GoBank is preparing to institute “more liberal check-cashing rules” for account holders in October, Bank Innovation has learned.
The mobile-first bank account from Green Dot Corp., known for its prepaid cards, launched in beta in January 2013 and opened its doors to the general public on June 25, 2013.
Since its general release, the branchless bank has received plenty of praise for its user experience, marketing and fucntionality, but also criticism for its less-than-generous check-deposit policy. Checks can be held for up to 10 days before the funds are deposited in the customer’s account.
It’s not clear to what extent this policy will be relaxed in October.
“It was only for personal checks written on a third-party account,” Green Dot CEO Steve Streit told Bank Innovation — in other words, the most risky kind of checks, and also checks, Streit pointed out, that the bank sees few of these days. Indeed, GoBank and similar mobile-centric offerings such as Moven are not built to be heavy on checks, though both include remote deposit capture capability.
Chief Risk Officer John Morton indicated the company was likely to move in the direction of liberalizing this policy in July of this year.
There was anger expressed at GoBank’s policy on social media and in its customer service channels, and the bank even closed some accounts that were flagged for risky behavior, causing further customer unhappiness.
This conservative behavior stems in part from Green Dot’s inclusion in a government investigation into money-laundering using prepaid cards in 2011. Green Dot cards have 4.5 million active users — and the company has refused accounts to 1.8 million users. Given this, it’s understandable the bank is careful about its GoBank accounts, but there is such a thing as being too careful.
It was a stressful year for Green Dot. The company’s stock plunged 60% in July 2012 on fears that new prepaid rivals would eat into its business. They have lost share, but the total amount of money loaded on prepaid cards has continued to climb. The stock has since regained its July 2012 levels, and the generally positive reaction to GoBank may play a small part in that.
Brand Separation
“There’s a clear separation between the brands,” Streit said of Green Dot and GoBank. “GoBank customers are younger, more tech savvy.” The brands employ different tech stacks and different social media teams. GoBank has launched a promotional campaign focused on the “Project Runway” TV show and Barnes & Noble university campus bookstores stores.
Green Dot cards, meanwhile, are sold in check-cashing store in major metropolitan areas. Green Dot is a late entrant here. Streit pointed out that other prepaid cards such as those offered by NetSpend, have long been available in these stores. It is hoped this will be a major driver of growth for the card side of things. (For an interesting report on how check-cashing locations are filling the role of bank branches in underserved neighborhoods, see this from the Atlantic Cities blog.)
But will the amount of care necessary to maintain a large prepaid card business hold GoBank back? The mobile-first account, Streit says, is ideally seen as a “fashion accessory” for the smartphone-loving younger set. Well and good, but GoBank needs deposits and customers. The bank recently launched a program offering a $5 bonus for bringing in friends via P2P transfers. These viral strategies make sense, but so far haven’t taken off on a large scale.
Green Dot Bank, which operates GoBank, held about $245 million in deposits in June 2013, according to the most recent data available from the FDIC.
Streit and company are betting that loosening its deposit policy may undo some of the negative feedback and help bring in the accounts the bank sorely needs to scale and grow.