U.S. firms cash in on ‘unbanked' bonanza

[Newsjock]

Source: The Globe and Mail

Even with 10,000 banks in the United States, there are tens of millions of people who are still regarded as “unbanked” or “underbanked.” That’s created an opening that two young public companies – Green Dot Corp. and NetSpend Holdings Inc. – aim to fill.

Both sell “general-purpose reloadable” debit cards. Think of these products as reloadable gift cards, branded with Visa or MasterCard logos, that can be used at multiple merchants. Or think of them as debit cards not linked to a particular bank account. Their “unique characteristics,” says D.A. Davidson & Co. analyst John Kraft, make them the fastest growing products in the prepaid-card sector.

... Consumers who take advantage of free or reduced-cost chequing accounts at a traditional bank will find that the fees for a reloadable card seem pricey. Green Dot’s cards cost up to $4.95 (U.S.) to purchase and have monthly maintenance fees of up to $5.95. There’s also a “reload” fee of up to $4.95 when the card user adds money at a retail location. NetSpend’s fee schedule is slightly different, with more “back-end” costs like overdraft charges.

What makes the economics of reloadable debit cards more appealing is that U.S. banks are offering free and reduced-fee chequing accounts to fewer consumers in the aftermath of legislation that scaled back the ability of financial institutions to charge overdraft fees. Various studies estimate the number of underbanked and unbanked Americans at 40 million to 60 million. Green Dot, which went public last July, aggressively argues that its target market also includes bank customers who make less than $75,000, which adds another 100 million people to the target.

... Wal-Mart provides two-thirds of Green Dot’s revenue, making some analysts skittish about the card provider’s dependence on the giant retailer.

Read more: http://www.theglobeandmail.com/globe-investor/investment-ideas/us-firms-cash-in-on-unbanked-bonanza/article1906983/

[FreakinDJ]

1. 1 of the Biggest Scams out there

[RandomThoughts]

2. Walmart is a scourge.

Its use of monopoly and even size is to use the broken rules of capitalism for worse effects, it leads to monopoly conditions and breaks any good effect capitalism could have.

They also do data collection for possible nefarious reasons, since the program of data collection has been expanded to many places, and use cult tactics on their employees.

They also don't put the 'race to the bottom' cost on the prices of what they sell. They don't tell people that the product a little cheaper has many other costs. So there is also an educational failure.

[jmowreader]

3. Green Dot is good if you're shopping online

I like to get a Walmart Money Card (it is a Green Dot card, but it costs $3 to buy and $3 to reload, rather than $10 to buy and $5 to reload) when preparing to make an online purchase. I load just enough money into the card to make the purchase.

If you use your debit card or credit card and the company gets hacked, you've got to go through a LOT of hassle to solve the problems you have. If they steal your Green Dot number, no problem--since you were going to use the card for exactly one purchase, them stealing the number won't hurt you.

[RB TexLa]

4. Banks allow you to create an online shopping Visa or M/C number for that

you chose how much you want assigned to that number for a purchase and then it goes away. No cost.

[jmowreader]

5. If Wells Fargo does that, they don't advertise it