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Green Dot Sheds Wall Street's Wet Blanket

Adam R.'s picture

Posted November 1, 2013

Yesterday's earnings announcement from Green Dot evidenced a product that remains resilient to any of the forces cited recently by its critics. Green Dot beat forecasts on EPS, but the strongest proof

came from the data points highlighted by Steve Streit on customer stickiness and in their retrenchment in Wal-Mart.

When analysts at Piper Jaffray and Janney Capital Markets downgraded Green Dot earlier this month, their shares began a steep descent from $26 to $20. Those analysts cited the potential threat posed by Amex's new plans to offer free at-the-register cash reloads at several retailers. But that doesn't seem to matter - at least for now.  

Some metrics:

  • Direct Deposit: Compared to last year, the company has 24 percent more accounts with direct deposit. 
  • Spend: Purchase volume per active card up 10 percent. GDV per active card up 8 percent.
  • Growth of Wal-Mart MoneyCards is faster: The number of direct deposit active cards went up 25 percent and the GDV of those cards increased thirteen percent. As if to underscore the appeal of cash reloading, Green Dot said that the number of said transactions has grown by 11 percent. Green Dot offers free cash reloads for the Wal-mart MoneyCard Preferred card.

Streit said that Green Dot would soon expand to nine different card styles. Much of that will generate even more stick: people can now upload a photo or choose a picture of their favorite NFL team. How that translates: Green Bay: NFL. Jacksonville: NASCAR. California: Selfie. 

Perhaps the most intriguing bit was the news that their cards would now be offered at every other checkout lane at Wal-Mart stores. Could there possibly be a better retail location for companies selling in the underbanked space? Could there possibly be space that costs more? That leads me to wonder if this is a strategic coup or a gamble aimed at overcoming the surging popularity of the AMEX cards in the big boxes.

Still, Green Dot says that it  has been beating Bluebird in face-to-face environments. 

Green Dot thinks Amex is losing money on Serve. According to their estimates, Serve earns $27 in revenue for each card per year, but spends $108 to do so. It is informative to any outsider to see the breakdown of those expenses: the biggest cost items are ATM host and network fees and costs paid to retailers for each free reload. 

They didn't offer anything on the initial results of Gobank.