Green Dot 2011 Annual Report Download - page 12

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business practices as a result of, among other things, a change of strategic direction, financial hardship or
regulatory developments;
•reduce the sponsorship and service fees and other expenses that we incur each year to the third-party banks
that issue our cards, and correspondingly create the ability to earn interest income and increase funds available
to us to spend on other aspects of our business, including the ability to further reduce consumer pricing; and
•improve our ability to compete for new program management opportunities, particularly with federal, state,
and local government entities that value working with a member bank of the Federal Reserve System.
Our Business Model
Our business model focuses on four major elements: our consumers; our distribution; our products and services;
and our proprietary technology platform, which provides functionality for and connectivity to the Green Dot Network
and supports the platform that brings the other three elements together.
Our Consumers
We have designed our products and services to appeal primarily to consumers living in households that earn less
than $75,000 annually across the following four consumer segments:
• Never-banked — households in which no one has ever had a bank account;
• Previously-banked — households in which at least one member has previously had a bank account, but no
one has one currently;
• Underbanked — households in which at least one member currently has a bank account, but that also use
non-bank financial service providers to conduct routine transactions like check cashing or bill payment; and
• Fully-banked — households that primarily rely on traditional financial services.
Based on data from the Federal Deposit Insurance Corporation, or FDIC, the Federal Reserve Bank, the U.S.
Census and the Center for Financial Services Innovation and our proprietary data, we believe these four consumer
segments collectively represent an addressable market of approximately 160 million people in the United States.
Customers in these different segments tend to purchase and use our products for different reasons and in different
ways. For example, we believe never-banked consumers use our products as a safe, controlled way to spend cash
and as a means to access channels of trade, such as online purchases, where cash cannot be used. We believe
previously-banked consumers use our products as a convenient and affordable substitute for a traditional checking
account by depositing payroll checks (via direct or in-store deposit) on a Green Dot GPR card and using our products
to pay bills, shop online, monitor spending and withdraw cash from ATMs.
We believe underbanked consumers use our products in ways similar to those of the never- and previously-banked
segments, but additionally view our products as a credit card substitute. For example, underbanked consumers use
our products to make purchases at physical and online merchants, pay bills, make travel arrangements and guarantee
reservations. We believe fully-banked consumers use our products as companion products to their bank checking
account, segregating funds into separate accounts for a variety of uses. For example, fully-banked consumers often
use our cards to shop on the Internet without providing their bank debit card account information online. These
consumers also use our products to control spending, designate funds for specific uses, prevent overdrafts in their
checking accounts, or load funds into specific accounts, such as a PayPal account.
Our Distribution
We achieve broad distribution of our products and services through our retail distributors, the Internet and
relationships with other businesses. In addition, our distribution is enhanced by businesses that accept reloads or
payments through the Green Dot Network, which we refer to as our network acceptance members, because they
encourage their customers to use our prepaid financial services.
Retail Distributors. Our prepaid financial services are sold in approximately 59,000 retail store locations, including
those of major national mass merchandisers, national and regional drug store and convenience store chains, and
national and regional supermarket chains. Our retail distributors include: