In the wake of its Loopt acquisition, Green Dot (GDOT) is considering licensing its technology unit's geolocation patents to retailers and financial services companies.
The Monrovia, Calif. company completed the Loopt deal earlier this month. Among other potential services, the technology allows Green Dot to send out deals to smart phones when a user is walking past a particular store.
"I wouldn't say it's a new line of business, but I would say it's clearly an asset and one that we view as being strategic," says Green Dot chief executive Steve Streit, in an interview with American Banker.
Green Dot's hopes for Loopt go far beyond monetizing its patents, Streit says. The company sees its acquisition as key to a business strategy based increasingly on mobile distribution. The prepaid provider will rely on tablets and smartphones to develop its branchless bank model, which it has pursued since its acquisition of Bonneville Bancorp last year.
Green Dot is betting that the technology will supersede consumer desktop and laptop computers and aid Green Dot in gaining new customers and further engaging existing ones.
"We believe that many younger consumers will skip this step of buying a computer altogether and will simply start out their adult life with a mobile device and perhaps a tablet," said Streit, on a call with investors. "And older consumers, like me, will continue to evolve our behavior to become more and more cloud-based mobile-centric, and less and less hard drive computer-based-centric."
Loopt, which Streit calls "Green Dot North," will become profitable for Green Dot in the beginning of next year, according to the company. That's around the same time that the mobile apps and new technology resulting from the Loopt purchase will be offered to Green Dot's customers.
The acquisition and the company's mobile strategy gives Green Dot a chance to compete with larger, more entrenched internet banking providers, such as ING Direct, says Wedbush analyst Gil B. Luria.
Green Dot Bank has the potential to improve on ING's model, Luria says, by marketing its checking account through retail stores. Today, Green Dot has relationships with WalMart and 7-Eleven that places its prepaid plastic on those retailers' shelves.
Streit said, on a first quarter earnings call with investors, that a pilot for the branchless bank will most likely be launched by the end of the year.
The loss of TurboTax continued to weigh on Green Dot's earnings.
"They had Intuit as a partner for two years … so it ended as planned," says Luria, in an email to American Banker. "I don't think they called out the impact on earnings, but would expect it to be proportional about 5%-to-7%."
But despite the loss, Green Dot still posted first-quarter earnings of $17.1 million, up 35% from the same period a year earlier. The company's total operating revenue increased 21%, to $142.3 million, year over year.
Green Dot management lauded the results as steady progress. Since going public two years ago, Green Dot lost nearly $900 million in market capitalization. This time last year, the stock was trading at about $45 a share. Early Friday afternoon, it was at $26.44 a share.
"So we have lost a lot of market cap in the last year, because investors are skittish," says Larry Berlin, a vice president and research analyst for First Analysis.
"It was high. It was a high flyer. It was Icarus. And now we have a valuation."