Unlike most gift cards, a Green Dot card can be loaded, and reloaded; it’s designed to be reused, in fact. But it’s not a giveaway. Those cards cost $4.95 up front, plus the amount you load into them, then cost $5.95 in “maintenance” unless you spend $1,000 or more on 30 purchases or more in that month. It also costs another $4.95 for each reload. ATM fees at non-MoneyPass ATMs cost $2.50.
It’s not a stifling amount, but considering it takes no real effort from Green Dot to keep the card active once you buy it, it is easy money … not to mention reliable, recurring revenue. More telling is that Green Dot cranked up 2010’s top line of $377 million to $484 million, turning $52 million of it into a net profit. There is a market here.
#2: Check Cashing (Non-Bank)
If even a prepaid credit card is just too much of a headache for an underbanked consumer, check-cashing services (payroll, personal or government) remain a viable choice.
There are plenty of choices here too, like payday and pawn lenders First Cash Financial Services (NASDAQ:FCFS) or EZCORP (NASDAQ:EZPW). Both have nearly doubled their annual top lines between 2007 and now.
The industry and its companies seem to be under perpetual regulatory (and social) assault, and the market regularly punishes these stocks for exposing investors to that risk. The dip in the price of gold through the first half of the year didn’t help matters much on that front, either — at least for the pawn operations of these outfits. Most of these companies had only been too happy to trade gold jewelry for cash, then turn around and make a tidy profit on the resale of that gold.
Those regulatory fears haven’t been merited yet, though, and likely won’t be in the foreseeable future. And with gold back in rally mode, the already-solid pawn business might be on the verge of turning great again.
Yet, one of the biggest check-cashing names isn’t even a name that was built on check-cashing. It’s Wal-Mart (NYSE:WMT); perhaps you’ve noticed many of its locations have established money centers at the front of their stores over the past couple of years.
The fee structure the world’s biggest retailer charges in its check-cashing business is pretty typical … $3 for checks under $1,000, and $6 for checks over $1,000. The company won’t cash a check over $5,000. Wal-Mart also offers a no-fee reload of its MoneyCard — which is a Green Dot-serviced card in a Wal-Mart wrapper — if you opt to get a prepaid credit card rather than take the cash.
The fees seem reasonable on the surface, because they are. But, when you’re talking about a few hundred customers per day at a few thousands stores, it becomes big business (not to mention a big draw for Wal-Mart).
Say what you will about the ethics behind the industry. Just know that there’s still a big investment opportunity as a result of it. And, unlike the majority of industries, this one has proven to be fruitful — and grow — regardless of the economic environment.
Thirty-six billion dollars per year is a mighty big number to ignore.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.