Prepaid Cards and Wall Street: Green Dot Plans IPO

Green Dot Files IPOThe Green Dot Corporation, a leading prepaid debit card and financial services company, filed a registration statement with the SEC today indicating an intent to sell up to $150 million in stock through an initial public offering.
In a registration statement (available here), Green Dot announced plans to raise up to $150 Million in stock on the New York Stock Exchange later in 2010. The price of the offering has not yet been set.

The registration statement provides a number of details about Green Dot as well as the prepaid debit card market in the United States. For example, the filing indicates that Green Dot recently entered into an agreement to acquire a bank holding company and its subsidiary commercial bank. Green Dot states that

We believe this acquisition will increase the efficiency with which we introduce and manage potential new products and services, reduce the risk that we would be negatively impacted by changes in the business practices of the banks that issue our cards, reduce the sponsorship and service fees and other expenses that we pay to third parties, and allow us to serve our customers better and more efficiently through a more vertically integrated platform.

The filing also provides a good look at what Green Dot considers to be their competitive strengths in the U.S. prepaid debit card market. According to Green Dot, these strengths include:

Innovative Product and Marketing Expertise. We are an innovator in the development, merchandising and marketing of prepaid financial services. We believe we were the first company to combine the products, technology platform and distribution channel required to make retailer-distributed GPR cards a viable product offering. Our consumer focus has led us to enhance our product packaging and product displays in retail locations to educate consumers and promote our products and services more effectively. We believe that we have the strongest brand in the prepaid financial services industry and we continue to build brand awareness using national television advertising.

Leading Retail Distribution. We have established a nationwide retail distribution network, consisting of approximately 50,000 retail store locations, which gives us access to the vast majority of the U.S. population. According to Scarborough Research, during the twelve months ended October 31, 2009, at least 93% of U.S. households shopped at one or more of the stores of our current retail distributors.

Leading Reload Network in the United States. We believe the Green Dot Network is the leading reload network for prepaid cards in the United States. We also believe that it can be expanded and adapted to many new and evolving applications in the electronic payments industry.

Proprietary Technology Platform. Green PlaNET, our centralized processing platform, contains a variety of proprietary software applications that run our front-end, back-end, anti-fraud, regulatory compliance and customer service processing systems. It enables us to develop, distribute and support a variety of products and services effectively.

Business Model with Powerful Network Effects. The combination of our broad group of products and services, large portfolio of active cards, nationwide footprint of retail distributors and proprietary technology platform creates powerful network effects. Growth in the number of our product and service offerings or network participants enhances the value we deliver to all network participants. For example, we are able to attract retail distributors because of the large number of consumers who actively use our reload network. We believe the breadth and depth of our network would be difficult to replicate and represents a significant competitive advantage, as well as a barrier to entry for potential competitors.

Stay tuned for more details about this registration. We expect this move by Green Dot will result in moves by other prepaid companies, including consolidation of program managers in the highly fragmented and immature prepaid card space.

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