Green Dot To Take Over Walmart MoneyCard from Long-Time Issuer GE Capital

Prepaid card program manager Green Dot Corp. will take over direct issuance of the Walmart MoneyCard prepaid card from General Electric Co.’s GE Capital Retail Bank under a deal Green Dot announced on Monday. The acquisition continues Pasadena, Calif.-based Green Dot’s effort to consolidate issuance of the prepaid card programs it manages from third-party issuers into its in-house bank, Green Dot Bank, which it bought 18 months ago.

Under the pending deal, which requires regulatory approval, Green Dot will buy the assets and assume the liabilities of the Walmart MoneyCard program from GE Capital Retail Bank, according to a Green Dot filing with the Securities and Exchange Commission. The bank, formerly known as GE Money Bank, has issued the general-purpose prepaid card for customers of Wal-Mart Stores Inc. since its 2006 inception. The filing does not disclose financial terms of the deal. A Green Dot spokesperson pegs the value of the MoneyCard program at $275 million.

The pending transfer marks an about-face from Green Dot’s position after it bought Bonneville Bancorp, a single-bank holding company in Provo, Utah, in December 2011. Then, it said MoneyCard issuance would remain with GE Capital. A GE Capital Retail Bank spokesperson tells Digital Transactions News that the MoneyCard is the bank’s only prepaid card program.

“The reason we are changing the agreement is that issuing these types of prepaid card accounts is not core to our business model,” the spokesperson says by e-mail. “As a result, both GE Capital Retail Bank and Wal-Mart believe the Walmart MoneyCard program can best serve customers and evolve going forward with Green Dot Bank as the issuing bank.”

Wal-Mart referred Digital Transactions News to Green Dot or GE Capital for comment.

“Green Dot has wanted to bring everything under one roof and this certainly was a step they needed to take to achieve that goal,” says prepaid card industry researcher Ben Jackson, a senior analyst at Maynard, Mass.-based Mercator Advisory Group Inc. “This is probably their largest subset of cards.”

Green Dot bought Bonneville Bancorp, parent of Provo, Utah-based Bonneville Bank, for $15.7 million in cash. The state-chartered bank, which the new owner quickly renamed Green Dot Bank, had just $39.2 million in deposits at the time. But Green Dot soon began transferring the deposits from prepaid card accounts it manages from its partner issuer banks to its new in-house bank, and as of March 31 Green Dot Bank had $251.9 million in deposits.

While taking on direct issuance of the MoneyCard will involve costs for Green Dot, it also will relieve Green Dot of any fees or other charges it may have paid GE Capital Retail Bank. Expense control will be particularly important for Green Dot in the near term because the sales commission it pays to Wal-Mart increased by 4 percentage points last month. Revenues derived from Wal-Mart customers accounted for fully 67% of Green Dot’s first-quarter operating revenues, according to a Green Dot quarterly filing.

As a service provider to the nationally chartered GE Capital Retail Bank, moving issuance in-house also might reduce Green Dot’s regulatory burden by taking the Office of the Comptroller of the Currency, the primary regulator of national banks, out of the picture, according to Jackson. Green Dot Bank is regulated primarily by the Federal Reserve and the Utah Department of Financial Institutions.

In addition, moving issuance in-house could enable Green Dot to offer bill-payment services to Wal-Mart customers through MoneyCard accounts via checks or other channels other than the card itself. That’s because the Durbin Amendment in 2010’s Dodd-Frank Act bans banks with more than $10 billion in assets from providing access to prepaid accounts they manage through any means other than the card itself without being subject to the debit card interchange cap the Fed imposed in October 2011. GE Capital Retail Bank, with $33.7 billion in assets, clearly would be subject to the cap in such a case. But with only $338.7 million in assets as of March 31, Green Dot Bank is not subject to the Durbin restriction and can earn about twice as much interchange per card transaction as a regulated issuer.

But bill-pay probably was a minor factor, if one at at all, in today’s deal, according to Jackson. “My suspicion is that this has nothing to do with bill pay; it’s more about about costs and regulatory hassles,” he says. “Wal-Mart would want walk-in bill pay, anyway.”

Wal-Mart last October teamed up with American Express Co. to offer another prepaid card product to its customers, the Bluebird card, which offers a host of bank-like features. Green Dot countered with a mobile-banking application called GoBank.