Green Dot Extends Pact with TSYS—After TSYS Deal to Buy Its Rival

Prepaid card issuer Green Dot has extended its payment processing contract with Total System Services , Green Dot disclosed in a Securities and Exchange Commission filing Feb. 22.

The 16-month contract extension was signed Feb. 20, just one day after TSYS announced its purchase of NetSpend Holdings, an Austin, Texas-based prepaid card marketer that is one of Green Dot's top rivals.

"Given the size of our portfolio and the number of products included in that portfolio, we believe that extending our current TSYS agreement beyond 2014 provides Green Dot with additional risk mitigation and flexibility as it relates to back-end transaction processing," a Green Dot spokeswoman said in an email.

During a conference call shortly after the NetSpend purchase was announced, an analyst asked TSYS President and Chief Operating Officer Troy Woods about the $1.4 billion acquisition's effect on his company's relationship with Green Dot.

"We have a great relationship with them," Woods answered. "We want to keep their business. We appreciate their business. And we're all hopeful that they will find their way to stay at TSYS from a processing perspective for many years to come."

Last April, Green Dot CEO Steven Streit said that his Pasadena, Calif., company was working on building its own payment processing platform. The completion of that project would presumably allow Green Dot to end its relationship with TSYS, an arrangement that has become more complicated now that TSYS is buying NetSpend.

But the 16-month contract extension, which will continue the relationship until Dec. 31, 2015, suggests that Green Dot is not on the verge of being able to operate without an outside payments processor.

"It sounds like they're not ready to go it alone yet," says Madeline Aufseeser, a prepaid industry analyst at Aite Group.