A listener to the Dough Roller Money Podcast recently emailed me about online security. He wanted to know whether our online financial lives—think banking, investing, credit cards, and the like—are safe. And what happens if a hacker does manage to compromise are accounts? Are just out of luck?
To begin answering this question, I interviewed Steve Streit. He is the founder and CEO of Green Dot. While many know Green Dot as a prepaid company, it’s also a bank. In 2011 Green Dot became a bank holding company. As such, Steve can speak to both the prepaid card space and the banking vertical.
Here’s what I learned in my interview with Steve:
- Not all prepaid debit cards are created equal. Some, like Green Dot, offer protections that go above and beyond the legal requirements. For example, because Green Dot is a bank holding company (not all prepaid cards are), “Green Dot prepaid card is identical in terms of its consumer protection as any checking account from any regulated bank.”
- It’s critical to notify a bank or prepaid card when you become aware that money has been taken without your authorization. The financial institution will block your account to make sure no additional funds are stolen.
- Green Dot provides a provisional credit to your account while it finalizes its investigation.
- Green Dot, like many credit card issuers, monitors its customers’ accounts for fraud. If it suspects fraudulent activity, it will block your account, notify you, and give you a chance to determine whether the transactions at issue are valid.
- The CFPB has proposed new regulations that would offer further protection to consumers. These regulations would, among other things, limit a consumer’s liability to $50 as long as the consumer promptly notifies their financial institution of the theft.
Steve and I also discussed scams and how to detect and prevent them for snaring your money. You can listen to the interview here, or read the transcript below.
Transcript of Interview with Steve Streit
Rob: Steve, welcome to the show.
Steve: Thank you Rob. How are you?
Rob: I’m doing well. I’m so grateful for your time. I imagine being the CEO of Green Dot probably keeps you fairly busy.
Steve: It has its moments but I’m never too busy to participate in shows like yours, so I’m honored to be invited.
Rob: I appreciate that. I was reading a bit about you. Am I correct that you’re one of the founders of Green Dot?
Steve: It is. I’m the founder of the company, Chairman and CEO and occasionally I still sweep the floors and do dishes. I do it all. [Laughs]. We have a large company, and it’s a 15-year-old company but it is true that I am the founder. We actually started at a little table in my bedroom at home in San Marino, California, near Pasadena. It was literally an idea that started in my house.
Rob: I love those kinds of stories. I’m curious though. What prompted you to think this is the kind of company you should start? What happened 15 years ago?
Steve: Well, it’s never quite that clear in hindsight. What was interesting those days was the Internet was something that was around but everyone had dialup modems. Those modems where, you know, you’d dialup and go get a cup of coffee, go get the newspaper and when you came back, hopefully you were connected and you could read an email. [Laughs].
Rob: Right. [Laughs].
Steve: Everyone knew that high-speed would come one day, but it really wasn’t around at all except for college campuses back then. But there was a common belief that one day people will be able to get online more quickly. One day you’ll always be on. You’d be able to access anytime and not have to dialup. And when that happens, commerce will pick up. And when commerce picks up, people will either pay for things—with credit cards likely being the dominant way to pay for things. All that came true, obviously. But what do you do for young people? Like, if you’re 17 or 18, in college and you don’t have a credit card and you want to buy a product online, how would you do that if you don’t have a credit card? That conversation, that discussion I had with a buddy of mine who worked for Hollywood Records, Disney Records which is the same company, got my brain working. Maybe this could be something cool—to develop a credit card for kids. That was the original idea we started on. I was working on a lot of things those days. I was in the broadcasting industry, not banking. I started thinking about how that would work and what would it mean. Before long we came up product called iGen which stood for the Internet generation. The iGen Mastercard. It was designed for kids on college campuses who had high-speed internet one day, that could buy something. What we found though, when we launched the product in 1998 in Rite-Aid Pharmacies in the Washington area—that’s where our pilot program started. When we launched them, kids were not buying the product at all. And when we did our research as to who was buying the product, it was actually low-income Americans who were buying it so they could have a credit card, if you will, or a debit card to use for electronic purchases and for buying things online or paying bills over the phone. All the things you and I do with our credit cards. We realized that we had the right product but the wrong target. It wasn’t kids at all that would find the product attractive. It became clear to us in the early days that it was people who would not qualify for a checking account or couldn’t get a credit card. Which is good, it made the market even bigger. But we had to retool the company— pull off all the packaging and re-launch in a more massive-kill message for a different kind of consumer. That’s what we did and that’s when we became the company we are today. But it originally started out as a card for kids in dorm rooms who wanted to buy things online.
Rob: I wonder if it’s starting to come full circle a bit in a sense that— at least it seems to me, over the last few years the prepaid, debit card market has started to go more mainstream. I wonder if you’re sort of circling back and getting those teenagers, young adults and other folks who are not unbanked—
Steve: We are. No, I think it is a very smart point. As you look at our customer base, it’s true that half do not have any other kind of bank account. So, in that regard, the roots of the product are still very present. But, the other half are not who we started with. The other half of our customers today have credit cards. They have a checking account at a traditional bank. They have savings account perhaps. But they find prepaid useful for other reasons. Maybe they view it as less risky because they don’t want to use their checking account number online and this debit card gives them some separation of funds. A lot of people who have bank accounts use our product for budgeting. They’ll say, “Okay, I’m going to put $500 on my Green Dot card and this way, when I spend it, I’m done. And I won’t actually spend my rent money that’s in my regular checking account.” People find different uses for it. But you’re right, it’s become more mainstream, more broad-based. And the customer base increase year-over-year looks more mainstream.
Rob: Yeah, yeah. The reason I asked you on the show is because I’ve had a number of listeners email with different kinds of questions, but all related to concern about their money online. Whether it’s an investment account, bank account or, in this case, a prepaid debit card, they’re concerned that if they put their money on a prepaid debit card and their account either gets hacked or number get stolen, and someone uses their card— Let’s say they spend their $500 for the month. The money is gone. Do they get their money back or are they out of luck?
Steve: Green Dot is unique in a good way. We really pride ourselves on wearing the ‘white hat’ in banking, if you will. For years and years and years, long before the CFTD and other organizations, we were pro-consumer before being pro-consumer was cool so we’ve always had great protections for our customers. But even more so because in our case, in 2011 we became a bank holding company regulated by a federally served board of governors in the state of Utah’s department of financial institutions, meaning that today a Green Dot prepaid card is identical in terms of its consumer protection as any checking account from any regulated bank; and so the answer is, if you have a Green Dot brand or a Walmart MoneyCard brand, which is our product as well, a prepaid VISA or MasterCard, your protections and rights are identical as if you had a checking account from any bank, and that is that you would notify us that your funds were lost or stolen, we would block the account to make sure no further damage happened. You would tell us how much money you lost and why, and then we would research that and give you that money back behind your card as a provisional credit if we couldn’t determine the facts fast enough. Or if we could determine the facts fast enough we just give it back to you right then, which happens typically. So in our case, you’re well protected. It is fair to say that not all prepaid cards have that, we’re the only bank if you will that is a prepaid company as our core product, and that makes us a little unique. But it is true that not every card is the same way and as you know there are obviously a lot of articles about whether prepaid cards safe and, are checking accounts safer?. The answer is, it depends on the brand. If you have a Green Dot card you’re in great shape. If you have a competitor’s card, maybe you are or maybe not in great shape, but the shift should be as part of their new rulemaking. As proposed in the new rules that prepaid cards, all of them, would be declared the same, what’s called a, Reg E is the name of the law. But the same Reg E protections as any other kind of bank account to make sure that consumers have the same protections that they can enjoy from other kinds of bank accounts. So ultimately we think that will become the law of the land, but today it’s something that Green Dot has that not all do.
Rob: Okay, so for money that I would put on a Green Dot card, is that money FDIC insured?
Steve: Yes, that’s right. Yeah, Green Dot’s a bank and your prepaid card is an FDIC insured bank account just like any others and so you have the FDIC insurance for the solvency of the bank if you will, that protects you against—you have the Reg E protection, which is what I just described for error and dispute resolution, and a regulated way of handling that for customers. And then you have all the other protections that banks afford their customers in terms of chargeback rights and dispute rights and all the goodies that you get when you use any kind of a bank. So the answer is, that’s right.
Rob: Just so folks are all on the same page, what’s a chargeback right? What is that?
Steve: A chargeback right is similar, it all falls under this Reg E— but you could have a Reg E dispute as it’s called in the industry for a couple of reasons. One is that you saw a— your card got lost or stolen, you say, “Oh gosh, I left it at a restaurant. I forgot to take it and now my card’s lost and I know this had this been 20 transactions that I didn’t make,” and you need that money back. That’s one kind. Another kind, may just be a dispute that, “Hey, I thought that this product was supposed to be called back. I ordered this from an online website but the charge was more than that or they charged me twice or they charged me three times. So it isn’t that it’s fraudulent necessarily. It’s just that it isn’t in keeping with what you thought your deal was and you have the right to say, “Hey listen, I want this charge back from the merchant. I didn’t do this.” Typically that’s handled between the customer and the merchant but oftentimes the bank is brought into that loop as well. So there’s all kinds of ways that customers can lose money on bank products and that’s why having those kinds of consumer protections are so important for customers.
Rob: So I know with credit cards there’s a federal law that says if your card is used in fraudulent transactions, you’re not liable for more than $50 of the charge, now I know most, at least the big issuers, maybe all credit cards today tend to cover even that $50 for consumers, but—
Steve: That’s right.
Rob: The federal law, you know, is that you’re not liable for more than $50. Is there any sort of similar federal law as it relates to prepaid debit cards?
Steve: Well not today. But if the CFPB rules go through as written there will be.
Rob: Okay.
Steve: But yeah, that’s right. It’s the same law. There are some slight variations between a credit card versus a deposit account like a checking account but ultimately you’re right that it’s a law as written and passed though it’s written. That’ll be a rule for all prepaid cards as well. The industry, some support it some don’t. Green Dot supports that whole-heartedly. We do it today even though it isn’t the law and we’ve done that for many, many years even though it was never in the law or even proposed to be in the law. Nobody likes to hear a CEO brag about their company but I am proud of our company because our employees are good people and we always intend to do the right thing for customers. We think that we do that because it’s right, but we also do it because it’s a great competitive advantage. If you’re a customer and you know that Green Dot has your back and that we’re a fair company to deal with, we think it’s likely to give us more customers and the bigger market share. So we do it because it’s the right thing to do. But we also do it because we think it’s good for business. And so yeah, but not everybody does, but as I mentioned, over time we do think everybody will because the CFPB will make sure that that becomes a law. So we’ve been a big proponent of that. But it’s expensive. So, if you were to ask— and I think it’s kind of part of your question, “Well, why wouldn’t everybody do that?” The answer to that is, it’s expensive to do. If you do think of a mass compromise, if the target data glitch happened, think of all the customers who are impacted by that. All the debit card numbers that were taken. All the checking account numbers that were taken. All the routing numbers that were taken. Just think of all the data that was contained or Anthem Blue Cross data breach that happened recently.
Rob: Yep.
Steve: Well, those things generate a lot of losses and we’re a big bank. And when you have customers, you can have, you know, hundreds of thousands of customers who lost money because their credit card details or their debit card details were compromised and money was taken. And so it’s expensive to have that kind of protection and offer it. That’s why not everybody in the industry loves the idea. But as I mentioned earlier, it’s the right thing to do for customers and the CFPB I think is going to ensure that it becomes a law for everybody.
Rob: From your vantage point, do you see that there are certain types of fraud that are sort of more common? And, perhaps, are there ways that consumers who use a Green Dot or even other prepaid cards— are there any steps they can take to protect themselves?
Steve: Well, I think the steps to self-protect are the same whether you have a credit card, a checking account, a prepaid card or your login credentials for anything— a brokerage account, and that is have good passwords for your online support. In other words, just don’t use the word ‘password’.
Rob: Right.
Steve: It’s always so funny that, “Oh, I have a great password.” ” What’s that?” “Well, nobody will ever guess it. I just say password.”
Rob: [Laughs].
Steve: [Laughs]. You know the thieves are onto that and there’s all kinds of loss, but there’s a lot of ways to have really strong passwords. In Green Dot’s case, we actually coach the customer and say, “Hey, that’s kind of weak. Why don’t we pick the stronger one?” But you know, number one, have a good password. Number two, keep your card with you and make sure you know where it is. Don’t give people your PIN number. You would be shocked to think how many people give away their PIN number then say, “Somebody went to an ATM and took money. How did that happen?” Or, “I write my PIN number on the back of the card so I don’t forget it.” Well, that’s not great.
Rob: [Laughs].
Steve: But it’s fairly common to hear things like that. And crooks know that too. So I think part of self-protection is just eating a good dose of common sense about keeping your details private and not with the card and knowing who you’re giving your account number to. Here’s another one that we’re learning about— Again, this is not about Green Dot per se, it’s about any bank, any debit card, but your listeners might find it interesting. There’s a scam that’s fairly widespread. I mean, I’m hearing about it a lot. And at my level if I hear about it that means it’s really happening. Remember, Green Dot has a lot of employees and a lot of different people in our risk and fraud departments so, by the time something hits my desk, that means it’s happened enough where they want me to know about it. I don’t know about every scam, but this one I thought was interesting. It’s where somebody will call you up from a call center. They sound very legitimate, right, and they say, “Oh, we noticed here that you’re a Direct TV customer or you’re a Time Warner customer (or whatever it is). And they know by neighbourhood what customer you likely are, so if I knew where you lived, I would likely know what cable service you had. Maybe it’s Charter. Maybe it’s this. Maybe it’s that, all based on your address.
Rob: Right.
Steve: And I call you up and say, “Hey Rob. I work for ‘fill in the blank’, you know, whatever company it is, and I have a deal for you. If you pre-pay one year of your cable service or your satellite service, I’ll give you two years for free.” And oh, that’s a good deal, you might think. Well yup, that is, but to do that, I need you to pay me. And we have a deal with ‘fill in the blank’ bank and if you put it on that account, then we’ll go ahead and give you this incredible discount. But to do that I need to open an account for your right now. And Rob says, “Okay.” “Alright great. Give me your name Rob.” And you give him your first and last name. “Now that I have that, I’ll need your social,” and you give it to me. “How about your date of birth?” You give it to me. “Okay great. Oh, the bank is going to want to know your mother’s maiden name is.” I’ll tell you that too—and it just keeps going. There’s a security test here where they want to know what college you went to or what the ZIP code of your house was back when you lived in Florida. And the customer, the victim who’s convinced that this is a legitimate promotion, will voluntarily give all of their personal details including the security information that the bank has put into that enrollment application to prevent from this kind of a thing. So it’s a great question you’re asking, what can consumers do to protect themselves. It’s common sense, but it’s hard to know because, well… I’ll be honest. My wife fell for that scam.
Rob: Uh-oh.
Steve: And we know a thing, and she goes, “oh we have this really cool thing with Direct TV” and I said, “Direct TV, what are they doing?” And she said, “Oh, oh.” And I said, “What did you tell them?” “I told them this or that.” And I asked her if she gave them her mom’s maiden name? “Well yeah, why? Is that wrong?” So it shows you that, and I think my wife’s really, really, sharp. And her husband works for a bank, so it goes to show you that these scams are very, very, difficult. But it always comes down to buyer beware. Good common sense and making sure that you don’t give your personal details out to anybody who you don’t personally know and trust. That’s a really good ‘first line of defense’. We try to preach that often. It’s one of the reasons why I’m giving your listeners that story, because these kinds of scams (or scams like it) are fairly common that affect all banks and all kinds of accounts. So people need to be cautious not to give away that information.
Rob: Right. Whenever I get a communication from a credit card company or a bank that I have a relationship with, particularly email or whatever, and I’m not certain it’s legitimate but it’s close enough that I don’t think I should ignore it, I never respond. Even if it’s a phone call. I just go to my credit card or my last statement and call the number I find on the card.
Steve: That’s smart.
Rob: I know with credit cards, they monitor the activity and they have alerts that pop up from time-to-time that suggest that maybe a transaction is fraudulent. And sometimes they’ll even put a hold on my credit card until I call them back and tell them it’s not (a fraudulent transaction). Or in some cases maybe it is. Does Green Dot have a similar kind of system?
Steve: We do. Our company does. But again, we’re sort of unique in the industry because we’re a big bank, meaning bigger than a small bank. We’re not as big as Chase or something like that obviously. But we’re a big enough sized company where we’ve invested in those types of tools and those types of protections. So the answer is yes, we do. Not all would. Not all banks do. Many small community banks and others don’t have the resources for that kind of technology. But in our case, if you have a Green Dot brand or a Walmart MoneyCard brand prepaid card, the answer is yes. If we notice something unusual— And when I say, we, it’s not a human being. It’s a computer that detects abnormal behaviour, abnormal transactional behaviour and you’ll get a text or a phone call that says, “You know, we’re calling from Green Dot Protection Services. Can you please call 1-800 such and so.” Then when you call, there’s an automated operator that says they know why you’re calling. It’s because of this block we can see it in the system. And we’ll ask you, “Hey, did you charge these last four transactions?” You click one for yes, two for no. If you say yes, then we unblock the card and you go about your merry way. It’s a simple tool but hard to develop once you have it deployed though. It really is very effective at stopping that. The customer may say “No. Those transactions are at an Exxon gas station in Pittsburgh and I was in Los Angeles those days. No, that’s not me.” That gives the bank the opportunity to stop it right then and there and issue a new account and a new card. It saves us the money because ultimately the customer’s going to call up with a Reg E—there’s that phrase again, a Reg E dispute and we’re going to end up paying that customer back. Also, it’s good for the customer because they’ve been inconvenienced and they don’t want to have to go through the rigmarole of trying to repair their account. So that kind of technology is expensive but most of the big banks in our country have it. We do as well.
Rob: Right, good. Well I appreciate your time today. Let me just try to hit you up with a couple more questions if you’ve got a couple minutes.
Steve: Sure.
Rob: And the first one is, where do you see the prepaid card market going over the next one or two, three years?
Steve: We like the business a lot and we think it has an opportunity to be increasingly more mainstream. When I say mainstream, we’re not a niche company. Low and moderate income Americans make up more than half of our country’s population and more than half of our households. When you think about households making $50,000 a year or less, that’s half the country. Half! If you say households— and by the way, household means mom, dad or a couple of adults maybe, living in that home, right?
Rob: Right.
Steve: So all of them, meaning they have two or three people working, the family income is $50,000 a year or less. If you look at $75,000 a year or less of household income, it’s almost two thirds of the country’s households, so our company serves a niche that really isn’t a niche, it’s the majority of the country. And knowing that, we try to program Green Dot and run it to be increasingly more mainstream. Meaning, the services we provide and the features on our card products are more and more indicative of a product that can be used for somebody’s full finances. So whether it’s online bill pay or being able now to take a picture of a cheque and deposit it through caption deposit, get cash at lots and lots and lots of free ATM’s, and do all the things that any of us need to do to sort of transact in the modern world, those features, which five years ago were very rare on a prepaid card, today I think are more and more common and increasingly so. That’s been happening because the customer base in America is getting more and more low and moderate income if you will and the country is heading poorer, not richer. So it’s the right demographic group to serve, if you will, from a business proposition. But also because the development technology in mobile phones, and Smart Phones, which again, five years ago were relegated mostly to higher income folks and younger people. Today senior citizens, low income people, almost everybody has a Smart Phone. And that has allowed better apps and better kinds of online services to be developed and be the new technologies. So I think the influence of better technology that’s more mass appeal in everybody’s hands. And the fact that more and more of America is lower income has created the mainstreaming effect of prepaid. I don’t know if I explained that well or if that makes sense. But the results of that is, we think these products will continue to have features and services that allow consumers to conduct their full banking off those cards.
Rob: Yeah.
Steve: That’s certainly the case with our products. I think we’re seeing that with others as well.
Rob: Yeah, you mentioned Smart Phones— it’s funny, I watched my in-laws, my wife’s parents, get Smart Phones. [Laughs]. It was kind of fun to watch this evolution in their lives, particularly when they sat in the same room and texted each other.
Steve: [Laughs].
Rob: You know, Apple Pay has been a big deal here. And now the Apple Watch. How do you see Apply Pay influencing this space, specific to prepaid cards?
Steve: So Apple Pay is fascinating. Or any kind of online or mobile integration like that because, if you fast forward over many years, the brand on the card and all those things may become less relevant while your method, or channel of payment, may become more relevant. I think Apple Pay’s indicative of that. Let me give you an illustration because that probably doesn’t make a lot of sense. I’ll give you an illustration using the broadcasting industry. It’s one that maybe your listeners can better relate to. It used to be that you had three television networks primarily. You had some independent stations. But basically you had ABC, CBS and NBC. Whatever shows they had on were the shows you watched. The networks had a huge gate-keeping function in terms of what kinds of shows consumers could watch. Then you had cable. And as more and more people grew up, you know, looking at shows— In other words, if you’re watching Saved by the Bell or something, you don’t know if you’re watching ABC, Fox, TNT or something else, but you don’t really care. You like that show, so actual channels became less relevant and what became more relevant was the content, right?
Rob: Right.
Steve: And then you fast forward to today and somebody says, “Oh, I love Greys Anatomy,” for example. I have a lot of kids but my youngest is 15 and she loves Grey’s Anatomy. She doesn’t care, or even know where she’s getting that show from. Was she watching it on her computer and downloading it from some site? Was she watching it on an airplane screen that was in the seat as we flew to New York? Was she watching it on her iPhone? And if you asked her, she wouldn’t know. If I were to say, “Hey, what network was Grey’s Anatomy on?” She’d say, “What’s a network?”
Rob: [Laughs].
Steve: If I asked her, “What channel is it on?” She goes, “What do you mean a channel?” Whereas I’m 53 and if you were to ask me that when I was in my 20s or teens, I would say I watched Happy Days on channel 10 (which is ABC).
Rob: I’m right there with you.
Steve: Right. So if you take that analogy of media, which maybe your listeners can relate to, the same thing I believe will happen over time with payments. And what I mean by that is, that it isn’t that I’m using a, “Oh, let’s pretend a MasterCard issued by Chase and swiping it at this terminal,” It’s that I have a banking relationship and that’s the bank that holds my money. But the content, the equivalent of Happy Days, or the equivalent of Grey’s Anatomy, the content is the ability to buy something when you want to buy it. And how you buy it, I think, is going to become less and less relevant to consumers. The fact that it’s this brand issued on that bank, processed by that transaction process or through that ATM network or whatever it might be. I don’t know if people are really going to think that much about anymore. Like, when you use an ATM machine. Do you really know or care that it was through, you know, the NYCE network versus the Interlink network versus the— I mean, all those logos are on the machine, right? But do you really consciously say, “Oh, okay. This is a better transaction because it’s processed through this instead of through that.”
Rob: Now see, if I were in your business, that would kind of scare me because I would worry about being relegated to a commodity.
Steve: I think that when you think about the actual transaction, in other words the way that an authorization message gets from a consumer’s bank account through some sort of clearinghouse, and then ultimately gets settled with the merchant, that back end is a process that is not a consumer process. It’s a business process. So I don’t think that the networks will be commoditized for the business side of life. But I can see my 15-year-old daughter right now… I don’t know that she’s going to really care when she’s 40 or 45, let alone the people who are being born today, I don’t know that they’re going to be as thoughtful about how they’re paying as much as they getting it paid.
Rob: Right.
Steve: A challenge for companies like mine is to say, “What services are we providing and what relationship do we have? What part of the tree do we own? Do we want to own the roots? The trunk? The leaves, the fruit? What part of that tree do we want to own and what part of that tree will always be relevant now or 30 years from now?” In our world view the relevant part of that tree is the roots and the trunk. Fruits are seasonal and will come and go but the roots and the tree, which means that’s why we’re a bank. We want to safely hold people’s money and that’s why we want to make sure that have the right features and services and are integrated with all the right services because people will always know their bank. I don’t care if it’s now or a 100 years from now, you may not know whether or not you used this network or whether or not your ATM transactions processed by that network, but everybody knows what bank they work with and deal with. Everybody knows what bank they have their money in. I’ve never met a consumer where I’ve asked, “What kind of account do you have?” And they’ve said, “Oh I have a checking account.” And when I ask them which bank they have the account with, they say, “Oh, I don’t know.”
Rob: [Laughs].
Steve: They always know that. They may not know the brand of the card. They may not know who made the POS device at the store, but they always know who they bank with. So, at Green Dot we always want to make sure our customers know they’re banking with Green Dot bank and we’ve have no penalties, fees or overdraft fees of any kind, ever. That they’re money is safe and protected. That if your card is lost or stolen or you have a dispute, that you can benefit from a really good bank and enjoy that experience. Because the fruits will come and go with the seasons, but the roots and the trunk will be there for the long term. You’re right, it’s scary, if you’re already a huge bank. But we view it as an opportunity. If you’re not a huge bank, much in the same way that Ted Turner going back 30 years ago realized that as cable became more popular, that content was king, not the tower, not the transmitter. And that was his whole philosophy behind building the Turner media empire, of course. I think he was right. So we’re the same way. In my view, we realize at Green Dot that ‘content is king’ and the content in our analogy is holding your money, making sure that your money is safe, having the right fee structure, being accepted everywhere you want to go and everywhere you need to be and for your products, and knowing that you have good service and good pricing and fair pricing to back it up. That’s the content. So, I think for younger companies like us who don’t have the same infrastructural burden of huge banks with, you know 80 or 90 year old infrastructures, that it is an opportunity to build a name with the Millennials and with the new crowd who is more interested in the content than they are the channel.
Rob: Right, right.
Steve: I don’t know if that made any sense at all.
Rob: It made perfect sense and I appreciate that perspective. Okay, well one last question. I promise this my last question. A lot of folks will email me and ask me if prepaid debit cards will help you build credit? And, of course, the answer is no. I tell them that and try to explain why. My question though is, do you ever see that changing? Or is it just not possible?
Steve: Well, let me pick out the best answer there for your listeners. The answer is that a prepaid card in and of itself does not extend credit or grant credit. It can’t build credit. All a prepaid card is doing is taking your cash and digitizing it so it can be used in the form of a MasterCard or VISA or American Express and then spent in the way a consumer wants to spend it through all channels of commerce. So you’re not really extending credit so there’s no way to legimately build somebody’s credit score. So you’re right when you tell your listeners that it doesn’t build your credit. You’re right to answer it that way. If you’re saying, “Can it one day build your credit?” The answer is, only in being granted credit and having the consumer responsibly pay the bank back or the granter of the credit back. That’s the only way to build credit. Then you say, are there other kinds of products and services that a bank like Green Dot can offer that can give that customer the opportunity to take out a Chase loan, (one that can afford to pay back that doesn’t get him into trouble at a fair rate) and if they pay that loan back responsibly can we report that responsible payment to the credit bureaus, then over time, if they handle their other obligations appropriately as well, they can build a better credit score? The answer is, yes. Green Dot has mentioned publicly in one of my earnings calls, that we have the goal to issue safe lines of credit for our consumer base, which again is a big part of America. That way, low and moderate Americans or young people who are new to banking, can in fact, over time, build a better credit score and have the opportunity to take out loans and buy cars and buy homes and all the things that you and I have probably enjoyed over the years. And so we do plan on doing that. But that’s different from the actual prepaid card itself which is simply a deposit holder.
Rob: You see prepaid companies going into the secured credit cards? Or you just don’t see it going that way?
Steve: We will, pending regulatory approval by the Federal Reserve is to do just that.
Rob: Okay.
Steve: We think that secure credit cards are great, if priced right. In other words, you can’t have garbage fees and things that have plagued those products in the past. But if you have a safely priced, responsibly priced product that in effect is minimal risk for the bank (that doesn’t cost the bank a lot of money to issue) but a good safe entry point for that young consumer or that consumer who has been in trouble with credit in the past, I think it’s a wonderful idea and a really good product that’s good for the customer and good for the bank and can allow that customer to self-graduate into better kinds of credit products. In our case we’ve specifically talked about secured credit and a product we’d like to do. As a bank it does require regulatory approval, and so there’s nothing certain there and we’re always patient and thoughtful of that. But, if we’re able to get approval we would love to roll out a product like that. We think it could be a logical fit for our customer base.
Rob: Well great! Listen Steve, I appreciate your time. Very informative, very grateful.
Steve: My pleasure, Rob. You have a great show. And again, I’m really flattered to be invited on it. So thanks to you for having me on the show and have a great day.
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