NetSpend IPO vs GreenDot IPO – A Look At the Numbers (Corrected)

Netspend Prepaid CardsNetSpend Corp., the Austin Texas-based prepaid debit card company, filed a registration statement with the SEC announcing their plans to sell up to an estimated $200 million in an initial public offering. NetSpend is the second major prepaid debit card company to file a registration statement this year. GreenDot announced their IPO plans in January. Green Dot and NetSpend are two of the biggest players in the growing prepaid debit card industry. We’ve compared NetSpend to Green Dot in the past, now we can take a closer look at some of the numbers thanks to the registration statements. [Note: See post for corrections]

Reviewing both NetSpend’s S/1 and GreenDot’s S/1A show that the two companies are equally optimistic about the growth and size of the prepaid debit card industry. Both companies rely on projections from Mercator Advisory Group, with NetSpend taking a slightly more optimistic view, focusing on the relative lack of penetration of prepaid in the underbanked sector. NetSpend states

According to Mercator Advisory Group, the GPR card market is forecasted to grow at a compound annual growth rate of 92% from 2008-2012 and is expected to reach $118.5 billion in annual funds loaded by 2012. A December 2009 study by the Federal Deposit Insurance Corporation, or the FDIC, estimates that more than 25% of U.S. households are unbanked or underbanked, which we collectively refer to as underbanked. According to the FDIC, underbanked households in the U.S. represent approximately 60 million adults who receive approximately $1.1 trillion annually in payments from employers and government entities. This consumer segment represents a large and underpenetrated market for alternative financial services solutions. According to the FDIC, only 16% of underbanked households have used a GPR card and only 4% of underbanked households currently receive their income through a payroll card.

And GreenDot views the market as follows:

Prepaid cards have emerged as an attractive product within the electronic payments industry. They are easy for consumers to understand and use because they work in a manner similar to traditional debit cards, allowing the cardholder to use a conventional plastic card linked to an account established at a financial institution. According to Mercator Advisory Group’s “Prepaid Market Forecast 2009 to 2012” research report, $8.7 billion was loaded onto GPR cards in the United States in 2008 and $118.5 billion is expected to be loaded onto GPR cards in the United States in 2012, reflecting a 92% compound annual growth rate during that four-year period. We believe that this growth in the use of GPR cards will contribute to a substantial increase in the demand for prepaid financial services.

Until NetSpend’s S/1 was published, it was difficult to identify the exact size of NetSpend’s operations or to compare NetSpend to Green Dot in a meaningful way. Now, thanks to the SEC filings, we can see the difference in numbers of cards issued by the two companies, as well as the new card activations and gross dollar value of loads on an annual basis. Here’s the tale of the tape.

NetSpend had 2,077,343 active cards issued as of March 31, 2010, with a gross dollar volume of loads (for the three months ended March 31, 2010) of $2,625,367,000.

NetSpend Active Cards

GreenDot had 1,790,069 active cards as of the end of March 31, 2010, with a gross dollar volume of loads (for the three months ended March 31, 2010) of $2,845,653,000.
Corrected: Green Dot had 3,373,396 active cards as of the end of March 31, 2010, with a gross dollar volume of loads (for the three months ended March 31, 2010) of $2,845,653,000.

GreenDot Active Cards

If those numbers are evenly reported, it appears that GreenDot has a slight edge on the average dollar amount loaded per card (of $1590) vs. an average dollar amount loaded per card (of $1264), while NetSpend has the edge on total active cards. Green Dot (NYSE: GDOT) has a substantially greater number of active cards than NetSpend, but that NetSpend has a higher average dollar amount loaded per card. In particular, NetSpend has an average dollar amount loaded of $1264, while Green Dot has an average dollar amount loaded of $844. This is consistent with our earlier comparison of NetSpend vs. Green Dot in which we discussed the different distribution channels NetSpend and Green Dot use and the fact that NetSpend has a higher number of payroll cards on the street. Payroll cards typically have a higher load amount than retail issued cards.

Check out the NetSpend S/1 here for more details.

Thanks to NetSpend for pointing out the errors in our initial article!

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