2 Dow Stocks Team Up
Being linked together in the Dow Jones Industrial Average(DJINDICES: ^DJI) is no longer the only thing American Express (NYS: AXP) and Wal-Mart (NYS: WMT) share in common. The consumer-finance giant has launched a prepaid card, called Bluebird, to be sold in more than 4,000 Wal-Mart stores around the country and online at bluebird.com. The effort signals a departure from AmEx's traditional business of high-fee credit cards that tend to be marketed toward those in upper-income brackets.
Both companies have dabbled in the prepaid market for a little while now, with AmEx offering a similar prepaid card at Target (NYS: TGT) and Office Depot (NYS: ODP) , and Wal-Mart selling prepaid cards managed by Green Dot (NYS: GDOT) . This new partnership appears to have a much brighter future simply based on the sheer reach and reputation of the two companies.
In a market that consists of more than 7 million users, the prepaid segment of the consumer-finance industry has grown from $12 billion to $57.2 billion in terms of money loaded onto these cards. AmEx and Wal-Mart clearly realize the growth potential, and the new Bluebird card is their attempt to steal some market share.
Being separated from bricks-and-mortar banks has allowed prepaid-card users to use electronic payments without the fees that generally accompany the services-based retail banking sector. What sets this card apart, however, is its complete lack of fees, which is a sharp contrast from both previous prepaid options and traditional bank debit cards. Other important differentiating factors are the lack of a minimum balance requirement and zero overdraft penalties. It will also incorporate the ability to deposit a check onto the card by simply sending an electronic picture of the check.
Green Dot is solely reliant on prepaid card usage for revenue, and that's reflected in the 20% drop its shares experienced today, even though Wal-Mart's contract with Green Dot runs through 2015 with no expressed desire to end the relationship. More well-hedged prepaid offerers, such as Western Union, have fared better since the news was released. Western Union finished down only 0.6% today.
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The article 2 Dow Stocks Team Up originally appeared on Fool.com.Taylor Muckerman has no positions in the stocks mentioned above. The Motley Fool has the following options: short OCT 2012 $55.00 puts on American Express Company, short OCT 2012 $60.00 calls on American Express Company, and long OCT 2012 $65.00 calls on American Express Company. Motley Fool newsletter services recommend American Express Company and Western Union. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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