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Is Loopt the Moat for Green Dot?

Adam Rust's picture

Posted August 7, 2012

When Green Dot acquired Loopt last March, investors reacted with a collective indifference. The stock's shares were gradually slipping at the time and stood at approximately $32. Since then, the stock's descent has only steepened, to the point where today they are selling for $10.40.

Yet today the wisdom of that acquisition deserves to be re-evaluated. Green Dot reported last week that some of

its exclusive partnerships with several national retailers were endangered. It seems that retailers want more competition in their stores. The immediate likelihood is that the price to buy a prepaid card in a store will fall. Green Dot's new exposure to competition is not unique. Competitors like NetSpend and PayPower are likely to face similar environments.

That is where Loopt suddenly gives Green Dot the chance to differentiate. Loopt's stand alone product was a mobile app that alerted consumers to price discounts. It derived its functionality from the highly specific geographic information that a smart phone could transmit. The Loopt app could notify an account holder when he or she was physically near a store with a special price on some good or service. That would seem to be a mobile translation of Groupon or Living Social. The GPS-enabled location feature makes it different and perhaps even better.

The idea works on several levels. If it can be operationalized in a manner similar to Groupon or Living Social, then Green Dot could end up with the ability to offer exclusive discounts. That is a win for their cardholders. Getting something for free is an experience that is very common to middle and upper-middle class households. It is less common with poor people. Poor people don't get rewards cards. That is not to say that the poor pay more, although many people would venture that theory, but only that they experience a simpler pricing environment. Wal-Mart has "everyday low prices." Indeed, simple prices are a staple of the prepaid card model.

They might also be able to extract some fee on the back end from retailers. That would be a big win for Green Dot.

One more advantage is that Loopt lets Green Dot leap into mobile.

The result is that Green Dot could be a first-mover on a unique consumer benefit.