Green Dot Announces New Distribution, Marketing Deals for GoBank, Prepaid Cards

Fresh from the launch of its GoBank mobile-banking product, Green Dot Corp. on Tuesday announced new marketing and distribution deals not only for GoBank but also for its core prepaid card program.

Green Dot cards will be sold through 20,000 more retail stores, including locations belonging to Dollar Tree, Dollar General, and Home Depot. These deals, which the company expects to have live by Christmas, will increase the company’s store count by one-third, to more than 80,000. Green Dot will also market its card products to inner-city customers through a trio of check-cashing chains in New York City in a program called “Project Outreach.”

For GoBank, which launched commercially over the July 4 weekend, the company has cut marketing deals with both mobile carrier U.S. Cellular and convenience-store giant 7-Eleven, Green Dot chief executive Steven W. Streit told analysts.

To reach college students, GoBank will also be available via the Apple Inc. App Store and will be marketed through Barnes & Noble college bookstores, Streit added. “It’s the perfect bank account for students,” Streit told analysts in a conference call late Tuesday to discuss Green Dot’s second-quarter results. Champion surfer Bethany Hamilton has agreed to be a spokesperson for the product, he said.

Meanwhile, the Pasadena, Calif.-based company is waiting for approval from banking regulators to transfer prepaid accounts for its largest customer, Wal-Mart Stores Inc., to its Green Dot Bank from the long-term issuer, General Electric Co.’s GE Capital Retail Bank. The Walmart MoneyCard accounts for 65% of Green Dot’s revenue, up slightly from 64% a year ago, the company said. In the conference call, Streit estimated it could be several more months before the regulators’ verdict emerges.

The new marketing and distribution programs represent a “significant expansion” of Green Dot’s reach, Streit said, calling the initiative with check-cashing stores a “strategic priority.” The chains signed so far are: RiteCheck, which has 12 stores; Davids Check Cashing, 26 stores; and Pay-O-Matic, with 150 locations. Combined, these chains account for about half of New York City’s check-cashing market, Streit estimated. “We’re off to a good start,” he said, in reaching prospective inner-city customers.

For the quarter, Green Dot reported 4.39 million active cards, down a hair from 4.44 million a year ago. Streit said this includes 3 million cards performing reloads. “That’s the highest [reload base] we believe in the industry,” he told the analysts. Purchasse volume totaled $3.2 billion, up 10% from $2.9 billion a year ago. Overall gross dollar volume came to $4.4 billion, an 11% year-over-year increase, while cash-transfer transactions grew 12% to 11.3 million.

Streit and outgoing chief financial officer John L. Keatley said that while Green Dot in May began paying significantly higher commissions to Wal-Mart on MoneyCard transactions, the in-house bank will lead to cost savings. Streit said in February that Green Dot’s commission rate to Wal-Mart was set to jump 400 basis points. But the bank is saving on fees the company once had to pay to bank partners like GE Capital. “2011 was the last year we outsourced all our bank issuing, and that was 20% of our expenses,” said Keatley. “That’s what we’re going after.”