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Serving the Unbanked – An American Express CSR Quarterly Report

April 8, 2013

According to a survey released by the Federal Deposit Insurance Corporation (FDIC) in December, roughly one in 12 American households, or 17 million adults, are "unbanked" – meaning that they do not have a current checking or savings account.

Similarly, one in every five American households is "underbanked," meaning that they have a bank account, but that they also rely on expensive alternative services -- like payday loans, check-cashing services, money orders and pawn shops – to pay bills or make ends meet.

According to The Economist (February 16, 2013), not all the unbanked are poor nor do all poor people lack bank accounts, but the rate of the unbanked among low-income households (defined in the FDIC survey as those with an annual income below $15,000) is more than three times the overall rate. And, the proportion of poor Americans without an account compares badly with other developed countries like Italy, Portugal and Greece.

Often, the unbanked have no alternative but to use cash for their financial transactions. Not only does this mean consumers incurring substantial fees, but carrying large amounts of cash increases the risk of theft. It also means that consumers have to find places that accept cash payments for expenses like electricity and telecommunications.

Stepping into this void, last October American Express and Walmart launched Bluebird, a new offering that provides consumers with an alternative to a traditional debit or checking account – a classic example of what Michael Porter and Mark Kramer call "shared value creation."

According to Porter and Kramer, companies can create "shared value" in three ways:

  • Re-conceiving products and markets (companies can meet social needs while better serving existing markets, accessing new ones or lowering costs through innovation);
  • Redefining productivity in the value chain (companies can improve the quality, quantity, cost, and reliability of inputs and distribution while they simultaneously act as a steward for essential natural resources and drive economic and social development); or
  • Enabling local cluster development (companies need reliable local suppliers, a functioning infrastructure of roads and telecommunications, access to talent, and an effective and predictable legal system).

Bluebird offers consumers a payment capability anywhere that the American Express Card is honored. In addition to the award-winning customer service that comes with an American Express Card, Bluebird members have access to Purchase Protection, which can provide coverage for accidental damage or theft to eligible purchases within 90 days of purchase, as well as the ability to add checks via smart phones, family sub-accounts and no fee access to cash at 22,000 ATMs for Bluebird members who have enrolled in direct deposit.

Recently, based on feedback from customers, American Express and Walmart added capabilities like eligibility for FDIC insurance coverage for all permanent Bluebird accounts, an option for ordering preauthorized Bluebird paper checks for those merchants who don't accept electronic payments, and more ways to add funds, including mailing a check to American Express. We also increased the Bluebird account balance limit to $100,000 annually.

The addition of FDIC coverage for permanent accounts and the increase in the account balance limit means that customers can now arrange for direct deposit of U.S. government payments such as Social Security checks or tax refunds directly into their Bluebird accounts (temporary accounts are not eligible for FDIC coverage). It also provides an extra layer of security for consumers – providing them with extra peace of mind.

"When we launched Bluebird last October, we were focused on serving the tens of millions of Americans who are not well served by the traditional financial services industry. The unbanked, underbanked, and the unhappily banked are beset by onerous fees and numerous inconveniences," said Dan Schulman, group president, Enterprise Growth at American Express. "Bluebird is designed to help make their everyday financial lives easier, more convenient and less expensive."

"Since launching Bluebird, we have been listening to our customers' feedback and working hard to expand its features and services," said Daniel Eckert, vice president of financial services for Walmart U.S. "Bluebird is helping customers streamline everyday money management without the frustration of navigating complicated dos and don'ts just to avoid fees."

As of January, more than 85% of Bluebird enrollees are new to American Express and more than 45% are under the age of 35 – increasing the number of consumers who are members of the American Express network and fulfilling a need that they have for simple, convenient financial services. A win-win for consumers, society, and our two companies. Or, "shared value creation" in CSR parlance.

Bluebird is available on-line at and at more than 4,000 Walmart stores in the United States.

If you have a question or comment, please share it here. Or, alternatively, follow me on Twitter at @tmcclimonCSRNow and comment there.

P.S. Did you know that the share of unbanked households using various pre-paid cards (often with sizeable fees) rose from 12% in 2009 to 18% in 2011? The Mercator Advisory Group forecasts this trend to continue at a compound annual growth rate of 21% to 2015.


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