Green Dot expects to benefit from the fintech crisis | Payment source
Green Dot seeks opportunities from the economic pressures on the fintechs it competes against, while also offering services to consumers who need ways to manage their cash flow.
“The market is becoming more rational,” Dan Henry, CEO of Green Dot, said on Thursday’s earnings call. “Many of the fintechs that had received large amounts of funding are now facing decline.”
For the quarter ended June 30, Green Dot reported revenue of $362.8 million, down from $369 million in the same period a year earlier, a decrease of 2%. Earnings per share were $0.72, beating analysts’ estimates of $362.1 million and $0.55 per share. The company confirmed full-year revenue between $1.394 billion and $1.430 billion, up 2% year-over-year and in line with analysts’ forecasts.
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Green Dot, a financial institution that specializes in prepaid cards and other financial products for underserved consumers, operates in a market that has attracted new competitors in the past couple of years. Many of these rivals are fintechs targeting the same consumer base with products meant to help them manage their cash flow, such as early salary access services and buy now/pay later loans.
The first half of 2022 has seen a sharp decrease in valuation of many of these fintechs amid a broader inventory decline, and concerns over higher delinquencies for credit products. While Henry did not name specific fintechs, he said this trend reduces competitive pressure for Green Dot.
“These companies may need to reevaluate how they’re going to run their businesses,” Henry said.
As these competitors recalibrate, they may cut back on marketing and hiring. That will create the potential for Green Dot to add fintech experts to its staff, while making it easier to match or exceed its marketing spend. Green Dot said it would accelerate its marketing in the second half of the year as a result of leaning into the trend.
If unemployment rises, Henry said Green Dot’s experience disbursing state stimulus checks during the pandemic would position it to increase that practice again if conditions warrant. Most of Green Dot’s consumers earn between $25,000 and $50,000
“As consumers leave or are pushed out of the banking system, they will seek alternative solutions powered by Green Dot,” Henry predicted.
As for Green Dot’s revenue, Henry said year-over-year comparisons were difficult given the end of pandemic stimulus programs that created a boost in payment volume in 2021. The revenue included a $13 million charge to settle the Republic Bank & Trust lawsuit against Green dotthat Republic filed after the prepaid card company backed out of a $165 million deal to buy the bank’s tax refund unit.
Green Dot, which relies heavily on retail partners like Walmart to deliver its financial services, also has a pipeline of new partnerships to help the company offset the loss of three named partners. That does not include Walmart, a partner whose contract is not up for renewal for another five years, according to Henry.
“We hate to lose any partners or revenue, but when we think about our long-term plan, I think we strive to be more unified in what we do,” Henry said.
