CORRECTED-UPDATE 5-Wal-Mart, Amex take on banks with low-priced debit card

(Corrects spelling of Daruvala, paragraph 11)

* Bluebird card available next week at Walmart stores,online

* Amex gets access to 4,000 stores, spending by under-banked * Wal-Mart brings low-pricing to card accounts * Average American pays $200 annually in fees * Shares of rival card companies NetSpend, Green Dot tank By Martinne Geller and David Henry

NEW YORK, Oct 8 (Reuters) - Wal-Mart Stores Inc andAmerican Express Co are teaming up to offer a prepaiddebit card called Bluebird to target lower-income shoppers whomay not have bank accounts.

The move will give American Express, best known for its moreaffluent cardholders, a 4,000-store gateway to tens of millionsof so-called "underbanked" households and the fees they willgenerate as technology moves more of their transactions fromcash to digital payments.

At the same time, Walmart will get to extend its mantra of"every day low prices" to yet another sphere and come closer toachieving its years-long goal of offering banking services.

"Walmart is doing everything it can to be a financialservices provider to the largest number of Americans possible,"said David Robertson, publisher of The Nilson Report, whichtracks the payments industry.

The Bluebird, which will be available next week, offerssomething similar to a checking account, but without minimumbalance requirements or monthly or annual fees. Adding money isfree, unlike other cards, known as prepaid debit cards orreloadable cards. Bluebird cards will be accepted anywhere thataccepts American Express cards, not just at Walmart.

"This is incredibly cheap. This is one of the best, if notthe best, options for prepaid cards, said Anisha Sekar, vicepresident for credit and debit products at NerdWallet.com, whichcompares prices for financial products.

The average American pays about $200 a year in ATM fees,overdraft fees and other bank fees, said Daniel Eckert,Walmart's vice president of financial services.

The elimination of those fees should free up more money tospend elsewhere.

The announcement sent shockwaves through parts of therapidly changing payments industry. Shares of Green Dot Corp,

which currently sells more expensive prepaid cardsthrough Walmart, dropped 20 percent, and NetSpend Holdings,

another provider of prepaid debit cards fell 3 percent,as bigger, more powerful companies move in on their business.

Bluebird also brings a new threat to the relationships bankshave with their customers. If the deal with Walmart works forAmerican Express, the financial services company could takemarket share from other banks.

"This is one salvo," said Toos Daruvala, a consultant inMcKinsey & Co.'s North America banking and securities practice."All banks need to try to figure out who is friend, who is foe,who they are going to partner with and who they are going tocompete against in the world of retailers, telecoms andtechnology players."


Bluebird accounts will accept payroll direct deposits andsmartphone deposits of photographed checks. They will also allowholders to make mobile payments and person-to-person transfers.

"We reimagined how banking might be done in the 21stcentury," said Dan Schulman, American Express's group presidentof Enterprise Growth. "Where every Walmart cash register is theequivalent of a (bank) teller."

Prepaid cards have been the subject of near-universal scornby consumer advocates for their often high and complicated feesuntil the past year when large banks, such as JPMorgan Chase &Co began marketing simple and low-cost versions, partlyto cut their own costs of dealing with people with less money.

Walmart's efforts to get into the banking business havespanned more than a decade. The Bentonville, Arkansas-basedretailer has applied for bank charters several times, but hasfailed amid opposition from banks, unions and others.

Prepaid card accounts are not subject to as many governmentregulations as traditional bank checking accounts, researchersat the Pew Charitable Trusts said last month. [ID:nL2E8K56AJ}

The U.S. Consumer Financial Protection Bureau is looking toimpose restrictions. Of particular concern is fees foroverdrawing accounts.

The Bluebird accounts do not currently run that risk becausethey do not allow holders to spend more money than they have onthe cards. Schulman declined to say how the company will handlethe issue once it allows customers to write checks on theaccount, expected next year.


Wal-Mart, the world's largest retailer, has long tried toserve its lower-income shoppers who have little or no access tocredit. It has offered various financial services to shoppersfor more than a decade, including check-cashing, domestic andinternational money transmission, walk-in bill payment, giftcards, and general prepaid card services.

SW Retail Advisors founder Stacey Widlitz noted that dollarstores - which include Family Dollar and Dollar Tree

- have been trying to wrestle market share from Walmartby adding more groceries and payment types.

"But Walmart isn't lying down and taking it quietly,"Widlitz said. "The Amex card is another way to appeal to thelow-income consumer."

Bluebird will be available next week online and in more than4,000 Walmart stores in the United States.

Cash withdrawals from the 22,000 ATMs in the MoneyPassnetwork carry no fees or surcharges for customers enrolled indirect deposit. For those without direct deposit, withdrawalsare $2. For out-of-network ATMs, each withdrawal is $2 andadditional operator fees may apply.

Walmart and American Express declined to reveal the terms oftheir agreement, or detail exactly how they will make money fromit, beyond offering value-added services.

Exact customer terms for the new accounts will be postednext week when the new cards become available, an AmericanExpress spokeswoman said.

Green Dot shares plunged $2.60 to close at $10.25 on the NewYork Stock Exchange, while NetSpend ended the day down 79 centsto $9.96 on the Nasdaq. Wal-Mart's shares closed up 12 cents andAmerican Express closed up 26 cents.

(Additional reporting by Jed Horowitz; Editing by MaureenBavdek and Leslie Gevirtz)

((martinne.geller@thomsonreuters.com)(646 223-6023)(ReutersMessaging: martinne.geller.reuters.com@reuters.net))