Fastest growth: Prepaid cards are the fastest growing type of electronic payment in the U.S., as measured by the total number of purchases made.
Consumer advocates are usually enthusiastic about prepaid debit cards, if only because they don’t give consumers the chance to get into credit trouble. “I like prepaid debit cards, and I like Green Dot,” says Adam Rust, an analyst with Reinvestment Partners, an advocacy group in Durham, North Carolina, that is often critical of financial institutions. “I think they are one of the good guys.” By contrast, Rust says, some other prepaid debit cards come with a long list of hidden fees.
Green Dot, headquartered outside Los Angeles, was founded in 1999 by Steve Streit, a former radio industry executive, who originally aimed the service at teenage shoppers. It grew significantly enough to go public in 2010. Its stock was recently trading near $25, nearly $40 less than its all-time high; financial analysts following the company say Wall Street is worried about turnover, or “churn,” among Green Dot customers.
One customer who has no intention of dropping the card is Molly Ibietatorremendia, a Sacramento mother of three whose husband is a prison guard. What drove them to prepaid cards, she said, was the stiff overdraft charges they were incurring on their occasional inadvertently bounced checks. “We went over a few times and ended up paying $30 even for a 30-cent overdraft,” she says. “We just got tired of it.”
The fact that Green Dot might be aimed at low incomes does not mean it is low-tech. The system integrates with the Visa and MasterCard payment networks, among the most complicated around. The company also had to design and implement a retail card reloading system that was both secure enough to handle huge sums of money and inexpensive enough to roll out in tens of thousands of storefronts. “We had to build quite an extensive technology platform,” says Secil Baysal, general manager of the company’s network.
While its origins are in the unglamorous world of prepaid debit cards, the company is also exploring more distant frontiers of the payment industry. Its Loopt purchase, for example, represents an effort to establish a beachhead in the booming but competitive field of mobile-phone payments. The company promises, though, that any future endeavors won’t change its basic philosophy of going after customers many other companies choose to ignore.