Green Dot’s New Mobile App Could Crack a Few Bluebird Eggs

Prepaid card program manager Green Dot Corp. launched its GoBank mobile-banking application Tuesday. The app gives struggling Green Dot a powerful weapon to fight competitors for underbanked consumers or those simply dissatisfied with mainstream banks, including American Express Co., issuer of the new, low-fee Bluebird prepaid card account for customers of Wal-Mart Stores Inc.

Consumers can open and manage GoBank accounts on Apple and Android mobile devices. Customers fund the accounts through direct deposit, mobile remote deposit capture, or depositing money at Wal-Mart locations and locations of retail partners that Green Dot hasn’t yet disclosed. Or, they can make deposits through debit-card-based funds transfers into Green Dot Bank. Green Dot bought that Provo, Utah-based bank, formerly known as Bonneville Bank, in late 2011.

GoBank provides a checking account with a Visa debit card, but customers don’t get paper checks. Instead, they pay bills through Fiserv Inc.’s CheckFree bill-pay platform. If a merchant doesn’t accept electronic bill payment, the Fiserv system will cut and mail a paper check based on the the information the customer provided through the app, Green Dot chief executive Steve Streit tells Digital Transactions News.

Further, customers can make surcharge-free cash withdrawals at more that 40,000 ATMs managed by Cardtronics Inc. and U.S. Bancorp’s MoneyPass network. Green Dot says its ATM network is twice as big as the ATM fleets of money-center banks JPMorgan Chase & Co. and Bank of America Corp. GoBank users, however, can’t use the ATM network for deposits.

The GoBank app, developed in large part by the staff of Loopt, a geolocation technology company that Green Dot bought last year, has a number of differentiating features. Loopt founder Sam Altman, who is now executive vice president of mobile products at Green Dot, said at a San Francisco launch Webcast that the vast majority of online-banking transaction are balance inquiries. Thus, the app displays the account balance when the customer moves an on-screen slider, without requiring a login.

The account also has budgeting features, including a savings-account-like place for customers to park longer-term money, and a “Fortune Teller” that tracks purchases and deposits and gives the user a recommendation on whether a planned purchase is affordable. GoBank also provides person-to-person payments and related features.

Like AmEx’s Bluebird card, Green Dot’s mobile-banking app paints itself as a low-cost, consumer-friendly alternative to fee-hungry big banks. “We didn’t design trouble into the bank,” Streit said at the Webcast. The account has no overdraft, penalty, or minimum-balance fees. It levies out-of-network ATM fees of $2.50 and $1, respectively, for cash withdrawals and balance inquiries. The bank charges a 3% transaction fee when used for purchases abroad, and $9 to customize the debit card with a cardholder-provided photo.

In fact, while the account is advertised as free, Green Dot is inviting customers to voluntarily pay a monthly fee of their choice, up to $9, depending on what they can afford and how they view the bank’s service. Based on what consumers in Green Dot’s test groups for the app said, some actually will pay, Streit says. “We think so, people say they will,” he says. “It [the app] was so neat and and interesting … why wouldn’t you pay?”

Green Dot’s stock rose 4.4% Tuesday after taking a beating in recent months. The Monrovia, Calif.-based company’s shares slumped when AmEx and Wal-Mart announced the Bluebird prepaid card, which many observers initially thought might encroach on the Green Dot-managed Walmart MoneyCard, a popular general-purpose reloadable prepaid card. The huge retailer accounts for more than 60% of Green Dot’s revenues.

Streit says his new account and Bluebird are “different offerings.” But he notes that GoBank accounts come from a bank and customers are protected by federal deposit insurance and can receive federal payments such as tax refunds by direct deposit. Bluebird, in contrast, is issued by a non-bank AmEx subsidiary, Travel Related Services, and thus does not have federal deposit insurance and can’t receive federal deposits, he says.

Prepaid card researcher Ben Jackson, a senior analyst at Mercator Advisory Group Inc., doesn’t think GoBank “is a Bluebird killer, but it may smash a few Bluebird eggs” by  capturing some customers who might otherwise take a Bluebird card. But he also tells Digital Transactions News by e-mail that “I think most Bluebird customers are people who fund the card from a bank account already, so it would not surprise me to see people use both GoBank and Bluebird.”

Jackson calls most of GoBank’s app’s features “table stakes” as mobile banking and payments become increasingly sophisticated, but he says the budgeting aspect is unique. “That may be attractive because it helps users manage their spending,” he says. “Of course, that lowers the risk of overdrafts, which is a positive thing for Green Dot as well as its customers. But this piece could be very attractive to people who are, as Steve Streit said, trying to manage their cash flow as opposed to a more complex budget.”

Streit says Green Dot initially will limit GoBank accounts to 5,000 to 10,000 customers, but he expects a national rollout in a few months.