NEW YORK (AP) — Competition from the Wal-Mart behemoth has investors in prepaid card companies running scared.
NetSpend and Green Dot, which sells many of its cards at Walmart stores, tumbled Monday after Wal-Mart Stores Inc. announced it would offer its own prepaid card with credit card issuer American Express Co. With its shares falling, Green Dot replied with a statement saying it supported Wal-Mart's efforts to offer more financial products to more customers.
Wal-Mart's bigger foothold in prepaid cards, which are generally targeted at lower-income families without traditional bank accounts, could upend competition. Wal-Mart and American Express said Monday that their new card, called Bluebird, would be a good alternative for shoppers fed up by the higher fees that banks are charging for checking accounts and other debit services.
Analysts said Monday that competition from Bluebird could force NetSpend and Green Dot to lower their fees or offer other enticements to make themselves attractive to customers.
Shoppers will be able to buy the Bluebird card at Wal-Mart and then use it at a variety of locations that accept American Express. They can put money on the cards by linking them to a bank account or their paycheck deposit, using cash at a Wal-Mart register, or through other options.
In a call with reporters, Wal-Mart executive Daniel Eckert said the company has no plans to end its relationship with Green Dot, but instead is simply broadening its assortment of financial services to serve more customers. Wal-Mart has a contract with Green Dot through 2015.
Green Dot, based in Pasadena, Calif., depends heavily on Wal-Mart. More than 60 percent of its operating revenue comes from sales there. NetSpend will probably be less affected by the Wal-Mart announcement, analysts said, because it doesn't sell its cards at Wal-Mart.
Still, Sterne Agee analyst Greg Smith said he believes Green Dot has a few factors in its favor. For example, while the Green Dot card might have higher fees over the long term, it does have a lower initial purchase price — $3 compared to Bluebird's $5 — that could heavily influence customers' choices.
Green Dot CEO Steve Streit said his company has "a great partnership with Walmart," and said he's "fully supportive of their focus on offering various alternative financial solutions for different segments of Americans looking for better ways to manage their finances."
Streit reiterated a point that Walmart executives made in a conference call — that the Bluebird product is meant to attract a different group of customers compared to Green Dot's Walmart MoneyCard.
"We will continue working together to grow our MoneyCard business, which we believe will continue to thrive alongside this new offering," Streit said.
Prepaid cards have also caught the attention of regulators. The Consumer Financial Protection Bureau has raised alarms about the industry's fees, with the companies usually charging customers to reload their cards, buy new cards and withdraw cash from ATMs.
In the early afternoon, Green Dot Corp. dropped $2.32, or 18 percent, to $10.54. NetSpend Holdings Inc., which is based in Austin, Texas, shed 75 cents, or 7 percent, to $10.
American Express edged up 19 cents to $58.75, while Wal-Mart rose 12 cents to $75.25.