Prepaid provider Green Dot will get into the marketplace lending business in 2016, its CEO has announced.
The move will happen in 2016, CEO Steve Streit announced yesterday at the US Treasury Financial Inclusion Forum in Washington, D.C. The marketplace, to be called Green Dot Money, will leverage Green Dot technology to match low- to moderate-income borrowers with loan products.
The move is a logical next step for the company, which became a bank holding company with its acquisition of Bonneville Bank in 2011. It has already added a mobile checking account to its prepaid card, so it has the deposit side covered.
In a December Investors presentation, the company said that it sees its role as a “matchmaker” and “community gatekeeper” for the lending community, and not the lender itself. However, it plans to launch a secured credit card along with the lending marketplace that it will use as a turndown product.
Green Dot also plans to use its prepaid card to help lenders evaluate potential borrowers. People declined for a loan who get a prepaid card and keep it in good standing for a year will be reevaluated at the end of that time for a loan.
The new products may change the competitive landscape at the low income end of the banking business. If prepaid cards can lead to more credit opportunities and the marketplace and secured card open up more avenues for credit, then traditional banking companies may find Green Dot a fierce competitor for entry-level customers.
However, Green Dot will need to have long range plans that will prepare the company for when these customers are ready for more advanced products. If customers build credit and develop better financial management habits, then they will soon outgrow this suite of products.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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