Friday , January 19, 2018

Buoyed by a Strong Quarter, Green Dot Prepares Launches of Apple Pay Cash And Intuit Programs

Prepaid program manager Green Dot Corp. logged a strong quarter and now looks forward to big results from fresh deals with Apple Inc. and Intuit Inc., chief executive Steven W. Streit told stock analysts on Tuesday.

Speaking on the same day Apple released a so-called public beta version of its new Apple Pay Cash service, for which Green Dot is supplying a virtual prepaid card, Streit praised the application’s design. “My personal belief is that sending and receiving money with Apple Pay and the associated Apple Pay Cash card are elegant and beautifully designed experiences exactly as you would expect from Apple,” he told analysts on the call, according to a transcript.

Apple announced Apple Pay Cash, which represents the computing giant’s entry in the hotly competitive peer-to-peer payment business, in June. It is expected to become commercially available as part of the 3-year-old Apple Pay mobile-payment app by year’s end.

Green Dot is serving as the merchant of record when consumers use Apple Pay to fund P2P transactions. It will earn interchange revenue when recipients use the Apple Pay Cash Card to spend the funds, which are kept in an account at Green Dot Bank.

Streit made it clear Green Dot is not expecting big results immediately from the Apple Pay Cash Card. “We expect economics related to Apple Pay Cash to be immaterial for the remainder of this year. Our hope is that by the time we report the fourth quarter, we’ll have enough usage data to begin to include estimates for this program in our consolidated 2018 outlook,” he said, according to the transcript. Green Dot’s fourth quarter will end Dec. 31.

In the Intuit program, announced earlier this week, Green Dot will provide a prepaid card for users of the accounting-software company’s TurboTax software. That program, too, will be run through Green Dot’s bank and is expected to launch early next year.

Equity analyst Robert Napoli at Chicago-based William Blair forecasts the program will generate as much as $30 million in revenue by 2019. Green Dot had run the program until 2012, when it lost the business to rival NetSpend Corp. In 2011, the program included 500,000 active cards and generated about $23 million in revenue, according to Napoli.

Both the Apple Pay Cash and Intuit programs are part of what Green Dot calls its “banking-as-a-service” program. But these two services in particular have involved considerable investment, Streit said, that was more than offset by the Pasadena, Calif.-based company’s third-quarter performance. “These terrific bottom-line results were achieved while simultaneously incurring incremental expenses associated with the large-scale buildout of both talent and technology needed to support the launches of Apple Pay Cash and the new Intuit program … despite having no revenue from these programs to offset the spend,” Streit said, according to the transcript. Uber Technologies Inc. and Wal-Mart Stores Inc. are among other clients using the BaaS platform.

For the quarter ended Sept. 30, Green Dot reported total operating revenues of $201.6 million, up 30% from the same period in 2016. Net income totaled $13.6 million, up nearly seven-fold from last year’s third quarter. The company processed $7.86 billion in gross dollar volume for the quarter, a 47% increase year-over-year.

Investors like what they see. At mid-morning Wednesday, Green Dot’s stock traded at $63.48 per share, up 8% from Tuesday’s closing price.

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