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Green Dot Adopts Radiohead's Approach to Fees

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Green Dot is taking a lesson from Radiohead, oddly enough, and giving customers control of one of the company's mobile bank account fees.

The Pasadena, Calif. company's choice to allow customers to decide if they want to pay a monthly fee of up to $9 for its recently released beta-version of its bank account, GoBank, mirrors the spirit of the English rock band. Radiohead allowed its fans to voluntarily pay for its download-only album release of 'In Rainbows' in 2007.

This attitude toward fees builds an initial relationship of trust between consumers and Green Dot, says Mark Schwanhausser, a senior research analyst for Javelin Strategy and Research. And, at the same time, it sends a clear message: If you like this, tip us.

"The Radiohead approach to 'How much I want to pay' is the kind of thing that can appeal to the penny-pinching nature of consumers," says Schwanhausser. "There are people out there that see value in financial services products."

That's exactly what Green Dot was aiming for.

Earlier this week, in an interview with American Banker, the company's chief executive Steve Streit said the fee had a "modern" feel to it and could be appealing to younger customers that are more likely to use a mobile banking app.

GoBank launched its beta-version earlier this week after months of internal testing.

The launch of the iPhone and Android app is the culmination of several acquisitions, including the purchase of Bonneville Bancorp in Provo, Utah (now Green Dot Bank) and geolocation company Loopt.

Indeed, the GoBank fee is surely not reliable, says Andy Schmidt, a research director at CEB Towergroup.

"Given that it's a mobile offering, and consumers are used to mobile offerings being free in the banking and payments space, it will be hard to get this past the 'feel-good barometer' phase," he says.

Though this is the first time in recent memory that a bank has offered such a fee, other industries have been notorious for such deals, says Celent senior analyst Zil Bareisis, who cops to paying a voluntary fee to download "In Rainbows" and then paying for a copy of the CD once it was physically released.

"In the early days of the Internet revolution, I recall websites that would let the users name their price for a seat on the plane or a hotel room," he says, adding that "as a 'purely mobile' offering, I would expect GoBank's costs to be lower than that of most other banks. They probably expect that the fees that they will be charging, [such as] out-of-network ATM use or personalized debit cards, will cover those lower costs."

And who knows, Bareisis says, Green Dot could be in for a surprise — surely someone is willing to pay something for GoBank if they genuinely like the service.

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