Wal-Mart is attempting to sell prepaid debit card thru Green Dot. “Green Dot is the largest provider of prepaid debit cards, which are sold as an alternative to checking accounts” (WSJ). The service provided by green Dot parallels that of prepaid phone cards. The “consumers can cash checks and have funds loaded on the card, set up direct deposit, pay bills and more” (WSJ). This untapped market of prepaid debit cards is booming and here are the key things to keep in mind.
Pros
• Low-income consumers which are underserved by traditional banks and increasingly unable to get credit cards are the main market of this new product.
• “Industry forecaster Mercator Advisory Group expects funds "loaded" onto such cards to grow more than 60% annually through 2013” (WSJ).
• Barriers to enter the market are low because “prepaid debit cards requires little capital investment” (WSJ).
Cons
• It is expensive to reload the prepaid debit cards
• Visa and MasterCard may enter the market very easily
• “50% of the company's "active" cards were thrown away”(WSJ)
• “Green Dot can add customers faster than it loses them”(WSJ)
• “Green Dot's stock price may be inflated by the scarcity of available shares”(WSJ)
The bottom line is that the consumer banking industry may lose costumer to this new way of doing business. I individuals do not need to spend 10 – 20 minutes opening an account to have a debit card they probably won’t. This means fewer costumers which translates into less revenue for the banks. Banks must be quick if they want to keep their competitive edge and chances are they will enter this new market soon.
source:
http://online.wsj.com/article/SB10001424052748703794104575546361605817130.html
The concept of the Green Dot card may be something that we want to talk about within our paper. What do you guys think? Until now, I hadn't heard of this "pre-paid debit card" concept. It is clearly an innovation, but, more importantly, as Marcelo emphasized, it is an innovation that is posing a serious threat to the banks. Can we incorporate this into our paper? If so, how? What section? What should our investors know?
ReplyDeleteIt is something we should try to include in our paper. It would fit in our section for room for innovation, which this is a perfect example of. Our investors though should be told how this green dot card will benefit the consumers as well as us. one tthing I am wondering is how long does it take to hake one of these cards, and does it have any enviornmental effects?
ReplyDeleteDon't forget to cite your sources!
ReplyDelete