Green Dot’s Banking-as-a-Service Revenue Is Now Equal to Product Revenue

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Green Dot Bank’s “banking-as-a-service” revenue has just about equaled product revenue, and may soon eclipse it, CEO Steve Streit said on yesterday’s earnings call.

This could have profound implications not just for Green Dot, but for the future of banking. This is the essence of open banking by another name — banks opening up their rails and services for third parties. This explains Green Dot’s partnerships with giants like Uber, with GoBank for Uber, and Apple, for Apple Pay Cash, Apple’s P2P payments service.

Green Dot is an unusual bank — it began as a technology company and created prepaid cards, originally for teenagers to buy things online. But a new class of customers, the so-called underbanked, those who use alternative or nonbank financial services for a variety of reasons, ended up being Green Dot’s sweet spot.

Here’s Streit, in response to a question about how banking-as-a-service is doing:

So there’s a lot of opportunity for BaaS, and my gut is, as you look at the sales pipeline, that we’re just scratching the surface. At the end of the day, if you think about where banking is going and the power of banking in the hands of a few large organizations or regulated institutions that then have all the accounts, if you will. The future, just like technology in general, is putting the power of banking in the hands of individuals, and corporates, and others. And Green Dot has something unique, which is this platform that allows people to do that successfully at scale….

And I think the future on that is very bright. And I wouldn’t be surprised, at some point, if the BaaS side of our business eclipses the product side of our business. Right now they’re about even. But BaaS is growing very quickly.

Streit was asked again about BaaS and he again emphasized the upside of the program:

And as BaaS becomes more and more known, and as more and more companies wake up to the fact that, “Wait a second, I don’t have to take that off-the-shelf product from that large main street bank. I can make my own product and do what I want to do with it, and use it build my loyalty or use it to build my business the faster that pipeline grows.” And we’re very blessed to have so many fabulous marquee-named clients early on in BaaS’s life. But the fact is that there are just a tremendous number of opportunities out there that run the gamut.

Currently, BaaS queries are mostly inbound, with little marketing, Streit said, also pointing out that BaaS products have higher margins than traditional products.

Revenue was up 16% on the quarter, to $258.3 million. BaaS and traditional products contributed about equally to revenue, Streit said.

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