Fee-Dependent Prepaid Card Maker Moves Into Banking

[Dover]

In the latest signal that the economic crisis has fundamentally changed the way Americans handle their money, the largest provider of prepaid debit cards is now buying a bank.

GreenDot Corp. got the go-ahead last week from the Federal Reserve Board to purchase Bonneville Bancorp in Provo, Utah, for $15.7 million, marking the first time a prepaid card company has won approval to buy a bank. The deal is expected to close next week, after the mandatory 15-day waiting period has ended.

GreenDot's purchase underscores the massive revenue growth and increased use of prepaid cards, which are typically used by Americans who have limited access to traditional checking accounts with debit cards. Though banking customers have been outraged over recently announced fees on debit cards, there's been little focus on prepaid-card fees, which can often exceed traditional banking fees. GreenDot's reloadable prepaid MasterCard and Visa cards, which are sold in more than 57,000 retail locations, cost as much as $4.95 to buy and $5.95 per month to use.

The Monrovia, Calif.-based company is planning to use the acquisition to develop new kinds of online bank accounts, including a low-cost simple checking account, Steve Streit, the company's CEO, said in a phone interview Tuesday. The idea would be to give workers a place to deposit their paycheck: "We have always thought that there was a compelling need for a low cost, simple account where you can get wages," Streit said. "That process has not changed much over last 100 years."

cont'd

http://www.huffingtonpost.com/2011/11/28/prepaid-cards_n_1117226.html?ref=business

[TexasPaganDem]

1. As someone in the banking industry

this horrifies me. GreenDot cards are known problems in banks and for law enforcement because there is no ID verification. It is simple to open an account under a fictitious name, then load the card with stolen funds for money laundering. It's gotten so bad, that when we see the GreenDot card, we assume that it's a fraudulent transaction.

That being said, if they provide proper ID and everything checks out, we are more than happy to do the transaction for them. We understand in the retail centers that not everyone can qualify for an account due to past issues, and prepaid cards are a way of handling transactions you normally just couldn't do easily without a debit card.

(And to clarify, I work in a "retail center" i.e. branch, of a large bank as a personal banker. I joke with my customers I wish I was one of the Wall Street bankers making billions of dollars for screwing people rather than working paycheck to paycheck. The fact that they call them retail centers now just emphasizes the fact that they have moved from servicing to selling, which sucks. I love my customers, but the selling kills me some times)

[kickysnana]

2. "There is no ID verification" "f they provide proper ID and everything checks out, we are more ...

I am not following you here and it isn't even Monday any more. LOL.

[Yo_Mama]

4. When you buy prepaid cards, you just pay cash for them.

So if you are using a false identity, whatever, it doesn't matter.

If you have proceeds from illegal operations (drugs, theft, whatever), this is a useful way to "launder" the proceeds - get them into the financial system.

[Yo_Mama]

5. FINcen for more info

http://www.fincen.gov/

In theory every money service business is regulated, but in practice the banks are supposed to effectively be regulators under the Bank Secrecy Act (which should be entitled the Bank No-Secrecy Act) for all the money service businesses. So banks have to establish customer identification, know the controlling parties for businesses/corporations, develop a risk profile for every customer, scrutinize transactions and account activity for suspicious appearances plus report same, and file Currency Transaction Reports for cash businesses.

This business is probably buying a bank because no bank can afford to do much business with it! Once it does buy a bank, the bank will have the same requirements and the same audits, so it will be interesting to see what happens eventually with this.

[Yo_Mama]

3. Well, they will be regulated for transactions done under the bank

And they will have to withstand the audits and the customer ID requirements for transactions with that bank - plus they will be subject (hopefully) to heightened money laundering scrutiny.

Not that I am arguing with your basic point.