An eon ago (about 10 years ago, which is officially an eon in tech) I asked a Retail Banker in America what his worst nightmare was. This was when Fintech was only a gleam in the eye of a few visionaries, and the financial system was in rude good health (a few years before suffering cardiac arrest in September 2008). So, the Banker had less to worry about, but he still had a nightmare:

“Walmart”.

So the announcement of GreenDot signing a partnership with Walmart caught my eye.

GreenDot Bank is an FDIC insured Bank. So, it looks like a branchless digital Challenger Bank, but in Fintech terms, Greendot looks hopelessly old-fashioned. What could be more old school than a plastic card with some pre paid money loaded? However that is confusing form factor with function. The pre paid account is the current/checking/demand account of the future.

The form factor – plastic card or mobile phone matters a lot less than the business model.

This could follow the same trajectory of the Oyster Card on the London Underground; this swipe payment went mainstream on plastic and is now moving to glass (aka phone).

GreenDot is interesting in venture terms. They hail from Southern California, which might as well be in Mongolia as far as access to Sand Hill Road VC goes. GreenDot started in 2001 and raised $33m in 3 rounds. Sequoia Capital invested during the worst of the technology nuclear winter (so they must have seen serious potential) and they invested alone in two more rounds. No other VC got a look in. The only other venture with that profile AFAIK is WhatsApp.

GreenDot did an IPO in 2010. Since IPO, the stock (GDOT) has not performed well, total market cap is below $800m and on most valuation metrics it looks cheap. The biggest risk seems to be too much revenue concentration from Walmart.

PrePaid cards have been around a long time and there are few barriers to entry. This is all about scale and that is where the Walmart deal is important. It is also where they may have to take it to the next level. You can see a lot of complaints on review sites like Consumer Affairs. The problem seems to be that there is a deposit limit of $2,500 per day. This is understandable for a PrePaid Card but not acceptable if you are expecting a normal banking service.

Customers see branding as Walmart Money Card (with By Greendot in small letters).

That is white label with an Intel Inside twist that I expect will become an increasing norm in partnership deals between Fintech ventures and Banks (or retailers).

Greendot is not classic Freemium. It costs $8.95 per month unless you have a “qualifying direct deposit of just $500 per month”. I guess that is “reverse freemium” and I guess true Freemium is still a better way to scale. Greendot looks like a twist on classic banking, which is based on minimum amount in the account; Greendot is minimum amount of deposits.

Because Greendot is not offering credit, there are no credit rating checks, just basic ID checks. That reduces onboarding friction.

Like M-Pesa, Greendot allows you to receive money and pay money. I can see why the Banker was worried, this is the replacement of the basic checking account going mainstream.

Some speculate that Walmart will get a banking license and acquire Greendot. The money at stake is huge and I have no idea of the outcome. I am confident that the historical neat boundary between Retail/Ecommerce and Banking is over. Alibaba is making that clear and in China there is little hesitation in granting banking licenses to tech and e-commerce giants.