While consumers historically underserved by mainstream financial services industry are often referred to as unbanked or underbanked, young adults are quickly joining their ranks. In Unbanked and Underbanked Consumers in the U.S., 3rd Edition, Packaged Facts found that the percentage of 18-24s who self-identify as unbanked has grown by almost 25% during 2005-2013. This jump has likely been influenced by recession-driven unemployment and wage trends that have disproportionately affected younger entrants to the job market, their dampening need for bank accounts. However, it also suggests that a generational shift away from traditional banking relationships among Millennials may be underway, as these young consumers adapt to newer forms of alternative banking, led by the likes of “non-bank” alternatives (i.e. PayPal) and reloadable prepaid cards.
As a case in point, as part of going after what it terms the “alternative to banking” category, American Express touts Bluebird as providing almost all the features necessary to address financial inclusion, and Packaged Facts is hard pressed to disagree. The card integrates several emerging online/mobile banking technologies under one roof for the first time, including P2P, bill payment, check image recapture, while also providing access to more traditional options, including-very significantly-the ability to write checks, as well as the ability to deposit checks onto the account by mail. It does all of this while promising no overdraft fees-or virtually any fees at all, for that matter. Funds are also eligible for FDIC pass-through insurance coverage. In the final analysis, there is very little for consumers not to like about this card. For now, all that is lacking is an international remittance option.
The most distinguishing feature of Bluebird concerns users’ ability to write checks-yes, physical checks-via a preauthorization procedure that circumvents any checking overdraft issues. For that matter, all transactions conducted using a Bluebird Card are funded from and to the extent of available funds in the account.
Packaged Facts believes that Bluebird sets a high bar, giving consumers a very robust array of features and benefits of any prepaid card program available while also providing a very low fee structure, in effect acting like a full checking account without the branch banking. It is also helping American Express bring consumers under its umbrella at a much earlier age than its bread-and-butter charge cards do, giving it add opportunity to grow along with them as they build assets and require more financial services. In the meantime, these same consumers may soon begin view traditional checking accounts as an afterthought.
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