Green Dotís GoBank Adventure
Alok Deshpande on the Convergence of Banking and Mobile
Perhaps it should come as no surprise that Green Dot Corp. has moved beyond the de facto banking functions of prepaid cards into a more full-fledged mobile banking service called GoBank.
The service, which got underway in 2013, is aimed at Americans who have household incomes of less than $80,000 and often find themselves overcharged and underserved by traditional banks, according to Alok Deshpande, Green Dot chief product officer.
Many of those potential GoBank customers live in rural areas or inner cities -- a long way from the nearest bank branch, Deshpande noted during the keynote address at the recent Prepaid Press Expo in Las Vegas.
Serving those consumers – many of them unbanked or underbanked – arose organically from the original Green Dot business plan, the way he tells it. In his accounting, the company’s founder and CEO, Steven W. Streit, set out in 1999 to introduce a stored-value card that would put a plastic payments vehicle in the hands of children.
The public apparently didn’t feel the need to empower kids to pay with cards, but legions of low- and moderate-income adults were tired of carrying cash and recognized the value of transforming currency into plastic, Deshpande told attendees. When Green Dot saw that its prepaid cards appealed to grown-ups as a substitute for banking, it repackaged the product and went on to become the nation’s largest provider of prepaid cards.
Green Dot cards have become available at more than 100,000 retail locations, and the company has added network services and introduced more ways to reload the cards, Deshpande said. To control its own destiny, Green Dot has even become a bank.
Yet despite the successes, prepaid cards still accounted for just 5 percent of the banking market, Deshpande observed. Green Dot wanted to do more.
Streit began searching for a way to use mobile computing to augment the banking-style functions of prepaid cards, Deshpande said. Streit’s quest to “read the tea leaves” of mobile brought him to the door of Loopt, a social-media company that helped users track the friends’ whereabouts and activities. Streit decided to purchase Loopt, and he brought one of Loopt’s founders, Deshpande, into Green Dot.
From there, Green Dot continued to study the potential customers for mobile banking. It discovered that people take banking personally and that they’re influenced by how they grew up. “They watched their parents manage money,” Deshpande told the crowd.
Green Dot knew that its best customers were the ones who stayed with the company for the long-term, and it could see that offering mobile checking accounts hold the potential for relationships that last decades, he said.
Streit, whom Deshpande described as charismatic, was also convinced that Americans longed for a bank with human qualities. The bank should never do harm and should feel like a compassionate best friend.
Meanwhile, consumer interviews and focus groups taught Green Dot that 64 percent of Americans trusted the Silicon Valley more than Wall Street to build a trustworthy bank. “Trust was at an all-time low,” he said of the established financial institutions.
Deshpande showed attendees a video of a consumer complaining that small overdrafts had led to huge financial penalties from her bank. Another video interviewee lamented a $10 monthly maintenance fee that began appearing on his bank statement. “When did this start?” he asked himself. “I was so frustrated by that.”
Finding the time to visit a branch during banking hours also presented a challenge for the consumers in the video. Mobile banking struck another video interviewee as “refreshing.”
“This hits on a lot of what we heard from different folks,” Deshpande said of the video’s talking heads. “A large portion of Americans say, ‘This isn’t working,’ “when asked about their experiences with brick-and-mortar banks.
Just the same, the research indicated people can be very slow to change their banking habits, partly out of an aversion to what they perceive as risk.
Once Green Dot assembled enough intelligence from its research, the company set about putting together an improved alternative to the familiar banking system, Deshpande said.
Because Green Dot didn’t come from the world of financial services, it was freer to start its planning from the customers’ points of view and to put that perspective on mobile devices, he maintained, noting that not having real estate provided an advantage.
Green Dot endeavored to provide what customers really wanted and to do it with the fewest clicks, Deshpande told attendees. The company wanted to provide, for example, an up-to-the-minute balance instantaneously.
“That was an interesting exercise in pealing back the layers,” he said of the effort to bring together the worlds of banking and mobile.
During that period Deshpande was flitting back and forth between offices in Palo Alto and Pasadena, making all sorts of payments on the fly and talking to the people he encountered in his travels about how they feel about the banking and payment systems.
In one example, a cab driver mentioned that he wished Chase took money out of his account faster to keep the balance reports closer to reality. He jokingly noted that Chase probably wished they could transfer the funds more quickly, too.
“The most common question people ask is what is their balance, and they ask it three times a day,” Deshpande said of Green Dot’s experience of that phenomenon. They want to log in without many keystrokes to get that information, too.
GoBank users weren’t obsessing over retirement or upcoming college tuition, Green Dot found. They were asking themselves if they could make it to the end of next week. “The liquidity problem is difficult to solve, Deshpande said.
“I can’t say we’ve perfectly solved it,” he continued, but the company did strive to make it simpler to track funds.
GoBank removed banking jargon, choosing plain language to promote better understand of processes, Deshpande said.
It’s all part of what’s new in online banking – the ability to use it for all banking functions, he maintained. “We tried to make this so you could use it as a primary bank account,” he said.
And GoBank offers those functions without the penalty fees that upset so many consumers, Deshpande said.
To make GoBank accessible, Green Dot offers it in Walmart stores as well as online, he noted. Making it easy to switch to GoBank is important because changing one’s approach to banking presents the emotional difficulties of breaking with the past and fear of the unknown.
But the right alternative can overcome those reservations. “At the end of the day, consumers want financial problems solved,” Deshpande told the audience.