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Bluebird Prepaid Card Represents Game Changer for American Express, Wal-Mart

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And it's a bad omen for the prepaid market's old guard.

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That's obviously bad news for the likes of Green Dot and NetSpend (NASDAQ:NTSP), which until recently enjoyed pretty firm control of the prepaid card market. Competing with the financial strength and visibility of either American Express or Wal-Mart would be difficult enough on its own, but trying to take on their alliance seems nearly impossible. So, the normal hit you'd expect the old guard's business to take as a result of increased competition will therefore be exacerbated by the popularity of the new kids on the block and the fact that they have a largely superior product.

We've already seen proof of this happening. The price of GreenDot stock fell nearly 25% on the day of the Bluebird Card's release and has settled at about 19% less than it was previously going for. The card's launch has also brought NetSpend stock down from its 52-week high.

Investors are clearly worried about these companies' ability to compete, and for good reason.

We all know that if the Bluebird Card is successful, many of the other largest banks and retailers will scramble to follow the example set by Amex and Wal-Mart. While that's bad for the issuers who only offer prepaid cards, it's undoubtedly a good thing for consumers. Prepaid card terms should get better and better as everyone is forced to step up their game in response to the Bluebird Card, and we may even reach the point where the free prepaid card replaces the free checking account.

(See also: American Express Goes Down-Market With Wal-Mart.)
No positions in stocks mentioned.
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