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Green Dot Gains on Growth Plans

The next major channel for the company, and perhaps the most important in my opinion, are the mobile carriers. In a report issued by the Federal Reserve earlier this year, the mobile financial services industry was reviewed. The report concluded that as the number smartphones increases and their capabilities expand, users will increasingly take advantage of mobile financial services.

When you consider the FDIC estimated 62 million Americans who are underbanked, 20% of our population, you can see the potential within banking industry.

The Federal Reserve report found that 52% of mobile phones are smartphones; moreover, 90% of the underbanked population has access to a mobile phone of which 56% of these phones are smartphones and have the capabilities to take advantage of mobile applications.

Green Dot has partnered with US Cellular in what I believe is an attempt to sign these underbanked citizens who have access to a smartphone. US Cellular will promote GoBank across its Android device portfolio to its five million customers. The customers will be able to easily make cash deposits at the company's distribution points including 7-Elevens.

As mobile payment technology expands, I could eventually see a day where Green Dot can scrap the conventional card altogether, instead allowing their customers to bank and transact directly from their mobile devises. Should the company find success here at home, it has the ability to greatly expand on a global level. There are 3 billion underbanked potential customers across the globe whom may have access to smartphone technology, yet no safe financial infrastructure.

Project Outreach

While Green Dot products are in a number of prominent distribution points, these retailers generally do not have a high concentration of locations in the inner city. The company announced it will now be extending its products to inner-city markets through a strategy called Project Outreach. On the conference call management discussed the plan in detail.

Green Dot and Green Dot Bank aim to become a leading provider of prepaid cards and other types of bank accounts through the nation's best and largest check-cashing centers. Through the partnerships Green Dot products will be available in the following New York metro area financial service centers: RiteCheck, David's Check Cashing and Pay-O-Matic.

These financial centers represent roughly 50% of New York's check cashing market, which management believes is the number one market in the United States. It is too soon to tell how well the brand will be received within the inner city, yet management believes its brand reputation should help capture market share.

Conclusion

Shares of Green Dot finished higher as a result of a strong quarter, promising partnerships and growth potential ahead. In my opinion, the move is warranted.

I would considering using broad market weakness as an opportunity to start a position in Green Dot. The company stands to benefit from the underbanked population in combination with an increasing number of distribution points.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Nate Matherson is currently a student at the University of Delaware, where he is pursing degrees in Finance and Economics. Nate manages his own investment portfolios in addition to writing investment analysis articles for a variety of news outlets. In the future, Nate would love to work in either the portfolio management or investment banking industry.
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