GoBank may be re-thinking its practice of charging a voluntary monthly maintenance fee.
On GoBank's website, it now says that accounts opened after July 23rd will have to submit to an $8.95
per month fee if they fail to set up a recurring direct deposit of at least $500. It looks like folks who deposit via a remote deposit capture will still have to pay the monthly fee.
"The $8.95 monthly fee (or $0 based on qualifying activities) is related to the small pilot that we’re conducting at 20 Walmart stores in Texas," said Chris Mammone, Vice President of Investor Relations at Green Dot. "We’re testing out a new retail version of the product which includes that structure for the monthly fee."
That decision doesn't make a lot of sense to me. In its last earnings report, Green Dot gave an upbeat assessment of GoBank, with a particular emphasis on how they were seeing high intensity of use by their direct deposit customers. Steve Streit said that GoBank cardholders have tended to use their accounts heavily; on average during the last quarter, a GoBank customer used the account for 19 transactions per month and deposited about $1,000. He added that first month attrition rate on accounts initially set up with a direct deposit was only 25 percent.
Focusing on fee income makes sense when there are too many "one and dones," as is frequently the case with prepaid debit cards, or when usage is very light. But GoBank is clearly an exception to that outcome. Green Dot seems to get that idea, judging by how Steve Streit described their GoBank strategy:
Today, our average GoBank account holder active longer than 90 days is delivering around $11 per month in revenue, which has been growing month over month as the cohorts age. What's more interesting is that once you get past that 90-day mark, retention looks very encouraging. We're seeing only a small amount of attrition in more mature cohorts. And based on that, it may well be that we find retention rates as high as 3 years or more on these accounts. So as this plays out, it's possible that a GoBank account could deliver, say, $300 to $400 in revenue over its lifetime at a 20% or so margin. So this is why we think that at scale, GoBank could provide a very meaningful expansion of our company's financial outlook.....even with free retail cash deposits at retailers, and a voluntary monthly fee plan, GoBank is generating meaningful revenue that's comparable to our company's prepaid accounts; and four, with the right distribution strategy, GoBank could be a very big product for Green Dot and so now achieving scale is the focus of our GoBank leadership team, and we think if we achieve scale we could be on to something really good here.
Given those numbers, it should stand to reason that it would be unnecessary and short-sighted to suddenly re-configure card pricing.
I've been a voluntary payor of a $1 per month fee for my GoBank account some time, but I have never set up direct deposit. While I continue to keep my account active, I would close my account at the moment that an $8.95 fee appeared on my statement.
It will be interesting to see how the Texas pilot turns out. How will Green Dot determine success? Will it be if their consumers prove to be willing to pay that much? Alternatively, will the policy spread if it provokes more direct deposits? Those would certainly be wins for Green Dot, but from a consumer perspective it would be a reversal on the recent trend toward price compression.