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Prepaid card issuer and services provider Green Dot Corp. on Thursday said it is over the hump of business lost when it closed its popular MoneyPak reload product early this year.
MoneyPak was a long-established product that Pasadena, Calif.-based Green Dot sold in stores to enable the reloading of prepaid cards. Consumers also could use MoneyPak to replenish PayPal accounts and for money transfers. But besides legitimate customers, fraudsters flocked to MoneyPak to get access to cash, so many that Green Dot said in mid-2014 that it would discontinue the product. That happened this past February.
The closure took a big bite out of Green Dot’s revenues and profits earlier this year and still is affecting year-on-year comparisons. For example, cash transfers, or reloads, fell nearly 24% in the third quarter to 9.53 million from 12.5 million a year earlier. Active cards declined 3% to 4.51 million. Purchase volume, however, grew 9% to $3.68 billion.
Green Dot, which also is attempting to reduce its heavy reliance on distribution through Wal-Mart Stores Inc., reported third-quarter net income of $174,000, down 99% from $12.3 million a year earlier, on operating revenues of $146.4 million, up 1% from $144.7 million.
“This quarter’s results and the outlook for the remainder of the year reflect the significant change we made to our business when we discontinued MoneyPak earlier this year,” Steve Streit, Green Dot’s chairman and chief executive, said in a statement. “The direct and indirect loss of revenue caused by the loss of MoneyPak is contributing to year-over-year declines in our legacy business lines, which are being offset by the contributions from our recently acquired businesses. Looking forward, however, we are feeling more optimistic.”
The MoneyPak declines are stabilizing, according to Streit. In the pipeline are new branded and private-label products as well as a “new version of our MoneyPak product with enhanced risk controls,” he said.
Green Dot has made a number of acquisitions recently. They include Santa Barbara Tax Products Group (TPG), a tax-refund processor serving nearly 25,000 independent tax preparers and accountants that Green Dot bought in October 2014 for $320 million in cash and stock. Green Dot has processed 10.6 million tax refunds so far this year, the vast majority in the first quarter.
In mid Friday morning trading, Green Dot shares were trading down as much as 16% from Thursday's $19.17 close.
