Gobank arrives

January 16, 2013

Yesterday saw the launch of Gobank, an exciting new bank from Green Dot. If you know about Simple, it’s at heart the same thing: mobile-first, no fees, very easy to use, and built by Real Internet People. (Green Dot acqu-hired Loopt for $43 million last March, giving it the requisite tech savvy to build Gobank; and indeed Green Dot itself was a Sequoia-backed startup, once upon a time.) At both banks, you basically do everything with either the app or your debit card — but although Green Dot is new to the bank-account space, it has been offering debit cards for many years, and so has pretty well-tested technology on that side of things.

Gobank does have some advantages over Simple. For one thing, as part of a large public corporation, it has more resources at its disposal, and is able to launch in fully-fledged form, with mobile check deposit, iPhone and Android apps, and the like. (At Simple, these things come slowly.) Gobank even offers you the ability to transfer money easily and directly from Simple, or any other checking account, straight into your Gobank account: you just type in your debit card number and your security code, and transfer as much money as you want. And because Green Dot has a lot of retail locations, it can offer something Simple will never have: free cash deposits.

More importantly, Gobank is, actually, a bank. (Simple, by contrast, is basically a smart front end built on top of Bancorp.) That means, at least in theory, that it can iterate more quickly than Simple, which needs to work with Bancorp in order to add features. And in terms of marketing, Gobank can sell itself as being a bank; Simple can’t.

Gobank is great news for consumers: it means that simple, no-fee, debit-card-based banking is really entering the mainstream, and might even get picked up by mid-sized commercial banks at some point. (It doesn’t make sense for banks with more than $10 billion of assets, because they can’t get the higher interchange revenue which makes Gobank and Simple workable.) It also means — I hope — that rip-off prepaid debit cards are going to become increasingly marginalized. Given the choice between a prepaid debit card and a Gobank account, it makes no sense at all to get the prepaid debit card: the bank account is superior, and cheaper, in all respects.

I asked Green Dot CEO Steve Streit about this yesterday, and he said that demand for prepaid debit cards rarely intersects with demand for checking accounts; he’s targeting Gobank at people who want a checking account, not at people who want a prepaid debit card. That’s fair enough. But as prepaid debit cards start looking more and more like bank accounts (think Suze Orman’s Approved card, or Amex’s Bluebird card, or Chase’s Liquid card), it’s pretty clear that they’re now going to have to start competing not only with other prepaid cards, but also with the likes of Gobank and Simple.

As far as Green Dot is concerned, Gobank is a big and important bet. Since its blaze-of-glory IPO in July 2010 at a first-day price of $44 per share, the company’s stock has gone steadily south. It rose yesterday, on the Gobank news, but gave up all those gains today: it’s now trading at just $13.30, which corresponds to a market capitalization of less than $500 million. I don’t know what Simple’s valuation is these days, but I’m sure that Green Dot would love to be credited with that kind of value, on top of its debit-card franchise.

I’m sure that Gobank will evolve over time: I don’t really understand the voluntary “membership fee”, for instance, and some of the gimmicks, like the “Fortune Teller” in the app which tells you whether you can afford a certain item, are not the kind of thing that people really want from their bank. But the technology looks solid, and it’s always encouraging when a company shows a willingness to cannibalize its existing customer base. (You can’t make free cash deposits onto a Green Dot prepaid debit card, for instance.)

So here’s hoping that Gobank is a big success, along with Simple and anybody else looking to enter this space. That’s really the best chance we have for the big banks to get forced to make their checking accounts much more user-friendly.


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