UPDATE 6-Wal-Mart, Amex take on banks with low-priced debit card

* Bluebird card available next week at Walmart stores,online

* Amex gets access to 4,000 stores, spending by underbanked * Wal-Mart brings low pricing to card accounts * Average American pays $200 annually in fees * Shares of rival card companies NetSpend, Green Dot tank

(Adds more comments, MetLife deal, American Express rivals)

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 itsaffluent 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.

It also recently announced a deal with Metlife Incto offer life insurance in a pilot program in South Carolina andGeorgia.

"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.

(For a related BREAKINGVIEWS column, please click)

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 or reloadablecards. Bluebird cards will be accepted anywhere that acceptsAmerican 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.

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

which sells more expensive prepaid cards throughWalmart, plunged 20 percent. NetSpend Holdings, anotherprovider of prepaid debit cards, fell 7 percent.

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. "Every Walmart cash register is theequivalent of a (bank) teller."

Prepaid cards had been the subject of near-universal scornby consumer advocates for their often high and complicated fees.But in the past year large banks, such as JPMorgan Chase & Co, Bank of American Corp , Wells Fargo & Coand U.S. Bancorp , began marketing simpler and low-costversions of the cards.

The Bluebird accounts, like most prepaid accounts, do notallow for paper check-writing and do not charge overdraft fees.Amex wants to add check-writing next year. Schulman declined tosay how that would work without overdraft penalties.

While American Express may be risking its upscale image bypartnering with Walmart, having more cards in use may cause moremerchants to accept all Amex cards. Amex is third to Visa Inc

and MasterCard Inc in the size of its merchantnetwork.

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.


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 and giftcards.

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."

There is more potential as well for the debit card. Thosehigher up the income ladder, who have checking accounts withbanks, use them for budgeting and cybersecurity.

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 ofthe deal or detail exactly how they will make money from thepartnership, which could become more important as theproliferation of smartphones encourages digital transactions.

"A surprising number of underbanked consumers have asmartphone" they can use with a prepaid account to makepurchases, Robertson said.

(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))