In a recent post, I threw out a number for the amount of Serve/Bluebird shutdowns as around half. A reader took me to task on this, asking where I got that number so I decided to take a better look.
- Serve Shut Down spreadsheet via r/churning, has over 200 reports
- Serve Shut Down poll via Dansdeals, has over 1,400 reports
Both the spreadsheet and the poll have around half accounts shut down and half still alive. At the time of this writing, the spreadsheet has 113 alive birds and 100 dead birds; the poll has 551 alive birds and 613 dead birds.
If you look closer at the metadata of the spreadsheet, it becomes clear a large part of the live accounts are those opened within the past few months. The cutoff seems to be November 1, 2015; accounts opened after that date are largely unaffected by the closures.
When narrowing our search to accounts opened in October 2015 and earlier, it’s around 2/3 shutdown and 1/3 still live. And some of the ones remaining open are accounts that weren’t active much and had no reason to be closed.
In short, the large majority of MS (manufacture spend) accounts were closed and most likely closures will follow on newer accounts who MS.
Quite a massacre.
Despite all the well reasoned and discussed events, I have to disagree that these results can in any way be interpreted as scientifically accurate. The data collected was only from self-selected individuals who both follow those specific sites and feel compelled to provide feedback. It is much like a poll dependent on people calling/emailing/texting in, only those motivated will do it, not a statistically random sample. If anything, I would propose (and not presume to be correct, just guessing as that’s all we can do) that those taking the effort to post a response are those upset about getting shut down. If I was shut down (I was not, 2 ServeVIPs still in service), I would likely google around, find the active discussions and read what was going on and at least be more in a position to post a shutdown update. So it could be a bunch of happy BB/Serve MS’ers are still out there doing their thing and not bothered about sharing the news. Again, not proposing that I have any inside knowledge, just saying that none of us do. It could be 10% shutdown or 30% or 90% or whatever, who knows.
Not that it matters anymore, but it sounds like some folks were able to get multiple Serve cards under 1 name (and I presume 1 SSN). How was that possible? Did folks slightly change the SSN?
Raj — many people would “manage” serve cards for their household and relatives.
Does anyone know whether loading random numbers would make a difference or not to avoid a shutdown? For example loading $199.97 instead of $200.
I would guess that would be worse. Think of it this way–if the intention is for most people to load cash, who would be loading 199.97 to their Serve account? They’re most likely rolling in with $20s and loading an even amount.
I and my wife switched to Serve from RB on November 14, and both accounts were closed last Friday.
I am very, very sure that Amex tracks all their prepaid card products via Social Security numbers. Evidence: Only one Amex prepaid card per social, and the 30 day “hold” period when you cancel one card to go to another. (When I switched cards a couple of years ago, I got out of the 30 day period by calling them up and asking them to allow me switch early.)
It is quite possible that they accounted for card switching when they evaluated your current prepaid card. They did the analysis at the SSN level rather than at the current card level.
If this is true, then it will be very difficult to get a new prepaid Amex card for previously unprofitable SSNs. I guess we will see in 30 or so days after the shutdown cards are officially canceled and people try to get new cards.
fyi i don’t think that counts as “metadata”
Lucky me, serve still open and opened another one 2 weeks ago
Chuck — as another reader noted previously, looking at data from reddit and dansdeals is definitely a biased sample of total Serve/BB cards owners and not at all representative of total cardholders. That bias is, of course, respondents in both those samples are much more likely to use those cards for MS purposes. Actual percentage of closedowns is probably much smaller.
I do have my own theory of HOW Amex decided which cardholders to shut down that I haven’t seen fully espoused elsewhere. Their email mentioned “patterns of behavior” and they could have used some type of complex algorithm to determine those patterns. I think they took the simplest and easiest route and created an individual card profitability model with the likely correct assumption that the least profitable cards are using them for MS purposes. They could divide card components into three areas: 1. Actions that cost them money 2. Actions that didn’t cost them anything. 3. Actions that made them money.
Actions that cost them money would include credit/debit card loads, excessive use of bill pay, Amex Offers (some of which are shared with their offer vendors), etc. Having more sub-cards for the express purpose of using them for Amex offers would certainly cost Amex more.
Actions that made them money include using the card for actual purchases and maintaining a high balance, over time, in the account.
Grandfathered softserve cards have the potential for being much less profitable than the more recently introduced varieties.
Recently obtained cards don’t have the history yet to be profitable / unprofitable. I think they will run this profitability model over time and if an individual card starts being unprofitable, they will close it down.
Loading with VGC at Wal-Mart and more recently Rite-aid wouldn’t really cost Amex anything as the assumption is that cost would be absorbed by the two retail partners.
Direct Deposit loads don’t cost Amex anything which is why they push that activity.
If a card user loaded up their card excessively to the max with credit card loads and then turn around and drains the account via bill pay or withdrawals to checking accounts, then that account is very unprofitable.
If a card user mostly loads the account with DD, cash, and even VGC loads and then maintains a high balance or drains it by card usage then that account is more profitable and would be safe.
I think this explanation fits what they are doing. If this is true, probably the best MS use of active serve cards is to only load them up with VGC (until that is shut down by retail partners) and then drain it by limiting bill pay to high value / low frequency items. For example, I have used Serve for paying real estate taxes and have heard about some people using it for paying college tuition!
Your post seems very well thought out and is probably mostly correct. I once read that Amex refunds FD, RA & WM for loading fees to Serve. Is that not true?
Good Question! I am not sure. PIN based debit card transactions (VGC with pin) do not go through credit card payment systems and are generally much cheaper to process than credit card transactions. That cost could be absorbed by Amex, retail partners (FD, RA, & WM) or possibly even the debit card issuer. For more info on these costs you could read through the PIN section of this explanation:
https://www.cardfellow.com/debit-card-transaction-fees/
The retail partners probably look at supporting the whole prepaid card segment as a means of generating increased store traffic and transaction size. Amex and the partners could easily analyze obtainable data that shows individual shopper purchasing in conjunction with prepaid card initial purchase and loading. The processing fees, and who pays them, should derive out of this. Part of that decision is how easy it is for the retail partner to incorporate isolating these costs into their point of sale processing software. I do know that RA VGC loads shows up as a retail purchase when looking at the VGC transactions after the fact.
Good post! I agree.
Like the concept but not sure it holds true. Had 3 serve cards all opened on 10/23. One got shutdown and two remain open. My two least profitable from Amex accounts remain open and my most profitable/least used account was closed.
Mark – Did the two that remain open have Direct Deposit loads and the one that was closed didn’t?
Trying to think like Amex here. Their easy solution would be to close all Prepaid down completely if the whole business was unprofitable. The harder solution is to figure out how to make it profitable. You need to keep as many (potentially profitable) prepaid cardholders as possible to maximize profitability. I think that they might give cardholders who set up direct deposits more leeway before shutting them down as I would guess that they have the greatest potential to be more profitable.
Think about what they did with softserve. They announced a $4.95 fee in early November that can ONLY be waived by direct deposit.
Only GC loading and BPing to credit card for all three accounts. A mix of loading at WM and RA. No direct deposit on any of the three.
I think you might be right about the profitability algorithm but they may also look at length of time between deposits and withdrawals as a factor to profitability…which may skew things a bit. Anyway, here’s the exact history for my three accounts.
Card 1 (alive):
OCT: $0
NOV: $1,000 – $285 BP (single BP to amex)
DEC: $3,800 – $4,515 in 5x BPs over the month on various days that by 12/31 left me with a $0 balance
JAN: $0 until the night of the shutdown announcements when I successfully loaded $500
Card 2 (alive):
OCT: $0
NOV: $1,000
DEC: $1,700 – $120 BP
JAN: $0 until the night of the shutdown announcements when I successfully loaded $1,500.
Card 3 (dead):
OCT: $0
NOV: $1,900 – $1,225 BP (one to Barclays and one to my CPA). BPs were 1 and 3 days after the load date.
DEC: $500
JAN: $0
It should be noted Card 1 and Card 2 are under the same last name at the same address whereas Card 3 is different last name and different address.
There doesn’t seem to be much of a pattern to my shutdown relative to my two cards that are still alive. If I was gonna bet, I’d say Card 1 would be most likely to get shutdown given the volume and that it was sitting with a $0 balance whereas Card 3 still has $1,700ish sitting in it for weeks.
Mark — If I read this right, the card that didn’t get shutdown had the least amount in BPs which may be the reason it wasn’t shut down. There are two implications of this. I think that one part of their profitability equation is retail card usage which is where Amex would make the most money. Dollars spent on bill pay are dollars not spent at retail, so that is a cost rather than generating revenue.
Second, it wouldn’t surprise me if they flagged larger bill pays to credit cards which could be indicative of MS. They would also assume that someone who does this would never be profitable to them.
Nope. Card 1 had 400 % more BP $ than card 3 but card 1 wasn’t shutdown and card 3 was.
Is it possible they decided to run a giant A/B experiment and decided to randomly ax half of the offending accounts and observe if it achieved the desired impact on the other half to reduce MS activities?
I’m with Mark. Had 2 BB’s, mine + DH. Oldest card (mine) is approx 2 years old & shut down. DH’s card is just over 1 year old, and still open. Both loaded only with gc’s, both drained via separate checking accounts. Both cards had very few, but exact same small purchases (small biz saturday last year + random petco, petsmart amex offers). Differences – oldest card did higher volume overall. Both cards – some months maxed, some months nothing. Major difference – I also have 2 target prepiads (non-redbird) + 1 Redbird registered in my name. DH had neither. Noodle on those data points……
Thanks for your comment, very well-written and thought out. I have had a lot of these thoughts as well, especially the profitability piece. The thing that’s been bothering me is- everyone is assuming our activities cost AMEX money, but I haven’t really been able to understand how!! As you correctly point out, it doesn’t cost AMEX anything when we load with VGC; the swipe fees are paid by the retailer. And even if AMEX pays part of it back, as Eric suggests, debit swipe fees are extremely low and a portion of that is going to be minimal. As for CC loading- sure there are swipe fees there, but they have limited it to AMEX cards which means for the most part, they are paying THEMSELVES!! Yes I know that only a part of the fee goes to the issuing bank but that’s the largest part, and besides- they’ve limited the loads to $1,000 per month which keeps their damage pretty low.
Why does it cost AMEX money to do an Ach billpay? Aren’t Ach transactions insanely cheap? I thought that was the point to them… if they weren’t, banks wouldn’t let us do an unlimited amount of them for free like most do. But if anyone has an idea of how much they cost, I’d be very interested to know what it is. Besides, most of us probably drain our Serves with just 1-2 of large BillPays per month.
Plus, they still get money out of us from the float for the time our money is in there, which of course varies by person. But I know I would leave mine in for as long as I could, usually most of the month- and not long after I’d be reloading the next month already, and I still got closed.
Sure, I know we don’t MAKE them money by using it for purchases, but that’s different from saying we COST them money. Plus, many people who made purchases in addition to MS-ing were shut down.
Obviously they shut us down so there must have been a reason, even though it took them 3.5 years. I’m just curious exactly which transactions cost them and how much. Is there any chance we were shutdown because of suspicious or unusual behavior- with fraud/laundering concerns- and not profitability?
CtownBin – It is always difficult to reconstruct an algorithm or formula based on very incomplete data, which is what we are kinda doing here. We are making two main assumptions and both are profit related. First that Amex wants to make money from their prepaid business otherwise they would shut it down completely. As a result, they are making a profit or thought they could make one from those accounts kept active and from future account holders. All other assumptions derive from those two points. A couple of comments on your post. Amex was clear that the shutdown was due to MS concerns. Without going into detail, you can argue that MS directly cuts into their financial profit margins. There might have been fraud/laundering concerns — but if there were, I think that that Amex would have very carefully cited that as a reason in order to act as a deterrent for remaining cardholders. For example, rather than saying “potentially fraudulent activity” which might have legal implications they would use such language as “suspicious transactions” or “not using the account for its intended usage” rather than cite MS directly. Currently, Amex makes as much as 3.5% on most card based purchases. (See this link for details: https://www.cardfellow.com/american-express-discount-rate/ ) If a cardholder does $1,000 of card based usage a month, then that cardholder makes as much as $420 for Amex. Conversely, lets say someone loads $1,000 a month and then spends 100% of that on bill pay per month (which costs Amex a little bit via either ACH transfers or printing and stamp). If we assume that the net average daily balance is $1,000 and that Amex is able to earn an aggressive 10% APR on that investment, the most that Amex would earn would be $100 for the year on the float. Conclusions: Amex’s prepaid profitability is being driven by retail card usage. The reason why they got into the prepaid card business was to get Amex cards into those that currently don’t have them (those with lower incomes) and then get them to use the plastic as much as possible at retail. Taking this one step further (and I have no inside info on this — all supposition), I wouldn’t be surprised if they cut a deal with Wal-Mart and Target where they charged them much less for BB or Serve usage in their stores. It would be a win-win for both sides (Amex gets business from Visa and MC; WM/target cuts their transaction costs). However, some people figured out how to do MS with Prepaid cards and spoiled their business model! Hmm.., if this logic holds, the best way to keep a Serve card active is to do some retail purchasing with the card. Allowing loads with Amex cards does cost Amex or another financial institution something. I believe they still allowed loads to count for spending bonuses for new card holders (i.e. $100 back if you spend $1,000 in three months) although they don’t count for… Read more »
Have (had?) 4 Serve accounts under my control. Three were closed and one remains open. All four were opened between May-July last year. I’m not positive if all three had VGC loads, but I am sure that over 95% went through just one card. I’ve never been that heavy (or interested) in VGC loads anyways. All three had: online cc loads, billpay, bank withdraw and were never used for purchases other than Amex Offers.
Now for the one that’s still open. It was used exclusively for max online cc loads and Amex Offers. Any funds in the account were p2p to my other Serve. I cannot fathom for a second that this account is profitable for Amex.
So while I don’t want to say that your theory is wrong, It does have me wondering if they required at least 2 types of transactions (or some mix that involves more than just 1, regardless of unprofitably). If so, then all 4 of my cards would mesh with that theory.
I opened a SErve ONeVIP for myself, wife, and mother about a week after RB died. I think that was late October. My wife’s was closed, mine and my mom’s are still open. I did similar MS on all 3, but made a single small purchase on my mom’s a few months ago and loaded some AMEX Offers on mine that I never used. I don’t know if those have anything to do with why they’re still alive.
Anyone tried to reopen an BB or Serve account after shut down?
I closed my serve and applied BB and serves. None of the applications got approval.
don’t you have to wait 30 days after closure to apply again anyway?
Yes, there is a 30-day wait to re-open an AMEX prepaid, always has been. Nothing to do with the recent closures. So we will have to wait until 30 days from when WE close our account to find out if we can re-open new accounts, or if we’re blacklisted.
This has not been my experience. I had Serve, closed it to apply for Target, and then went back to Serve. Each time I was able to make the switch immediately. Many others have reported similar experiences.
If you apply for the card using the exact same information as the account you just closed you do not have to wait 30 days, atleast in my experience
What message are you getting when your application gets denied?
I’m attempting to apply for another Redcard and getting a “Sorry – we cannot open an account at this time”… or something similar.
I may just have to wait the 30-day period out (which, btw, wasn’t an issue several months ago when I moved from RC to BB within 24 hours).
Sub
You mean the part of their business where they were losing money? I’m sure they will cry themselves to sleep.