Today, NetSpend Corporation announced that NetSpend cardholders loaded a record $1.04 billion onto their NetSpend prepaid cards during the month of February 2010. How do those numbers stack up against those recently made public by Green Dot? Do the different distribution channels of the two companies make a difference?
Since few prepaid debit card program managers are publicly traded, it is frequently difficult to use these kinds of marketing announcements to compare prepaid programs, or investigate the numbers. Thanks to Green Dot’s recent IPO registration, however, we have a good basis for comparison to judge how big the NetSpend announcement is.
NetSpend’s Numbers and Distribution Channels
NetSpend, in their press release, claims that most of the $1.04 billion was loaded by cardholders who chose to have their paychecks, government benefits and tax refunds electronically deposited onto the card. NetSpend issues their prepaid cards directly to consumers, but also co-brands or partners with others to distribute their cards. For example, NetSpend partners with check cashing companies like ACE Cash Express to make it easier for check cashing customers to cash and access their paychecks.
Further, NetSpend has focused on expanding into corporate payroll and government benefits cards. In 2008, NetSpend acquired Skylight Financial, in a deal that gave NetSpend control of Skylight’s corporate client base (of over 1,000 corporate clients) and strategic partnerships with U.S. Bank and SunTrust.
Based on NetSpend’s load volume reports for February 2010, the strategy of pursuing payroll, government benefits, and check cashing loads seems to have paid off (at least in terms of gross load volume).
Green Dot’s Numbers and Distribution Channels
Green Dot Corporation, on the other hand, primarily distributes cards through retail locations. As Green Dot notes in their recent S/1, “Substantially all of our operating revenues are derived from our products sold at the stores of our retail distributors.”
Here’s what Green Dot’s load volume for the 3 month period ending October 31, 2009 looks like (the load numbers, footnoted as item “2”, represent the “total dollar volume of funds loaded to our GPR card and reload products in the specified period”, and the numbers are in thousands):
On an average monthly basis, Green Dot cardholders loaded a little more than $0.5 Billion in the Fall of 2009 (about 1/2 of the load volume reported by NetSpend in February 2010).
Who is Doing Better?
From a pure gross load volume standpoint, NetSpend appears to have a substantial edge on Green Dot. But the gross load volume doesn’t necessarily translate into revenue for NetSpend. Both NetSpend and Green Dot currently act as program managers. The deposits are held at issuer banks (MetaBank for NetSpend, Columbus Bank & Trust and GE Money Bank for Green Dot). The bulk of card fee income for both NetSpend and Green Dot comes from transaction-based revenue (that is, both NetSpend and Green Dot make money when their cardholders use their cards to make purchases or withdrawals).
Without more details about NetSpend’s number of active cards it is difficult to compare the two programs on an even basis. However, it is likely that NetSpend’s payroll, benefits and direct deposit users keep their cards for longer periods, translating into greater fee income.
The balance of power may change, however, when Green Dot begins acting as a card issuer, and Green Dot is able to both control the deposits as well as the transaction fees.