Green Dot has retained the contractor to be the program manager for the Walmart Money Card, it announced this week. It defied the skeptic and handwringing investors who thought it would lose its position to American Express’s Bluebird card.
Green Dot Corporation (NYSE:GDOT) announced today that it has entered into a new, long-term agreement with Walmart, whereby Green Dot Corporation and Green Dot Bank will continue to serve as the program manager and issuing bank for the Walmart MoneyCard suite of prepaid reloadable debit card products.
The initial term of this new agreement is for five years. The new term has an effective start date of May 1, 2015 and will replace the current agreement which would have otherwise expired at the end of this year.
While investors have been quick to sell Green Dot stock at any sign of perceived competition, they sent the shares up on the news of the renewal. It is worth noting that in 2013, Green Dot chairman Steve Streit said that the customers of Green Dot’s Walmart card were value shoppers. Streit also compared the costs of running the American Express Serve program with Green Dot’s program, and the company offered analysis in its supporting materials to its third quarter 2013 earnings call. Streit estimated that every Serve card would need at least $4,000 a year in spending to break even. He also said that Green Dot has been out-selling American Express products by 17 to 1 “at one major retailer” in 2013.
Additionally, Green Dot has been working to diversify its distribution channels, as evidenced by its recent, but quiet purchases, of AccountNow and Achieve Card. Mercator Advisory Group examined the ramifications of these deals in its note: Seeking Pastures Beyond Walmart: Green Dot Buys Distribution Diversity.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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