The dominant prepaid card marketers, Green Dot and NetSpend, faced a new and significant rival with the launch two weeks ago of the Bluebird card by American Express and Wal-Mart Stores Both prepaid companies are expressing early optimism — but long-term uncertainty looms.
“These are clearly uncertain times and evolutionary times for our industry,” Steve Streit, Green Dot's chief executive, said in an earnings call Thursday. “We're comforted by some of the earlier polls … but the election hasn't been held yet.”
Green Dot's net income fell to $10.6 million in the third quarter, down 20% from $13.3 million a year earlier. Its revenue rose 16%, to $134.3 million.
Four of Green Dot's top five retail partners no longer sell its cards exclusively, and Green Dot provided some rough figures that show either continued sales growth or slowing growth at specific partners in the face of new competition on its partners' shelves.
Even with growth slowing in some instances, “these early results are somewhat comforting,” Streit says. “We believe these early results, in the face of so much new competition from so many new large entrants, is a positive indicator.”
Amex and Wal-Mart last month announced the launch of the Bluebird card, which is built on Amex's Serve digital wallet technology. It has almost no fees, charging a $2 fee only for loading cash from a debit card and for making an out-of-network withdrawal at an ATM or other source of cash, leading some observers to view the partnership as a strong rival to banks.
NetSpend has been more upbeat about the launch of Bluebird and similar products, such as JPMorgan Chase's Liquid prepaid card. At the PaymentsSource 20th Annual ATM, Debit & Prepaid Forum last month, NetSpend CEO Dan Henry expressed excitement over the “tens of millions a day” Wal-Mart and Amex would spend to promote the value of prepaid cards.
On a conference call Thursday to discuss earnings, Henry continued to cheer his rivals for the promotional boost they would give prepaid cards. NetSpend's net earnings dropped 47% to $4.4 million in the third quarter from a year earlier, largely due to $10.3 million in litigation-related losses. Its revenue rose 14%, to $84.9 million.
Both CEOs faced questions about whether low-fee prepaid cards will force them to change their own pricing.
Green Dot's Streit argued that his company's pricing is in line with, or better than, many rivals over the course of normal use, since higher ATM fees on rivals' cards negate their lower or absent monthly fees. He said his company has no immediate plans to alter pricing.
NetSpend's Henry said pricing “is a never-ending conversation that will only prove itself out over time. ... We talk about the value that our customer has from our product, we don't see the need to do any changing in our pricing.”
Features that provide long-term benefits, such as person-to-person payments and mobile-phone minute reloads, provide enough long-term value to retain customers, Henry said.
“Our biggest competitor by far still is cash,” he added. “Ourselves and Green Dot, two of the biggest collectively, we've got less than 10% of the total available market.”
NetSpend is also contributing to some of the problems its rival Green Dot faces — the retailers that used to sell Green Dot's cards exclusively are adding NetSpend cards on the same shelves and pegs that Green Dot once had to itself.
NetSpend also announced Nov. 1 a deal to provide prepaid cards for tax refunds to users of Intuit's TurboTax software. Green Dot used to provide that service to Intuit.