WalMart, AmEx Banking the Poor

NEW YORK (TheStreet) -- Last month the FDIC made a big deal out of pointing out that 17 million adults are "unbanked," and 51 million are considered "underbanked," meaning they have poor access to checking accounts and credit cards.

Every big problem like this has hidden within it a big opportunity, as American Express (AXP) and Walmart (WMT) seem bound to prove.

Without banks, consumers rely on check cashing services and pawn shops that take a huge bite out of every dollar going through them. Companies like Fast Cash Financial Services (FCFS) on the transaction side and EZ Pawn (EZPN) on the credit side do big business, as I noted at Seeking Alpha recently, because they have offices where these people live. The margins are enormous.

Past efforts to reach these consumers through technology, prepaid debit cards offered by companies like Green Dot (GDOT) and Netspend (NTSP), have failed, even with celebrity endorsers like Russell Simmons and Magic Johnson, because it's tough to get poor people to trust plastic and celebrities aren't brands. Plus, folks want a physical location, not a virtual one.

After trialing this business earlier in the year and seeming to back off due to poor results, as American Banker reported at the time, WalMart and American Express have now decided to go all-in with a prepaid debit card dubbed Bluebird, Yahoo News reports.

Bluebird offers the unbanked and underbanked enormous value. These are Walmart shoppers. They can now get money turned into AmEx card value at any Walmart cashier, rather than having to join a single line at the front of the store. This makes a difference. Walmart cashiers don't have glass windows in front of them. Walmarts are clean. Try being a mom living on $30,000 a year -- things like this make a difference.

A modest paycheck, deposited directly through Bluebird, will now create free access to 22,000 ATMs in Amex's ExpressCash network. I just checked near my own Atlanta address, and found 15 ExpressCash locations within 1.2 miles of my house. Apparently those no-name "ATM machines" at all the local convenience stores are actually AmEx machines -- who knew? Next year the plan is to roll out paper checks -- nothing gives my neighbors more pleasure than writing checks that won't bounce.

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