Green Dot's mobile growth distances it from its prepaid reputation

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Riding the momentum of its banking-as-a-service platform and new accounts driven through mobile apps, Green Dot reported record revenue of $315 million for the first quarter, an increase of 25% over the $253 million in the first quarter of 2017.

The prepaid card issuer is increasingly attracting customers who are more inclined to seek it out through the app store in addition to its traditional distribution channel of convenience and big-box stores.

"It's just how the world works now," Green Dot CEO Steve Streit said during the company's earnings call Wednesday. "Part of it is that, yes, we are trying to incite that evolution and part of it is just the [consumer] behavior and we have to make sure our products work in that way."

The mobile-centric products added 1 million new active accounts for Green Dot since the bank established that avenue as a key part of its drive for account growth in the past year, Streit added. He went as far as saying that when consumers see Green Dot advertisements on TV, "they don't even think of prepaid when thinking of Green Dot."

Banking-as-a-service manifested itself through Green Dot's role in providing technology for Apple Cash, Intuit's Turbo Card, Walmart's Money Card, the new Uber debit card as well as new bank account creation for Stash, a personal investing and finance planning app.

"It's a great sign because those are the kinds of customers you want, and they are engaged in the product and are more likely to take advantage of the features we have to offer," Streit added.

Still, much of Green Dot's growth continues to be delivered through established product lines such as prepaid cards available at Walmart and 7-Eleven.

"When you think about the growth in Q1, you have to think of it in thirds," Streit said. "A third of growth is from banking-as-a-service programs, a third from established legacy business and a third was from two months of the UniRush acquisition, which had not lapped until March" of 2017.

Green Dot acquired UniRush LLC and its operating business of RushCard, an online direct-to-consumer general-purpose reloadable prepaid card, last year. That acquisition almost immediately paid dividends for the Pasadena, Calif., company as revenue from prepaid cards doubled in the second quarter of 2017 from a year earlier.

Green Dot is also making a bigger play in the gig economy, such as by powering Uber's payment and expense platform. It has helped the bank seriously contemplate what other areas of freelance business it can play a role in with its SimplyPaid product.

"Our early belief was that it would be all gig economy, and that has turned out not to be the case," Streit said. "Believe it or not, there is more interest for regular W-2 employees from employers who are trying to find ways to keep their lower, minimum-wage employees more engaged and showing up to work more often by paying them daily."

As for the future, Green Dot says it has positioned itself well by striking partnerships with some of the major technology companies in the country.

"We love our partnership with Apple because look, it's Apple, and what a fabulous company to be a technology and banking partner to," Streit said.

The bank reported first-quarter net income of $70 million, a 72% year-over-year increase. Overall, Green Dot continues to get its footing after a rough patch that covered parts of 2015 and 2016 when it had to deal with discontinuing its original MoneyPak account-loading card after it had become a popular fraud tool.

But Streit declared "MoneyPak is back" based on the strong performance of the updated version of the product, which became available at 70,000 more store locations, mostly at 7-Eleven stores.

Green Dot services for cash transfers, tax refunds, e-cash and PayPal cash products generated revenue of $102 million during the quarter.

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Prepaid cards Mobile banking Mobile payments Earnings Green Dot