Green Dot Puts Banks in the Crosshairs

Prepaid financial services company Green Dot Corporation today announced it is getting directly into the banking business, launching a mobile-based banking service called GoBank.

GoBank is launching in a limited release, with general availability later this year. In a webcast conducted today, Green Dot touted the features of GoBank, which include no overdraft or penalty fees, no minimum balance requirements, and a network of some 40,000 no-fee ATMs, which the company claims is more than twice the amount of Chase or Bank of America, which are the two largest banks by asset size in the U.S.

Green Dot says all GoBank accounts are FDIC-insured. Each account includes a checking account with a linked Visa debit card and a second integrated bank account, which the company calls a “Money Vault,” that’s designed for account holders as a way to put money away for savings. Accounts are demand deposit accounts (DDA) with full “Regulation E” consumer protections.

“Most people today, and especially people under 40, aren't satisfied with their current banking options," says Steve Streit, CEO of Green Dot Corporation. "Many traditional bank accounts have long and complex fee schedules with terms and conditions that favor the bank; not the customer."

GoBank does have four fees: a $2.50 charge for using an out-of-network ATM, a three percent surcharge for a foreign transaction, a $9 optional fee for a customer who wants a customized photo on a GoBank Visa debit card, and an optional monthly membership fee. The company says members can voluntarily pay a monthly membership fee in any amount they think is fair, from nothing up to a maximum of $9 per month.

Madeline Aufseeser, a senior analyst with Aite Group says GoBank has a "wow factor" and will likely appeal to the younger set, especially with the PFM tools it offers. GoBank features a "Fortune Teller" which alerts members if they try and spend beyond their budget. Fortune Teller cross-checks the price of an item with the member’s integrated GoBank budget, and if they can’t afford it they’ll be advised in real-time to pass on the purchase.

Aufseeser says that's something that "should be very attractive to the younger, mobile generation who are just learning to manage their finances. It will remain to be seen whether Green Dot will make enough off of this offering to sustain the model, but it is clearly making an investment in the future of banking.”

Ted Bissell, a mobile payments expert at PA Consulting Group, says that GoBank represents a step forward in catching the attention of the segment of consumers ready to abandon traditional banking services.

"GoBank bundles a range of mobile banking services on the mobile app that are relatively advanced for the US market, showing how GoBank has carefully thought through how the smartphone-centered consumer runs his or her life a bit differently from the web user," he says. "However, none of the bank’s innovative services such as check capture, bill payment or money transfer is a market first, leaving GoBank exposed to banking competitors simply tweaking their offerings for the smartphone consumer." Bissell adds, "With U.S. smartphone penetration shooting above 50% and mobile e-wallets making their debut, GoBank is yet another compelling step on the path to smartphone-oriented financial services."

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio