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Refundo RAL Redux

Adam Rust's picture

Posted December 19, 2014

There is more about Refundo than I knew.  Let's review the details.

There are three Refundo-branded financial products.

The first, and the one that I referred to as potentially a kind of new RAL , is a preparer-paid advance of up to $500. The $500 is delivered in a check within hours of when the return is approved by the IRS. According to Refundo, preparers are not allowed to charge a discrete fee to the consumers that opt to use the service. 

The second is a standard refund transfer product. The RT costs $27. The RT is paid for by the consumer. 

With both products, the consumer can avoid having to pay preparation costs out of pocket. 

In both instances, the value proposition for the preparer is a chance to increase traffic. That is particularly true with the Refundo Now. In a market where most preparers cannot offer a loan against a future refund, having the ability to offer an advance could influence where consumers choose to go for preparation services.

What about the cost to the consumer? Refundo says that it will be free to filers. But as I wrote previously, I expect that preparers will cross-subsidize the cost of their prep services to make up for the expense of the Refundo Now. What is that on a per-loan basis? Here is how I would construct a calculation to answer that question:

Number of Refundo Nows sold * $50

over

total store tax preparation revenues

plus

Margin

equals

average cost paid by consumers for Refundo Nows. 

But under this structure, Refundo can say that there are no fees to the consumer. Anyone that chose to disagree would find it impossible to assert the true cost with any certainty. The actual cost will vary from preparer to preparer. The top-off could be as high as $50, but it could be far lower in stores where only a small fraction of customers choose to get the Refundo Now.

Refundo's refund transfer ("RT") is straightforward. A filer pays $27 for the RT along with additional line items for transmission and technology.  Note, though, that those latter fees are not relevant with certain tax software programs. 

The third financial product sold by the company is the Refundo Prepaid VISA card. The card is issued by First Bank & Trust (Brookings, SD). I have searched the Refundo web site for a price schedule, but alas. I cannot find one. I do understand that the monthly fee is waived when there is a recurring direct deposit established with the account.

But from my perspective as a long-time observer of prepaid cards, the most interesting part of the card is its downstream incentive for preparers. According to Refundo, with each swipe that a consumer makes on the Refundo card, the preparer receives fifteen cents. Granted, that's not quite like what was going on with Office Space. In fact, I would be surprised if any card account generated more than $50 in revenue for a preparer over the course of the year. Indeed, a preparer who could realize an average benefit of$15 per card would probably be doing very well. Nonetheless, it is an interesting promotion. I haven't heard of this kind of approach to customer acquisition.