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Tuesday, October 9, 2012

That Evil Wal-Mart

Wal-Mart in partnership with American Express will introduce a new banking function that has a paucity of the normal fees associated with a bank account.
    1.       No set up fee
    2.       No minimum balance
    3.       No monthly maintenance fees
    4.       No annual fee
    5.       No fee for access to your money when using an American Express ATM

Aimed at the “under banked”  the Bluebird accounts (as Wal-Mart calls them) offer direct deposit, deposit by cell phone, deposits at any Wal-Mart cashier and a card that can be used exactly like a debit or prepaid cash card at any store that accepts AE.

There is one more thing.  Remember the cap that the Durbin amendment to the Dodd-Frank legislation put on “swipe fees” for Debit and Cash cards?  They won’t apply to Bluebird card swipes since Wal-Mart defines them as electronic traveler's checks.

It will be interesting to see if Wal-Mart is praised for inventing a banking system that can actually be used by lower income individuals, sans the normal fees, or whether they will be vilified for skirting the Durbin amendment.


  1. Are the swipe fees the source of revenue then?

    1. Yes, what the lay person refers to as a swipe fee the industry calls a funds transfer fee. In this case the fee is: 1) settled between Wal-Mart and AE, 2) transparent to the user and 3) passed on to all customers as part of retail product cost. The ironic part is that the entire scheme helps low income and under-banked individuals. One of the very groups that the Durbin amendment was attempting to protect from swipe fees.

      Of course, if those card users are making purchases at Wal-Mart they are still paying a swipe fee as part of the purchase price of product. So I think that gets us back to where we started except that the fee is spread to a broader base (Wal-Mart customers not using the Bluebird cards) and less visible.