Green Dot expects to benefit from the fintech crunch

Green Dot is seeking opportunities from from the economic pressures on the fintechs it competes against, while also providing services for consumers in need of ways to manage their cash flow.

“The market is becoming more rational,” said Dan Henry, CEO of Green Dot during Thursday’s earnings call. “Many of the fintechs that had gotten large amounts of funding are now facing declines.” 

For the quarter ending June 30, Green Dot reported revenue of $362.8 million, down from $369 million for the same period a year earlier, a decrease of 2%. Earnings per share was $0.72, better than analysts’ projections of $362.1 million and $0.55 per share. The company reaffirmed its full-year revenue to be between $1.394 billion and $1.430 billion, up 2% year over year and in line with analyst projections. 

As fintech competitors face economic pressure, Green Dot hopes to spot new talent and a less crowded  advertising market.

Andrew Harrer/Bloomberg

Green Dot, a financial institution that specializes in prepaid cards and other financial products for underserved consumers, is operating in a market that has drawn new competitors over the past couple of years. Many of these rivals are fintechs that target the same consumer base with products meant to help them manage their cash flow, such as early wage access services and buy now/pay later lending

The first half of 2022 has seen a sharp decline in the valuation of many of these fintechs amid a broader stock slump, and concerns over higher delinquencies for credit products. While Henry did not name specific fintechs, he said this trend is reducing competitive pressure for Green Dot.

“These companies may need to evaluate how to run their businesses,” Henry said.

As these competitors recalibrate, they could cut down on their marketing and hiring. That would create potential for Green Dot to add fintech experts to its staff while making it easier to match or exceed their marketing spending. Green Dot said it would accelerate marketing in the second half of the year as a result to lean into the trend.  

If unemployment rises, Henry said Green Dot’s experience in disbursing government stimulus checks during the pandemic would position it to ramp up that practice again if conditions warranted. 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 driven by Green Dot,” Henry predicted.

As for Green Dot’s earnings, Henry said the year-over year comparison was difficult given the end of pandemic stimulus programs that created a boost in payment volume in 2021. The earnings included a $13 million charge for settlement of Republic Bank & Trust lawsuit against Green Dot, which Republic filed after the prepaid card company pulled out of a $165 million deal to buy the bank’s tax refund unit.

Green Dot, which relies heavily on retail partners such as Walmart to deliver its financial services, also has a pipeline of new partnerships that should help the company offset the loss of three unnamed partners. That does not include Walmart, a partner whose contract does not come up for renewal for another five years, according to Henry. 

“We hate to lose any partners or any revenue, but as we think about our long-term plan I believe that we are striving to be more uniform in what we do,” Henry said.

Most Related Links :
honestcolumnist Governmental News Finance News

Source link

Back to top button