When Walmart and American Express unveiled their Bluebird alternative payments platform earlier this month, it was viewed as another positive sign for the growing prepaid industry.
Odds are prepaid competitors Green Dot and NetSpend aren’t looking upon the news with the same optimism.
As Business Week points out, prepaid cards are generally (but not always) targeted at lower-income families, as such families are less likely to have traditional bank accounts.
The case is especially dire for Green Dot, which sell many cards in Walmart stores, thus giving Bluebird the opportunity to seriously undercut its market. As the world’s largest retail chain with a large percentage of customers that fit such demographic, Walmart’s a key retailer from which Green Dot sells. In fact, Green Dot derived 62 percent of its revenue from WalMart in Q2 2012.
While Walmart has said it doesn’t plan to cut ties with Green Dot, with which it’s partnered through 2015, that hasn’t done much to help the prepaid competitors’ stock. In the initial week after Bluebird’s launch, Green Dot lost 23.74 percent of its value, falling to $9.80 a share. It’s rebounded and fallen again some since then, and sits at the same price today.
That Green Dot’s stock is, putting it kindly, volatile, is not news. The company lost nearly 60 percent of its value in late July following disappointing Q2 earnings, and has seen double-digit percentage rises and falls every few weeks since.
For many prepaid investors, Bluebird validates the fears they’ve had all along: once bigger companies and financial institutions enter the prepaid picture, smaller players such will be left in the dust.
Read more on Bluebird’s prepaid stock ramifications here.
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