After crackdown on Chime, Green Dot trumpets bank status

As more fintechs offer banklike services, Green Dot sees its banking charter as a differentiator.

While Green Dot promotes the immediacy of mobile-first banking with its new GO2bank for low- to middle-income consumers, it’s also leveraging the stability and broad services of a true bank while some fintechs struggle to clearly define themselves.

Digital bank Chime must soon cease using the word “bank” on its website, according to a settlement it reached with California regulators.

“It’s powerful for us to be able to use the word ‘bank’ in our marketing because we are a legitimate financial institution," said Dan Henry, CEO of Green Dot, in an earnings call Wednesday. "Words like 'bank,' 'savings account' and others are things that other neobanks and challenger banks should not be allowed to use."

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Green Dot bought Bonneville Bank of Provo, Utah, in 2011, enabling the company to issue its own prepaid cards. In the decade that followed, Green Dot has diversified its product line, and now plans to enhance GO2bank with lending and investment services that may include buy now/pay later options.

The Pasadena, California-based company invested heavily to launch GO2bank in January, and the expense dented first-quarter profits somewhat — but the service is off to a brisk start with Green Dot now.

Green Dot has reorganized its business reporting structure into three segments, including consumer, business-to-business and money-movement services, as it builds a multi-pronged strategy to reach consumers directly and through businesses and employers.

Green Dot reported revenue of $380 million, up 10% from $347 million for the same period a year earlier. Net income was $25.7 for the quarter, compared with $46.8 million for the same quarter a year earlier.

Revenue was strongest in the consumer segment, up 21% during the first quarter, while the business and money-movement segments saw declines in revenue due to marketing and operations investments.

Henry is optimistic about Green Dot’s ability to gain market share in employer-sponsored banking channels in the next few years.

GO2bank customers are using the product for online and in-app purchases, with Green Dot’s anti-overdraft feature contributing to revenue growth, according to Henry. Green Dot gives customers a $200 cushion for overdrafts.

“Over 65% of the overdraft transactions we cover are no-fee transactions, which means we’re helping our customers when and where they need it,” Henry said.

Green Dot plans to extend its “consumer-friendly” overdraft feature in the direct business to all products at the end of May, he said.

In its banking-as-a-service business, Green Dot still getting its footing, and profit was down 12% due to flat-fee contracts.

Green Dot has seen very low turnover among direct deposit-based customers that have made Green Dot their primary banking account, he said.

Payroll cards continue to be a steady driver of revenue for Green Dot. Rapid PayCard revenue was up 11% year-over-year during the quarter, with 336 new employers coming onboard during the quarter. Nearly 5,000 small and midsize businesses are now offering banking services to employees through Green Dot.

Green Dot recently began rolling out early wage access — which allows employees to obtain the funds they've already earned between paydays — to employers using Rapid. So far only a handful of companies are using the service, but Henry expects adoption to increase over the next year.

Green Dot is also one of the top five U.S. providers of push-to-debit through its various distribution channels Henry said.

“As we combine push-to-debit offerings together with our cash access network, we see great opportunities to expand to other verticals, including digital card programs, gaming, insurance, claim payouts and lending,” Henry said.