Prepaid card provider Green Dot Corp. announcedtoday that is has entered an agreement to buy Tax Product Group of SantaBarbara, a tax refund transaction processor, in a deal value at approximately$320 million. Steve Striet, the founder, chairman, and CEO of Green Dot, saidthe deal was an extension of Green Dot’s current business of helping the lowand moderate income market.
“In addition to the expected economicbenefits, we believe this acquisition is strategically compelling. The segmentof consumers who utilize TPG’s services are highly correlated to Green Dot’scustomer segment of LMI American families. As a point of reference, more than50% of all tax refunds loaded to Green Dot’s prepaid cards in the most recenttax season were processed by TPG. Furthermore, in the same period, we believe themajority of tax refund dollars loaded to all prepaid cards industry-wide wereprocessed through TPG. Given the strong correlation between customer segments,we believe that, over time, there is a significant revenue opportunity inbundling Green Dot’s award winning prepaid cards and checking accounts alongwith TPG’s industry leading consumer tax refund processing services.”
Tax refunds are obviously a large source of loads for GreenDot, and the company was involvedin a pilot to deliver tax refunds on its cards in 2011. In its press release, Green Dot says that TaxProduct Group processes and settles refunds for four of the top six taxpreparation companies. The deal could potentially give Green Dot an avenue tooffer its prepaid cards as a tool to those companies for delivering refunds.
The purchase seems to be an extension of Green Dot’slong-term strategy of vertically integrating its value chain as much aspossible. While the processing is not traditional transaction processing, itdoes help with the Green Dot load business. In addition, having the processingplatform potentially could give Green Dot another tool for foiling tax fraud.With insight into the refunds being prepared by many of the largest preparationcompanies, it will have more insight for spotting duplicate returns and filingsthat don’t match up with existing customer identification information.
Overview by Ben Jackson, Director, Prepaid Advisory Service for Mercator Advisory Group
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