Green Dot, which provides card and related financial services directly to consumers and as white-label services, disclosed last week that it’s in a dispute with one of its contract customers, the ride-share company Uber Technologies.
Green Dot didn’t provide many details with respect to the dispute other than to allege that Uber isn’t living up to agreements between the companies. In its quarterly regulatory filing on Aug. 5, Green Dot said it’s “in the midst of a dispute with Uber over their obligations under our agreements with them.”
When asked for additional information, a spokesperson for Green Dot suggested legal action has commenced. “We generally do not comment on pending litigation, but we do intend to exercise our legal rights and protect our interests in this matter,” said the spokesperson, Alison Lubert.
Lubert didn’t immediately respond to a follow-up question regarding where any lawsuit may be pending. An Uber spokesperson didn’t immediately respond to a request for comment.
In 2019, Uber launched a real-time earnings function for its drivers so they could access their funds after each trip rather than being limited to five cash-outs a day. The real-time offering was to run through an Uber debit account powered by Green Dot that let drivers overdraw by $100 without a penalty.
Customer contracts not renewed
Austin, Texas-based Green Dot also disclosed during the earnings report that “several” of its banking-as-a-service (BaaS) customers declined to renew their contracts recently.
“We have several contracts where we could not come to an agreement that both we and our partners believe would serve the best interests of both parties and they will not be renewed,” Green Dot Chief Financial Officer George Gresham said during the company’s Aug. 4 earnings call with analysts. “We are also in the midst of a dispute with Uber over their obligations under our agreement with them. We won't be getting into the details about the specific circumstances of non-renewals or terminations, but at a high level, I would reiterate that we are increasingly focused and more disciplined about the structure of our contracts.”
Green Dot had a similar disclosure about the lost contracts in its regulatory filing for the quarter. “During the second quarter of 2022, we also engaged in contract renewal negotiations with several BaaS partners, but after extensive negotiations, could not agree upon terms that would best serve the long-term interests of both us and our BaaS partners,” the company said in its quarter filing with the Securities and Exchange Commission on Aug. 5.
Among the BaaS customers that Green Dot has noted in the past are the tech companies Apple and Intuit, online retail giant Amazon, Uber and retail behemoth Walmart, Wall Street Analyst Robert Napoli of William Blair said in an Aug. 5 note to his investor clients.
During the discussion with analysts on the company’s second-quarter results, CEO Dan Henry suggested it wasn’t a bad outcome to lose the clients.
“I believe that for the long term, we are striving to be probably more uniform in what we do and, long-term, we'll probably be quite okay without these partners,” Henry told analysts on the call.
Gresham also noted Green Dot has renewed one contract with a “major BaaS partner,” without providing a name. In addition, the company is making progress in discussions with Walmart, he said. That big retailer contract with Green Dot expires on Jan. 31, 2027.
While the company’s executives said the non-renewals would have only a “modest impact” on the second half of the year, they also said it would negatively affect the forecast for next year.
Henry said the company is changing up its approach in crafting contracts with clients to avoid those that can’t grow in the same way Green Dot seeks to grow.
“I don't want to be out there opening up our (bank) charter for every Joe finTech that wants to do something in payments,” Henry said on the call with analysts. “We really want to be focused on partners that can be of scale, and partners that are focused on solving the problems that we're focused on solving, which is really serving consumers and small businesses that aren't aren't very well served by traditional financial institutions for various litany of reasons.”
Green Dot’s shift comes in the wake of its CEO changing up the company’s leadership, with about a half dozen new executives added in the past couple years since Henry’s arrival in early 2020, Napoli noted.
That analyst also mentioned in a report that Green Dot’s relationship with Walmart could change as that retail juggernaut pursues its own financial services.
Green Dot’s neobank, called Go2Bank, could eventually put it in direct competition with its largest retail distributor customer, Walmart, because that retail giant has been building up its own financial services through a new venture, called Hazel. Currently, Green Dot provides the Walmart MoneyCard account services and its bank is the issuer of those card accounts.
“One of Green Dot’s core initiatives is growing its own neobank, Go2Bank, which would seemingly compete directly with the aforementioned fintech of a key partner,” Napoli noted in his team’s Aug. 5 note to investors.
Last year, business with Walmart generated about a quarter of Green Dot’s revenue, but that percentage has been decreasing as Green Dot diversifies its income streams. For the first half of this year, it was about one-fifth of overall revenue, according to the quarterly filing.
The company’s BaaS business fits within its business-to-business segment, which accounted for just under 40% of Green Dot’s revenue in the first half of the year.
Of the company’s three revenue segments, its biggest is from its consumer business, which generated just over 40% of revenue in the first half of the year. In that segment, Go2Bank caters to consumers who don’t qualify for standard bank services, including through retailers such as Walmart. In its third and smallest segment, Green Dot provides money transfer services such as tax refunds and cash deposits.
With the increasingly difficult macroeconomic environment, Gresham said the company expects to see some rivals pulling back, creating an opportunity for it to increase marketing in the second half of the year and lure more consumers. While that’s particularly true on the consumer side of Green Dot’s business, it could also apply to its B2B segment, he said.
Green Dot reported second-quarter net income dropped 40% to $15 million compared to the year-ago quarter as its revenue fell 2% to $362.8 million, according to its Aug. 4 press release.