Now that equity analysts have taken their shots at Green Dot, NetSpend is the next to follow, with several analysts saying the company will not be able to sustain earnings in the face of competition from large banks and players like American Express Co.
Green Dot Corp’s dim outlook is casting a shadow on NetSpend Holdings Inc as rising competition turns the two companies’ high-margin prepaid cards into just another piece of plastic.
Even as analysts wring their hands over new prepaid competitors, the article does note that these new entrants may have different audiences.
NetSpend has escaped the competition so far, as its cards are sold at check cashing bureaus and other alternative financial service providers.
It is important to note that many customers for both Green Dot and NetSpend consciously choose an alternative to traditional banks because of convenience, previous bad encounters with banks, and a perception that they do not have enough money to sustain an account. In addition there are other cardholders who want a payment device that is separated from their traditional accounts. In the same way that people often hold credit cards from a bank that is different than the one where they keep their primary checking account, it is not unreasonable to expect that customers would be willing to do the same with prepaid. It is too early to predict the demise of prepaid based on the entrants of untested programs that are aimed primarily at banks’ current customers.