Credit and Debit Card Ratings

The Debate Over Green Dot




Analysts disagree about how much longtime prepaid debit card supplier Green Dot should worry about new competitors

By Shane Tripcony

Recently, (Green Dot Corporation- click for our review of their prepaid card) has been a source of debate and disagreement. A longtime issuer of prepaid debit cards, Monrovia, California-based Green Dot, is an established player in the industry, selling Visa and MasterCard branded prepaid cards both online and at tens of thousands of retail locations. In its most recent quarterly earnings report this past July, Green Dot not only declared that both its net income and revenue were 4 percent higher than the year before, but it also raised its full-year guidance.

Not everyone is as rosy about Green Dot’s position in the prepaid industry. In mid-October, the company’s stock price took a tumble after Janney Capital Markets’ analyst, Thomas McCrohan, issued a client note (http://www.businessweek.com/ap/2013-10-16/analyst-cuts-green-dot-to-sell-on-competition) downgrading his rating of Green Dot from “Neutral” to “Sell.” McCrohan’s dimmed view on Green Dot’s fortunes were due to what he saw as stiffening competition from big financial players like American Express. In particular, McCrohan cited the low (or non-existent) reload fees available with cards such as AmEx’s Serve and newly introduced cards from retailers like Walgreen’s.




In McCrohan’s analysis, Green Dot’s Wal-Mart MoneyCard, which has a $3 reload fee, doesn’t stack up well. “Paying a fee to reload cash onto a card is an irritant to most consumers, and retailers are beginning to turn to zero-fee reloads as a tool to drive foot traffic,” McCrohan wrote in his note to clients.

McCrohan’s comments about Green Dot came during a stretch in which the company’s shares slid to three months’ low. Not everyone seems to share McCrohan’s dour view on Green Dot. On October 29, Piper Jaffray analyst, Michael Grondahl, (http://www.businessweek.com/ap/2013-10-29/green-dot-climbs-as-analyst-raises-rating)elevated his rating of the company from “Neutral” to “Overweight.” Grondahl said that the impact of increased competition on Green Dot’s business health was being overstated. He also noted that Wal-Mart is not pressuring the company to reduce fees on its card and is instead offering a larger selection of Green Dot cards.

McCrohan, Grondahl and other observers of the quickly expanding prepaid industry will be able to quibble all the more soon. On October 31, Green Dot is set to (http://ir.greendot.com/phoenix.zhtml?c=235286&p=irol-newsArticle&ID=1865243&highlight=”) announce its third quarter financial results.

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  • The Debate Over Green Dot

    The Debate Over Green Dot




    Analysts disagree about how much longtime prepaid debit card supplier Green Dot should worry about new competitors

    By Shane Tripcony

    Recently, (Green Dot Corporation- click for our review of their prepaid card) has been a source of debate and disagreement. A longtime issuer of prepaid debit cards, Monrovia, California-based Green Dot, is an established player in the industry, selling Visa and MasterCard branded prepaid cards both online and at tens of thousands of retail locations. In its most recent quarterly earnings report this past July, Green Dot not only declared that both its net income and revenue were 4 percent higher than the year before, but it also raised its full-year guidance.

    Not everyone is as rosy about Green Dot’s position in the prepaid industry. In mid-October, the company’s stock price took a tumble after Janney Capital Markets’ analyst, Thomas McCrohan, issued a client note (http://www.businessweek.com/ap/2013-10-16/analyst-cuts-green-dot-to-sell-on-competition) downgrading his rating of Green Dot from “Neutral” to “Sell.” McCrohan’s dimmed view on Green Dot’s fortunes were due to what he saw as stiffening competition from big financial players like American Express. In particular, McCrohan cited the low (or non-existent) reload fees available with cards such as AmEx’s Serve and newly introduced cards from retailers like Walgreen’s.




    In McCrohan’s analysis, Green Dot’s Wal-Mart MoneyCard, which has a $3 reload fee, doesn’t stack up well. “Paying a fee to reload cash onto a card is an irritant to most consumers, and retailers are beginning to turn to zero-fee reloads as a tool to drive foot traffic,” McCrohan wrote in his note to clients.

    McCrohan’s comments about Green Dot came during a stretch in which the company’s shares slid to three months’ low. Not everyone seems to share McCrohan’s dour view on Green Dot. On October 29, Piper Jaffray analyst, Michael Grondahl, (http://www.businessweek.com/ap/2013-10-29/green-dot-climbs-as-analyst-raises-rating)elevated his rating of the company from “Neutral” to “Overweight.” Grondahl said that the impact of increased competition on Green Dot’s business health was being overstated. He also noted that Wal-Mart is not pressuring the company to reduce fees on its card and is instead offering a larger selection of Green Dot cards.

    McCrohan, Grondahl and other observers of the quickly expanding prepaid industry will be able to quibble all the more soon. On October 31, Green Dot is set to (http://ir.greendot.com/phoenix.zhtml?c=235286&p=irol-newsArticle&ID=1865243&highlight=”) announce its third quarter financial results.

  • Green Dot and Walmart Expand Prepaid Partnership

    Green Dot and Walmart Expand Prepaid Partnership

    Six new Walmart MoneyCard prepaid debit cards are announced as the retailer expands its partnership with Green Dot

    by Chris Warren

    Just how well, or poorly, Green Dot Corporation, a leading supplier of prepaid debit cards, would fare in its latest quarterly earnings report was the source of considerable disagreement. In the weeks leading up to the company’s third quarter earnings announcement on Halloween, one Wall Street analyst covering the company downgraded his rating, saying that increased competition in the prepaid space from powerful entities like American Express would hurt Green Dot. Then, just days before Green Dot unveiled its earnings, another analyst pooh-poohed concerns that competition would scuttle Green Dot and elevated his rating.

    It’s unlikely that the actual earnings announcement by Green Dot will end the debate. Still, it would be hard to say that Green Dot is exactly wilting under the pressure of increased competition. Indeed, the company reported third quarter revenue of $136 million, an increase of 3 percent from the same quarter in 2012. But the picture wasn’t entirely rosy. Higher company expenses meant that Green Dot’s net income fell from $9.6 million in the third quarter of 2012 to $6.1 million this year, a drop of 36 percent.

    Green Dot CEO Steve Streit said the results bode well for the future. “We feel very good about the future prospects for our company and believe we are well-positioned to return to double digit revenue growth as we look towards 2014,” he said.

    One reason Streit is optimistic about Green Dot’s future is because on the same day as it revealed its third quarter earnings it also announced that it was expanding its partnership with Walmart. In the past Green Dot Bank issued three versions of the Walmart MoneyCard – the Basic, Plus and Preferred cards – each of which varied in the sorts of features they offered and in their costs.

    Now, thanks to its expanded collaboration with Green Dot, Walmart is offering a selection of new cards, each of which cost either $5 or $4.95 to purchase. Among the new choices are a “create your own” prepaid Visa, which allows cardholders to customize their card with a personal photograph. Other new cards are geared to NASCAR and NFL fans as well as outdoorsmen. The NASCAR prepaid Visas allow customers to choose between photos of Kasey Kahne, Danica Patrick, Tony Stewart, Jeff Gordon and Dale Earnhardt, Jr. NFL fans can have their cards emblazoned with one of 12 teams (more to come later) and the so-called Mossy Oak prepaid MasterCard gives its users special deals throughout hunting season.

Credit and Debit Card Ratings