Strategies: How AmEx’s Bluebird Enhancements Miss More Immediate Customer Needs

Ronald Mazursky and Jehan Hamedi

An analysis of customer chatter on social media shows how the T&E giant may have to repair its new prepaid product to make it take wing.

The recent announcement by American Express Co. and Wal-Mart Stores Inc. of upgrades to the Bluebird product seemingly responds to the competitive demands of the general reloadable prepaid card space. However, these upgrades might not be quite what the Bluebird customer wants today.

Make no mistake, Bluebird has generated strong enrollment through its association with Wal-Mart. They report more than 1 million accounts opened since its launch. But there have been mixed signs from customers, with expressions of both strong customer satisfaction and displeasure on Twitter, Facebook, and other public discussion forums.

American Express has now gone full bore into the debit arena with Bluebird: a co-marketed product (targeted to the underbanked) that is the visage of an entirely new form of checking account with the addition of Federal Deposit Insurance Corp. insurance and paper-based checks.

With Bluebird’s current array of benefits, it is now competitive with the best prepaid products in the market: elimination of most fees, access to ATMs, free bill pay, employer direct deposit, paper checks, and FDIC insurance. Bluebird seems ready to deliver what the underserved consumer needs.

They’ve certainly moved in the right direction, but Bluebird customers are saying something different.

Gaming the System

Consumer sentiment on Bluebird is almost an even split between positive and negative sentiment since the October 2012 launch (based on an analysis of tweets, Facebook posts, and online discussion forums using the Crimson Hexagon ForSight platform through March 31, 2013). What we find most interesting, however, are the underlying consumer motivations propelling these sentiments.

On the positive side, we see consumer excitement about the ability to “game the system.” Consumers are drawn to the prospect of earning rewards points on existing credit and debit cards through the purchase and use of Vanilla Reload Prepaid Cards (28% of all conversation).

The process works this way:

(1) The Vanilla Reload Prepaid Cards issued by InComm enable consumers to top up prepaid products, including Bluebird.

(2) Consumers can buy Vanilla Reload Cards with their credit cards, receiving points on their rewards card products. We should note that some retailers have started to limit purchase of these cards to cash only.

(3) Savvy consumers then use their Bluebird account, either online or through paper checks, to pay billers that do not accept credit cards (for such services as mortgages or student loans). It is clear that already-banked consumers have figured out how to benefit from this process, but Bluebird’s targeted, underbanked consumers are not realizing this benefit.

Second, and more akin to Bluebird’s competitive positioning, we find general praise of fee savings—incorporating discussion of savings over other prepaid cards in the market (19%).

Interestingly, since Bluebird’s launch, chatter concerning rewards tied to Vanilla Reloads (as a proportion of total conversation) has increased by 14%, while the benefit of receiving lower fees has declined by 14%.

This finding tells us one of two things: either (1) a relatively large segment of Bluebird customers consists of reward hunters and are searching for new ways to accrue additional points (based on these conversations they may not be underbanked), or (2) fee reduction may be required to compete in the post-recession prepaid game, but that alone may not be a compelling enough incentive for adoption.

On the other hand, nearly half (49%) of all commentary since the launch is unfavorable. This negatively charged opinion might ultimately determine the fate of Bluebird.

As consumer complaints continue to amass on social media, it has become painfully clear that Bluebird suffers from an array of flaws in its onboarding and processing operations. In fact, 30% of the online conversation reflects an unsatisfactory customer-service experience.

This discussion includes general customer-service grievances as well as complaints related to transaction processing and payee issues. Since October, the proportion of total conversation related to customer-service complaints has increased by 8%.

Another significant driver of criticism is American Express’s current requirement that the customer cancel his/her Serve account prior to being approved for Bluebird (18% of the conversation). Bluebird is offered on the Serve platform, which is perhaps creating back-office problems for American Express.

For one reason or another, these individuals want to possess both prepaid accounts. The frustration is palpable in customer postings and it is not clear why American Express won’t allow current customers who are willing to fund multiple accounts to do so.

Finally, the former lack of FDIC insurance has had little impact on current Bluebird customers. Less than 1% of Bluebird discussion focuses on the omission of this insurance, which tells us that either the insurance was added to satisfy underbanked customers who have not yet acquired the Bluebird card or that it was added to appease consumer-interest groups.

Bluebird is on the right path toward becoming a debit and checking card alternative for the underserved, but current customers are not happy. Could they eventually attract more underserved customers with the new product features? Yes, but that strategy does not address current customers’ needs.

In the near term, American Express needs to focus on three issues. (1) The surprisingly strong interest in “rewards gaming” makes this a critical benefit requiring further exploration—and raises new questions about meeting the needs of current Bluebird cardholders vs. potential underserved customers.

American Express must contend with the criticisms leveled by its current customers. In particular, (2) the customer-service issues will impede customer retention and growth if not resolved quickly. And (3) the frustrations with the cancelation requirement for the Serve card will surely lead to abandonment of one product or the other.

Assuming American Express can resolve these issues before adding any more enhancements, Bluebird may well establish an attractive nest in the prepaid arena.

Ronald Mazursky is a managing director at Market Innovations Inc. Jehan Hamedi is the global market development manager at Crimson Hexagon. Reach them at rmazursky@ marketinnovationsinc.com and jehan@crimsonhexagon.com.

Technology That Understands the Chatter

Crimson Hexagon is a Boston-based provider of social-media analysis software. Powered by patented technology originally developed at Harvard University, the Crimson Hexagon ForSight platform allows clients to discover consumer opinion contained in billions of tweets, Facebook posts, and various online social media conversations that are important to their businesses, and view this valuable business intelligence in real time.

With ForSight, customers can define and quantify categories of social-media conversation, such as the discrete reasons consumers cite for adopting or abandoning a particular product, and accurately measure how the proportions of those categories change over time.