Green Dot Takes on Big Bank Fees

Green Dot is taking on big bank fees by allowing customers to voluntarily pay what they want each month, CEO Steven Streit told CNBC this week.

"If you're in college and we're competing with pizza and beer, we may lose that fight," Steit said, but a lot of people feel it's a great service and the bank's respectful customers are willing to kick in some money each month, according to the company's surveys.

While not a traditional banking business model, Streit said in a "Squawk on the Street" interview, "We can be profitable whether or not anyone pays us that voluntary pay-what-you want fee."

Instead, Green Dot believes the strategy sets the right tone for the product. "It feels organic and modern, and more respectful of our customer base," he said.

There are other ways Green Dot makes money, including interchange fees — the amount a merchant pays the bank when someone uses one of its prepaid debit cards — and out-of-network ATM fees.

This week, Green Dot launched a new mobile-based bank account, GoBank, to help broaden its customer base, however it still relies heavily on prepaid debit cards that it distributes through retailers across the country, such as Wal-Mart Stores, Walgreen, and CVS Caremark.

That distribution network is being tested by some pretty big competitors. Last October, Wal-Mart and American Express announced a competing product, sending Green Dot's stock tumbling. And in its latest quarterly filing with the U.S. Securities and Exchange Commission, Green Dot stated, "Our future success depends upon our retail distributors' active and effective promotion of our products and services."

Over the past six months, Green Dot stock is down nearly 40 percent.


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