With a Bluebird taking flight, enthusiasm for Green Dot Corp. is plummeting to Earth.
The Monrovia company’s days as the leader in the prepaid debit card space could be coming to an end as Wal-Mart Stores Inc. launches a competing card this week from financial giant American Express Co., called Bluebird.
Green Dot will continue to sell prepaid cards through its own partnership with Wal-Mart, but last week’s announcement was seen as a huge blow. More than 60 percent of the company’s revenue come from cards sold at Wal-Mart.
To make matters worse, American Express told the Business Journal it was planning in coming weeks to release a separate prepaid card product at 7,000 CVS stores, where Green Dot has long been the primary seller of such cards.
“It’s bad,” said Andrew Jeffrey, an analyst at Suntrust Robinson Humphrey in San Francisco. “When you have the overwhelming majority of your revenue concentrated within exclusive (retailer) customers, and those customers move away from exclusivity, that’s a challenge in a business with barriers as low as this one.”
The new competition is the biggest sign so far of a potential threat that has long worried investors: the encroachment by large financial institutions into a market that Green Dot has dominated since pioneering prepaid cards more than a decade ago.
Green Dot remains the largest issuer of the reloadable cards in the country, with analysts estimating the company accounts for between 25 percent to 30 percent of market share.
But as the cards’ popularity has exploded – overall use has grown by some 20 percent annually since 2005 – excitement around Green Dot has shifted to fears of how it would survive if larger competitors started selling similar products at the same retail outlets.
Even prior to the Bluebird announcement, those fears had driven down shares on the New York Stock Exchange nearly 60 percent this year. More than $700 million in market capitalization has been wiped out this year.
The stock dropped further after the Bluebird announcement, closing down an additional 20 percent at $10.08 for the week ended Oct. 10, making it one of the biggest losers on the LABJ Stock Index (see page 30).
The low stock price, combined with rising competition, has some analysts predicting a possible sale of Green Dot, potentially to another financial institution looking to enter the market.
Green Dot Chief Executive Steven Streit was not made available for an interview. But in a statement, he downplayed direct competition between Bluebird and its own joint venture with Wal-Mart, MoneyCard.
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