Prepaid card pioneer Green Dot Corporation (GDOT) has partnered with retail giant Wal-Mart Stores Inc. (WMT) to launch GoBank – a low-cost checking account service that will be linked to a MasterCard (MA) debit card. A nationwide rollout of the service is planned for October.
Wal-Mart stores across the country will double as bank branches for GoBank, the mobile banking platform backed by Green Dot Bank. Wal-Mart shoppers can simply sign up for or deposit cash into a GoBank account, giving the smartphone-based bank an edge over rivals like Simple and Moven.
The account is meant to be a low-cost alternative to traditional bank checking, with the starter kit costing just $2.95. There will be no minimum balance fees, monthly fees or overdraft charges, provided that customers have a minimum of $500 in the account through direct deposit. To put it in perspective, an independent study by Bretton Woods estimates that consumers pay about $218 – $314 a year for a basic checking account.
The checking accounts will be insured by the Federal Deposit Insurance Corporation (FDIC). Account holders will gain access to a network of 42,000 ATMs without incurring any withdrawal fees.
Moreover, Green Dot uses an in-house system to screen GoBank customers for credit-worthiness and identity verification. Credit bureau ratings and other scores traditionally used to determine eligibility are not part of the process. This will broaden the appeal of the service to a large segment of Americans with limited or no access to banks, especially those with a questionable financial history.
The account’s “Fortune Teller” will alert customers in real time if a purchase falls outside their budget, by crosschecking the product’s price with the customer’s planned income and expenses. Customers can also transfer money instantly to each other at no cost, through an email or a text message.
GoBank attempts to overcome the barriers to traditional banking, providing a large segment of consumers with a feature-rich FDIC-insured checking account. The deal also unlocks a significant distribution channel for GoBank that presently serves 140 million customers in the United States on a weekly basis.
In 2013, Green Dot generated around 64% of its revenues from prepaid cards and other financial services distributed through Wal-Mart. Green Dot recently agreed to acquire Santa Barbara Tax Products Group (“TPG”), in a bid to expand its offerings beyond personal banking, broaden its product portfolio and reduce its dependence on Wal-Mart.
With a market capitalization of about $939 million, Green Dot is the largest provider of prepaid debit card products and prepaid reloading services in the U.S. This Zacks Rank #1 (Strong Buy) stock competes with Blackhawk Network Holdings, Inc. (HAWK) and American Express Co. (AXP), which offers the Bluebird card service.
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