Can GoBank Save Green Dot?


Last summer, Green Dot , purveyor of prepaid debit cards and financial services for the underbanked, suffered a crisis. Second quarter EPS and revenue were lower than expected. The company revised its 2012 outlook -- and investors left in droves, driving a 60% stock value plunge from which the company has never recovered.

But, unbeknownst to outsiders, Green Dot had a plan. The culmination of that plan was announced today, and it may very well be just the thing to restore the company to its former glory.

Courting those fed up with banking fees
Though best known for providing reloadable prepaid debit cards through Walmart stores, Green Dot apparently had bigger things in mind. Aware of the widespread dissatisfaction with big banks and their mounting fees, Green Dot has had its eye on younger, more mobile banking customers who prefer to do their banking with their smartphones.

And, so, Green Dot set about getting itself into the banking business. It purchased a Utah bank in 2011 , then bought a little-known location app maker called Loopt for about $43 million in March of last year. As it turns out, Green Dot was interested more in the tech team that came with the Loopt purchase -- the very developers that created the company's current offering, GoBank.

What's not to like?
GoBank goes where no bank account has gone before, and in so many ways. The account is created and maintained through a customer's smartphone, and features a voluntary monthly fee. There are no overdraft or other penalty fees, and the service features two FDIC-insured banking accounts: a checking-like account that utilizes a Visa- branded debit card, and a savings account.

The firm boasts a network of 40,000 free-to-use ATMs, though the company charges a fee for using an out-of network kiosk. The service also allows mobile check deposit via cell phone photographing, just like offerings from big banks like Bank of America , a frontrunner in mobile banking technology, and JPMorgan Chase , another banking giant that was recently recognized for being tops in mobile banking access for their customers.

Walmart's partnership with Green Dot was tested last spring when the huge retailer took on a new prepaid card issued by American Express , called Bluebird. Since then, the card has been pulled and reintroduced ; recent research indicates, too, that the product hardly affected Green Dot 's business inside Walmart -- a real win for the company.

One Fool's take
Could GoBank be a life raft for Green Dot? I think it is entirely possible -- not only because of the product's broad appeal and low cost, but because Green Dot obviously took the time to plan the ultimate banking product. It made all the right moves, and took into consideration the facets that consumers liked the best and disliked the most -- and used that information to its advantage. The product should be a win for Visa as well, which is extending its own mobile reach these days with products such as its new Vme offering .

The service is currently being offered in a test launch, and I'm betting it will be a hit, giving not only companies like American Express but even big banks a run for their money.

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Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends American Express and Visa. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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