The overhaul, following Wal-Mart Stores Inc.'s price cuts four months ago, will give Green Dot cardholders an incentive to reload and reuse their cards after the initial amount has been spent.
In August, Green Dot will reduce its up-front fees for all consumers, and it will start waiving its monthly maintenance fees for consumers who use their cards regularly, executives said Tuesday.
"One of the problems with a lot of the prepaid products out there is that it rewards your worst customers," said Steve Streit, Green Dot's founder and chief executive. "If you buy a card and use it once and throw it away, you never pay any monthly fee. If you buy the card, really like it and really use it and keep it for a year and a half, the way a lot of our customers do, you're paying a lot of money just to make sure that it works."
Like an airline's frequent flier program, Green Dot's new pricing structure will reward repeated use, Streit said. "If you're a regular user of the card, the miles rack up. We really want this to be a product that they use over and over, and fees never become a material consideration of whether they use it or not."
He spoke to American Banker during the fourth annual Underbanked Financial Services Forum. (The conference was presented by the Center for Financial Services Innovation, a nonprofit arm of Chicago's ShoreBank Corp, and SourceMedia Inc., the parent company of American Banker.)
Green Dot, which markets its own cards and provides reloading and support services for Wal-Mart's MoneyCards, may not have the retailer's name recognition. But Streit said his Monrovia, Calif., company has sold more than 10 million of its cards, which are sold mostly in grocery stores and other retailers, since 2001 and has "several million" active accounts.
When Wal-Mart reduced its up-front, reloading and monthly maintenance fees to $3 each in February, it said it was on the way to having 2 million customers. Kathy Barney, the president of H&R Block Inc.'s bank, said in an interview Tuesday that it issued about 2.7 million of its prepaid Emerald cards this past tax season.
Mark Troughton, Green Dot's president of cards and network, said its up-front fee will be "significantly lower than it is today." In addition, "if you're a regular user, it will be completely free from ATMs to back-end fees," including monthly fees. However, all users will still have to pay the up-front free, as well as reloading fees if they reload their cards through channels other than direct deposit. "That's not really a card fee. That's a retailer fee."
Green Dot would not say how much its reduced up-front fee will be or how the company will determine whether a cardholder is a regular user, beyond "a couple of tests," as Troughton put it. "It's really easy. … You don't have to have lots of money. If you make this card your primary vehicle, that's the mind-set with which we approached the pricing model. For us, it's about building a portfolio of long-term customers."
On July 1, nFinanSe Inc. will cut the up-front price of its reloadable prepaid card by $2.95, to $3, the Tampa company said Wednesday. The other fees — a $2.95 monthly maintenance fee and $2.95 reload fee — will not change. Direct deposit and customer service will remain free, nFinanSe said. (Some prepaid providers charge consumers to call a customer service center.)
