Many firms have been navigating a lot of change of late given the small matter of the international health crisis, but even by recent standards, Green Dot stands out.
The firm, best known as a pioneer in the prepaid card businesses, saw its founding CEO and extremely long-term (20 years) leader announce his departure in late December of last year. His successor, former Netspend CEO and FinTech veteran Dan Henry, was hired in March of this year and officially got his start at Green Dot six weeks ago.
The announcement that Henry was joining Green Dot as its new president, CEO and board member alone generated a lot of industry interest and buzz. As it turned out, however, Henry was only Green Dot’s first high-profile hire of 2020, not its only. Last week, Walmart’s former Senior Vice President of Services and Digital Acceleration Daniel Eckert officially joined the team as Green Dot’s executive vice president and chief product, strategy and development officer.
And times, Henry and Eckart agreed as they sat down with Karen Webster for their first joint media interview since taking their respective helms at the firm, have been busy. There is a lot of ground to cover, Henry explained, as the firm has been working overtime to overcome what he described as a “decade of missed opportunities.”
Green Dot, he said, will still be in the payments business for which it is best known going forward, but it will aim to do much more by leveraging its considerable assets more widely and ambitiously. That will start with a simultaneous “two-pronged” attack on expanding beyond their simple payments core.
The first prong, Henry explained, is built around the banking charter the firm acquired in 2011 and creating a full and robust consumer-facing digital challenger bank, in the true sense of the words. A challenger to the traditional financial services ecosystem that is also a bank.
The goal, Henry said, is to “become the financial institution that supports this low-income consumer once and for all and meets them where they are.”
The second prong is the development of their Banking-as-a-Service offering under Eckert’s leadership. Ultimately, Eckert said, that effort will build a full financial services ecosystem across a number of diverse endpoints to enable “magical experiences for customers via access to their [Green Dot] accounts in the places that they’re already engaging as customers.”
Henry and Eckert acknowledge that the goals are ambitious and will take more than words to realize if the number of times Henry was asked, “So, when are you selling your bank?” during the company’s earnings call last week is any indication. But, they both noted, the projects are worth undertaking because Green Dot is one of the few companies strategically placed to accomplish them.
“When you look across the financial ecosystem today, there are maybe a few companies that have the assets to build a FinTech ecosystem, powering brands where customers are engaged,” Henry said. “In fact, I would even go as far as to say Green Dot might be a unique sample size of one in this regard.”
Capturing The Consumer’s Banking Relationship
On the one hand, Henry noted, it makes little sense that Green Dot kept fielding questions about whether it would be selling its bank anytime soon given the veritable rush for banking charters among FinTechs of late. That’s particularly true since the fabled “FinTech bank charters” once bandied about by the Office of the Comptroller of the Currency (OCC) are unlikely and being a bank is what every FinTech would like to be. Why would any payments company with a bank want to sell it, Henry asked, semi-rhetorically.
On the other, Henry acknowledged that it’s a legitimate ask since, by all indications, it appeared that Green Dot wasn’t that interested in doing anything with the asset.
“The perception that we might want to sell the bank came from the fact that Green Dot bought the bank in 2011 and went on to do nothing notable with it,” Henry said. “That wasn’t because it was a bad idea. It was because it was poor execution.”
Execution that Green Dot is now ready to turn around by making its most under-appreciated asset — the bank — a source of sustainable competitive advantage. The goal, Henry said, is to leverage the Green Dot bank charter in combination with the company’s technology platform to create a comprehensively useful offering for the low-income consumer.
“That might mean extending or adding tools to help them stretch their purchasing dollar,” he said. “It is not just about a payment transaction with a slick mobile user experience, but taking deposits, making loans and many other tools. It’s how we can bring all these things together to solve pain points for consumers.”
Not just within their own Green Dot banking ecosystem though. Eckert noted how this effort connects to the second prong of Green Dot’s ambitious expansion plan: Banking-as-a-Service. It’s also about how to connect those accounts to the wider commerce ecosystem where those consumers commonly interact and transact — and make those interactions a smooth, secure and seamless whole.
Building A Banking-as-a-Service Ecosystem
The standard litmus test in banking, Webster observed, has been the same for a long time: Where does the consumer choose to deposit their paycheck? That, she noted, is often the cornerstone of the primary financial relationship, and it is not always an easy thing to capture.
Henry readily agreed and noted that is certainly true of the consumer banking prong of Green Dot’s expansion plan, and that will always be its primary indicator of success. How many of their 160 million to 180 million active payments customers worldwide can they bring into that bigger banking fold?
But, he noted, when one considers the Banking-as-a-Service side of the house, the considerations are different.
“We, Green Dot, don’t have to be the account where customers make a direct deposit, right?” he said. “That requires us to make it possible for a consumer to easily create an account within one of our business partners’ applications and tools.”
It’s similar, Henry said, to how Walmart has embedded Green Dot’s Banking-as-a-Service tools into its offering.
That, he said, sets up the potential to kick off a powerful “flywheel effect” in terms of marrying financial services to the consumers’ overall daily journey. That might mean, for example, simple things like one-touch onboarding of a Green Dot account into a connected gig economy app like Uber or GrubHub. Or it might mean allowing consumers to have their account balances displayed for them throughout a shopping journey so they can more easily keep track of their spending, and then making it possible for those balances to be enabled for payment at a merchant location.
“There are so many ways to create value because of the way our platform works,” Eckert said. “Combining consumer banking plus Banking-as-a-Service creates very inventive combinations that candidly heretofore have not been really activated yet because the platforms just haven’t been built to be that flexible.”
And what consumers want more than anything these days is flexibility, he and Henry agreed. No one wants a phone with four pages of apps they want to toggle between to complete a simple interaction or transaction. They aren’t terribly impressed by offerings that are essentially gussied up versions of a checking “account” paired to a debit card that pass as “challenger banks” at this point.
What they want are transactions that are relevant and customizable to the complex array of needs they have as consumers. Real innovation on this front, Henry noted, is going to mean building something actually different, not just bigger versions of the digital banking that has come before. It must be something that actually can work for the mass of consumers who really need it.
“Ten years ago, the majority of the unbanked population was unbanked because it didn’t have a choice, right?” Henry said. “They got into the check systems database, and the banks wouldn’t take them. Today, if we create this product and solutions and financial services networks that are mobile, intuitive and friendly, we can build capacity that has never existed. We’re really just getting started on this.”