The Retail Banking Revolution May Be Over Before a Shot is Fired

by Tom

The folks at American Express and Wal-Mart are chirping about Bluebird, especially since it looks like they don’t have to worry about the July expiration of the Dodd-Frank Act’s ban on commercial firms owning industrial loan companies or holding limited purpose banking charters. The executives at Wal-Mart say they are through looking for a banking charter, and given the success of their alliance with Bluebird, who can blame them?

According to a report published this week in American Banker, by January Amex’s Bluebird card had more than 575,000 accounts and $275 million in funds after the first three months. This includes 85 percent of customers new to American Express and under age 35. As we reported earlier, in March the Bluebird card added FDIC insurance and checkbooks to draw from accounts that can be valued up to $100,000 each year. So even without a bank charter, Bluebird functions as a true checking account.

In a separate story, American Banker reports that the expiration of the Dodd-Frank moratorium on commercial institutions holding bank charters seems moot; the horse has already left the stable.

As the story reports, the Dodd-Frank ban was imposed before the banking industry became the villains in Washington. Following the financial crisis, some feel that putting commercial companies compete with banks is not such a bad idea. The Independent Community Bankers of America want to extend the freeze to keep retailers out of banking, but the industrial banks or ILCs have proven they have a viable business model. The Dodd-Frank moratorium is more likely to go out with a whimper rather than a bang, since there is no real demand for bank charters. The success of the Amex/Wal-Mart model shows you don’t really need one.

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