Greendot Launched GoBank -Designed for Smartphones - featuring Mobile Deposit
Green Dot wants to disrupt the banking industry in the same way that Apple disrupted the music industry.
Green Dot, the largest provider of prepaid debit cards in the U.S., announced Tuesday that it is launching a new bank account called GoBank which is specifically designed for consumers with smartphones.
Rather than partner with an existing banking institution, Green Dot designed GoBank from the ground up to be truly mobile-first. For starters, customers can quickly set up an account from their phone using GoBank's mobile website or apps for Android and iPhone. GoBank members can send money to friends and family for free through e-mails, texts and Facebook notifications.
GoBank has also implemented several novel features that may not be necessities, but will likely appeal to a generation raised on smartphones and social networks. For example, you can customize your debit card with a photo taken from Facebook instead of simply having a bank logo on the card, or you can turn to the Fortune Teller feature in the app to determine whether to make a purchase based on your current budget.
The bank, which is FDIC insured, has no branches to walk into or tellers to deal with. Instead, GoBank offers a network of 40,000 fee-free ATMs around the country that consumers can visit to withdraw and deposit funds. Green Dot has also partnered with Walmart, which will accept deposits in stores, and the company hopes to partner with other retailers in the future.
"We have tried to bring everything we always wanted in a bank and take out all the things we hate about a bank," said Sam Altman, the EVP of mobile for Green Dot, told Mashable. As part of that effort, GoBank has also eliminated some of the most derided aspects of traditional banks, including overdraft fees, minimum balance requirements and overly complicated fee disclosure forms. In their place, GoBank has just four fees up front and has adopted the Radiohead model of asking users to determine how much they are willing to pay for a monthly fee.
For Green Dot, which went public in 2010, building a bank account was part of its original vision, but it took a long time to develop. Altman says the company made its first effort to purchase a charter bank in Utah in 2010 — a "long and painful process" which took nearly two years to complete. Green Dot also held discussions with some existing banking institutions about why they hadn't implemented these steps and whether there was an opportunity to partner in the future, but ultimately, he says, "no bank wanted to be as innovative as we needed."
In the meantime, a couple other companies have attempted to innovate the banking experience for mobile. Simple, a startup formerly known as BankSimple, launched an online-only bank in 2010 to eliminate fees and work better on smartphones. Likewise, American Express partnered with Walmart last year to launch Bluebird. Altman expects that more startups and larger companies will begin to innovate in this space in the coming years.
Green Dot is banking on the assumption that consumers are frustrated enough with existing big banks and fees to consider switching to a new institution. The hope for Green Dot, which had 4.4 million active prepaid accounts as of last quarter, is that this will significantly expand its customer base. That said, as Altman points out, the new bank account will likely prove less popular among an older demographic who are "still more comfortable with physical branches and tellers." But, he says, "if you live on Facebook and your phone all the time, then we're probably a great choice."
GoBank is currently available in beta and will accept around 20,000 users in the next couple months before launching publicly.
Sounds very interesting - yet GDOT stock is down significantly today.
Here is Motley Fool's take on it:
Last summer, Green Dot (NYSE: GDOT ) , purveyor of prepaid debit cards and financial services for the underbanked, suffered a crisis. Second quarter EPS and revenue were lower than expected. The company revised its 2012 outlook -- and investors left in droves, driving a 60% stock value plunge from which the company has never recovered.
But, unbeknownst to outsiders, Green Dot had a plan. The culmination of that plan was announced today, and it may very well be just the thing to restore the company to its former glory.
Courting those fed up with banking fees
Though best known for providing reloadable prepaid debit cards through Walmart (NYSE: WMT ) stores, Green Dot apparently had bigger things in mind. Aware of the widespread dissatisfaction with big banks and their mounting fees, Green Dot has had its eye on younger, more mobile banking customers who prefer to do their banking with their smartphones.
And, so, Green Dot set about getting itself into the banking business. It purchased a Utah bank in 2011 , then bought a little-known location app maker called Loopt for about $43 million in March of last year. As it turns out, Green Dot was interested more in the tech team that came with the Loopt purchase -- the very developers that created the company's current offering, GoBank.
What's not to like?
GoBank goes where no bank account has gone before, and in so many ways. The account is created and maintained through a customer's smartphone, and features a voluntary monthly fee. There are no overdraft or other penalty fees, and the service features two FDIC-insured banking accounts: a checking-like account that utilizes a Visa- (NYSE: V ) branded debit card, and a savings account.
The firm boasts a network of 40,000 free-to-use ATMs, though the company charges a fee for using an out-of network kiosk. The service also allows mobile check deposit via cell phone photographing, just like offerings from big banks like Bank of America (NYSE: BAC ) , a frontrunner in mobile banking technology, and JPMorgan Chase (NYSE: JPM ) , another banking giant that was recently recognized for being tops in mobile banking access for their customers.
Walmart's partnership with Green Dot was tested last spring when the huge retailer took on a new prepaid card issued by American Express (NYSE: AXP ) , called Bluebird. Since then, the card has been pulled and reintroduced ; recent research indicates, too, that the product hardly affected Green Dot 's business inside Walmart -- a real win for the company.