable substitute

With these changes Bluebird is evolving into a more viable substitute for a bank account. For instance, with FDIC insurance, account holders will now be able to have government payments, such as Social Security security payments and federal tax refunds deposited directly to their Bluebird accounts. And preauthorized checks mean that Bluebird account holders can use checks in situations where there's no other accepted way to pay.

"When we launched Bluebird last October, we were focused on serving the tens of millions of Americans who are not well served by the traditional financial services industry," said Dan Schulman, group president for enterprise growth at American Express. "The unbanked, underbanked, and the unhappily banked are beset by onerous fees and numerous inconveniences. Bluebird is designed to help make their everyday financial lives easier, more convenient and less expensive."

Schulman said that the changes reflect feedback from consumers, advocacy groups and government officials, and represent "the next set of enhancements that further distinguish Bluebird from other financial services options."

The essential ATM

On the other hand, those enhancements begin to blur the line somewhat between a prepaid Bluebird account and a "virtual bank" account with a provider such as GoBank. Launched just this year, GoBank is a mobile app- and online-based banking service aimed at Millenials and others who are disaffected with the traditional banking system.

Ties to a tiny bank in Utah allow GoBank to extend FDIC insurance and traditional banking services in a non-traditional way. But what makes the concept workable is access to ATMs. GoBank piggybacks on the MoneyPass and Cardtronics networks to offer surcharge-free access to 40,000 ATMs nationwide. 

Bluebird provides fee-free access to 22,000 ATMs to members who enroll in direct deposit. Bluebird service is offered through Walmart stores and is built on the American Express Serve platform. Accountholders can also deposit checks via smartphones, set up sub-accounts.

Because it's at heart a prepaid account, the checkwriting function of Bluebird is a little clunky. Funds must be set aside to cover a check transaction, so the check must be preauthorized in two steps:

1. Obtain a unique authorization code online or through the Bluebird mobile app. (The funds associated with that check are immediately deducted from the customer’s balance, and are held until the check is presented for payment.)
2. Write the authorization code on the check and give it to the payee. The payee can confirm that sufficient funds are available by calling American Express.

On the other hand, in a world where checkwriting has become almost unnecessary, Bluebird does meet an important, if rare, need.

'Everyday money management'

And, said Daniel Eckert, vice president of financial services for Walmart U.S., this is exactly the mission of Bluebird — to make services available as needed to make customers' lives easier.

"Bluebird is helping customers streamline everyday money management without the frustration of navigating complicated dos and don'ts just to avoid fees," said Daniel Eckert, vice president of financial services for Walmart U.S. "The enhancements we're announcing today make Bluebird a great option for our active duty military personnel, government employees and other customers, helping them take greater control of their everyday finances."

Read more about mobile banking.

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