The new CEO of Green Dot has vowed to alter the company’s strategic course, saying the prepaid card issuer will rely less on promotional marketing of its traditional products and more on its banking license to drive profits.
Dan Henry was hired in March to revive the fortunes of a firm that had seen its stock price fall by about two-thirds over the previous year. Henry is the former chief executive of NetSpend, a Green Dot competitor that was acquired by Total System Services in 2013. He has spent his first six weeks at Green Dot working remotely amid the coronavirus pandemic.
In Henry’s first public remarks since starting as CEO, he said that Pasadena, Calif.-based Green Dot has traditionally launched a new product every year or so, and then promoted that product. Henry indicated that he hopes to reduce marketing spending by offering a more consistent product set through its bank subsidiary that customers, many of whom have low or moderate incomes, will use for a longer period of time.
“I think what you’re going to see is kind of a philosophical change in the approach in terms of consumer marketing,” Henry said Monday during the company’s first-quarter earnings call.
Persuading customers to use Green Dot’s products for many months or years was also an emphasis of Steve Streit, the company’s longtime CEO who stepped down in December. Long-term customers generate far more swipe-fee revenue than those who use the firm’s prepaid cards as a disposable product.
Henry indicated Monday that he believes Green Dot’s banking charter, acquired in 2011, is an underutilized asset in the company’s efforts to promote long-term card use.
Increasingly, Green Dot competes against
“We really should stop calling these marketing companies challenger banks and neobanks,” he said. “Because none of them are banks.”
Earlier in the call, Henry preemptively dismissed the idea that Green Dot might consider selling its Utah-based bank, which has about $1.6 billion of assets and does business as Green Dot Bank, GoBank and Bonneville Bank.
“In a word, no,” he said.
One of the bank’s signature products is its Unlimited debit card, which offers 3% cash back on online purchases, plus a 3% yield on savings of up to $10,000. Henry said those terms will be revised in the near term to improve Green Dot's economics.
The bank also offers works with companies like Uber and Apple to offer banking services to those firms’ customers. Last week, Green Dot announced the hiring of former Walmart executive Daniel Eckert, whose responsibilities will include leadership of those bank partnership efforts.
Green Dot reported first-quarter net income of $46.8 million, down from $64 million in the same period a year earlier. The surge in U.S. unemployment as a result of the pandemic is expected to lead to reduced spending on Green Dot cards, and the firm withdrew its financial guidance for the rest of 2020.
“With no one knowing the extent of the negative and lasting impacts of COVID-19, we are very fortunate to have banked this quarter before the world changed,” Henry said.
Shares in Green Dot have climbed by more than 50% since the company announced it was hiring Henry as CEO on March 25. They were trading at $35 a share early Tuesday, up 14% from Monday’s closing price.
