When prepaid cards are marketed as checking account alternatives, the writing of physical checks may be a feature offered but not often promoted. And yet the American Express Co. and Wal-Mart Stores Inc. revealed on March 26, 2013, that the addition of a check writing capability to their alternative checking account program, Bluebird, is now front and center.
The new service allows Bluebird accountholders to order checks either online or via the Bluebird mobile app and use the checks to pay bills and make purchases based on a preapproval scheme. Accountholders can pay with checks "without worrying about insufficient funds or incurring overdraft fees because a member's funds are set aside during the pre-authorization process," the companies said.
To pre-approve a Bluebird check, customers must obtain a unique authorization code. "[O]nce a Bluebird check is preauthorized, the funds associated with that check are immediately deducted from the customer's balance, and are held until the check is presented for payment," the companies said. Customers then write the authorization code on the check and give it to the payee, who can confirm that sufficient funds are available for the purchase by calling AmEx.
"Since launching Bluebird, we have been listening to our customers' feedback and working hard to expand its features and services," said Daniel Eckert, Vice President of Financial Services at Walmart U.S. He noted that the Bluebird enhancements help active-duty military personnel and government employees take greater control of everyday finances.
Madeline K. Aufseeser, Senior Analyst at Aite Group LLC, said most prepaid debit card issuers offer a check writing option, but do not promote it. For Wal-Mart and AmEx, that addition to Blackbird rounds out the product offering, "particularly in the case with certain billers who may not accept card payments [such as] private landlords for renters or some doctors," she said.
Aufseeser agreed that requiring payees to phone AmEx to confirm that checks are good seems "a bit cumbersome," especially since remote deposit capture scanners at the POS can authorize checks in real time. But she pointed out that the service protects payees from receiving bad checks and protects accountholders from making financial mistakes.
However, Aufseeser sees another part of Wal-Mart's and AmEx's recent announcement as more important for Bluebird accountholders and for Bluebird as a viable product going forward: the partners added Federal Deposit Insurance Corp. protection of up to $100,000 on Bluebird accounts.
Aufseeser said the move enables the companies to expand Bluebird to consumers who receive government benefits, such as Social Security payments, via direct deposit. "So this expands the consumer market opportunity for AmEx," she noted.
It also provides compliance with Regulation E to the Credit Card Accountability, Responsibility and Disclosure Act – a federal "safety net" for accountholders against lost, stolen or fraud incidents on cards, Aufseeser said. "AmEx had already offered a Reg E-like service to its prepaid customers, but now it complies uniformly with the government standards," she added.
Overall, Aufseeser characterized the additions to Bluebird as a "real plus for American Express in the market as they continue to compete on all levels with other providers in the space."
MyBankTracker co-founder Alex Matjanec agreed with Aufseeser that AmEx's new features make Bluebird more attractive to consumers and bolsters AmEx's position in relation to its competitors. He said JPMorgan Chase Bank NA already offers FDIC insurance on its Liquid prepaid card, and general-purpose reloadable card provider Green Dot Corp., having acquired its own bank, can now offer checking accounts.
As prepaid card companies move into traditional banking and vice versa, AmEx has to keep up. "I think AmEx is taking baby steps in moving in that direction," Matjanec said. As the distinctions between prepaid and traditional banking continue to blur, Matjanec expects a new type of account to emerge. "What you're going to see more of are payment accounts," he said. "They will call it a payment account that also lets you write checks instead of a checking account that also let's you do this or that." 
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