Payments 3.0: Bluebird’s Failure Is Still a Lesson Today

The end of a payments era will arrive on June 3, when American Express closes all of its Bluebird prepaid cards. It’s the end of a product that seemed to have all the advantages that a payments product could want, but seemingly never made the most of them.

AmEx launched Bluebird with Walmart in 2012, looking for the “unhappily banked,” as Digital Transactions reported at the time.

The partnership gave AmEx access to Walmart’s distribution footprint, and because Bluebird ran on AmEx’s three-party network, it wasn’t subject to Durbin Amendment interchange caps. It looked like a prepaid product with structural advantages its competitors couldn’t match.

Although the prepaid market was crowded and neobanks were starting to appear on the scene, Bluebird stood out: almost no fees, direct deposit, mobile check capture, person-to-person transfers, and access to a fee-free ATM network.

It’s one drawback at the beginning was that it lacked FDIC insurance, which limited its ability to accept federal direct deposits, but AmEx added it within the first year.

Industry analysts at the time speculated that Bluebird could even become a pathway into AmEx’s credit products. The logic was that Bluebird offered deposit and transaction data from consumers who were often thin file or credit invisible. If AmEx wanted to expand its customer base, Bluebird could, in theory, have provided information for future charge card or credit card customers. But no evidence suggests it ever happened.

Bluebird was created under the leadership of Dan Schulman, then head of AmEx’s Enterprise Growth division. That unit was built on the Serve platform and aimed to become an enabler of “digital commerce,” Schulman said in early 2012. He described Serve as an enabler of “digital commerce,” and he had already struck deals with Sprint and Verizon to preload Serve on mobile phones. Bluebird, in that context, was not a one-off prepaid card—it was part of a broader plan for AmEx to reach new customer segments and new distribution channels.

So, why didn’t Bluebird become a dominant force in American consumer finance? AmEx did not respond to a request for comment, but I have a few ideas.

First, I don’t think competition was the biggest constraint. Bluebird had a rich feature set that seems to have anticipated the coming neo-bank movement. It had subaccounts for families, goal-based savings, mobile-first money movement, and connections to the Walmart Savings Catcher program. It had the makings of a super-app before that was a thing.

I think the real challenges came from a combination of infrastructure and strategy.

Bluebird and other AmEx prepaid products had a different issuer—American Express Travel Related Services Company Inc.—from the rest of AmEx’s products, which are issued by American Express National Bank. Its prepaid products were processed on their own separate platform, the Serve platform.

That likely made it more difficult to integrate Bluebird data into any customer-prospecting programs that AmEx had.

AmEx sold the Serve Platform to InComm in 2017, describing the deal as taking advantage of InComm’s prepaid experience. It seems more likely the deal was AmEx looking to spin off a silo that was not part of its central business.

When it comes down to brass tacks, I think Bluebird’s relative success reflects that AmEx missed the opportunity that a lot of financial-services companies miss. They can build the customer they want, but they need to organize their products to build customers’ financial capacity.

The lesson is to think big picture. How can you take a new product and integrate it into the big picture of a company, its products, its infrastructure, and its markets for long-term strategic goals?

—Ben Jackson bjackson@ipa.org