Product and strategy benchmarking of prepaid card vendors in the us by Sutherland Global Services

Product and Strategy Benchmarking of Prepaid Card Vendors in the US July 2014

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Introduction • Along with other payment types, consumers are increasingly using prepaid cards across many spending categories. Retail purchase made with prepaid card is expected to exceed USD200 Bn in 2014, thereby equaling 5% of all retail spending in the US • Prepaid debit cards are becoming increasingly versatile. Along with unbanked population and individuals with poor credit score, many families and college students are regularly using the cards to manage their finances • While the competitive landscape of prepaid card is getting crowded, prepaid card vendors have initiated several strategic steps to overcome competition • This report benchmarks 10 leading prepaid cards in the US based on fees & charges, features, funding options and support . It also provides a detail comparison of strategic priorities of pure-play prepaid card vendors like AccountNow, Green Dot and NetSpend (Now TSYS)

Source: Sutherland research

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The US Prepaid Card Industry Market Share Observation • Green Dot’s dominant market share has been aided by its previously exclusive retail relationship with Wal-Mart, which provided an unparalleled distribution network – In 2012, approximately 64% (USD349.6 Mn) of the total revenue was generated from products and services sold at the store locations of Wal-Mart

GPR Prepaid Card Market Share (by Active Accounts) Prepaid Card Provider Green Dot

• NetSpend (NTSP) is the second largest prepaid provider by active accounts. NetSpend The company has grown its account base through a distribution network comprising primarily check cashers (notably ACE Cash H&R Block Express), alternative financial solutions outlets, and some retail locations Western Union – In addition, NTSP serves as the exclusive program and distribution manager for PayPal’s prepaid GPR card offering • H&R Block’s Emerald Card sources its account base from tax refunds because of differentiated use between GPR prepaid cards and tax refund prepaid cards

Bluebird(American Express)

% Share of Active Accounts 30% - 40% 15% - 20% 10% - 20% 5% - 10%

5% - 10%

RushCard

<5%

AccountNow

<5%

• Western Union’s prepaid offering is distributed through its agent network and is differentiated by having no maintenance fees • American Express’s Bluebird GPR prepaid card has approximately 5-10% domestic market share with over 1 Mn accounts. Bluebird is a recent entrant in the prepaid space, launching the card in Wal-Mart locations in late 2012 • RushCard has distributed its cards solely through a direct to consumer model, but will be entering the retail market through a partnership with Green Dot • AccountNow majorly sells its prepaid card through internet and has also partnered with The Bancorp Bank for its distribution Source: Sutherland research

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Product Benchmarking – Prepaid Cards (1/2) Prepaid Card Comparisons Mango

Kaiku

Net Spend

AccountNow

Vision Premier

Green Dot

ACE Elite

READYdebit

Walmart Money

Upside Visa

USD 2.50

USD 2.00

Fees & Charges

ATM Withdrawal

USD 2.00

USD 0 in network, USD 1.45 out of network

USD 2.50

USD 0 in network, USD 2.50 out of network

International ATM Withdrawal

USD 2.00 + 2%

USD 2.45

USD 4.95

N/A

USD 4.95

N/A

USD 2.00

Monthly Service Fee

USD 5.00

USD 1.95

USD 5.00

USD 9.95

USD 5.95

USD 5.00

USD 9.95

USD 3.00

USD 2.99

International Conversion Fee

1.50%

3.50%

2.95%

USD 2.50

ATM Balance Inquiry

USD 0.50

N/A

USD 0.50

USD 1.00

USD 2.50

USD 0.50

N/A

USD 1.00

USD 0.99

Close Account Fee

USD 10.00

N/A

USD 5.95

USD 15.95

USD 9.95

N/A

USD 8.95

Paper Statement

N/A

USD 2.95

USD 5.95

USD 2.95

N/A

USD 5.95

USD 2.00

N/A

Card Replacement

N/A

USD 3.95

USD 9.95

N/A

USD 10.00

USD 4.95

USD 3.95

USD 10.00

USD 3.00

USD 8.95

Source: Sutherland research

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Product Benchmarking – Prepaid Cards (2/2) Prepaid Card Comparisons Mango

Kaiku

Net Spend

AccountNow

Vision Premier

Green Dot

ACE Elite

READYdebit

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Walmart Money

Upside Visa

Features No Credit Check Text Alerts Online Account Management Smartphone App Savings Account Rewards Program Online Bill Pay

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Funding Options Add Money: Bank Transfer Add Money: MoneyPak Add Money: Direct Deposit Add Money: Western Union Maximum Card Balance Daily Cash Deposit Limit Daily ATM Cash Withdrawal Limit Daily Direct Deposit Limit

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USD 10,000

USD 15,000

USD 10,000

USD 2,500

USD 15,000

USD 10,000

USD 3,000

USD 2,000

USD 1,000

USD 950

USD 7,500

USD 6,000

USD 1,100

USD 2,500

USD 3,500

USD 2,500

USD 1,100

USD 500

USD 600

USD 500

USD 940

USD 300

USD 110.00

USD 400

USD 300

USD 500

N/A

USD 500

N/A

USD 10,000

USD 7,500

USD 9,500

USD 999.99

USD 10,000

N/A

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Help & Support Telephone FAQs Email

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Source: Sutherland research

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AccountNow’s Strategic Initiatives (1/3) Expansion – Through Strategic M&A •

In February 2014, AccountNow acquired prepaidwireless.com from Generis Group and babblebug.com from Fuze Online, Inc., both providers of wireless telecom products and services – AccountNow's easy access mobile site makes tax season simpler, and PrepaidWireless.com and Babblebug.com prepaid mobile telecom customers need and want pay-as-you-go financial transaction services. AccountNow believes that a multi-channel strategy with meaningful benefits for customers will prove to be a significant driver of future profits

"Customers of all companies win. They now enjoy easy access to new financial and telecom services delivered exactly the way they want them. And more products and services conveniently delivered from a trusted partner.“ – Jim Jones, CEO, AccountNow

•

In December 2012, AccountNow completed its acquisition of the payment card operations of nFinanSe, Inc., a provider of stored value and prepaid cards distributed at retail stores – nFinanSe is also the developer of nFinanSe Network – a secure, reliable value load and activation platform which connects with retail merchants and other value load stations located throughout the US

“These capabilities in retail distribution are highly complementary to our existing direct-to-consumer capabilities with virtually no overlap. This strategic combination instantly expands our retail distribution to an additional 15,000 plus locations.” – Jim Jones, CEO, AccountNow

•

In June 2011, AccountNow’s Board of Directors approved a merger with Ready Financial Group, Inc., Nampa, Idaho – The combined company continued to operate using both brand names and continued operations in San Ramon and Nampa – Jim Jones was named the CEO of the combined company to be known as AccountNow

“AccountNow, Inc. attributes its remarkable success to a strong value proposition and well planned and executed hyper-targeted direct marketing campaigns. We have great respect for Ready Financial Group as an innovator creating new ways for consumers to access financial services and to address the consumer payment needs of their commercial clients. Working together, we will be larger, expand our product lines to include payment card applications for commercial customers and have an increased talent pool to accelerate our development.” – Jim Jones, CEO, AccountNow Source: Company website, Sutherland research

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AccountNow’s Strategic Initiatives (2/3) Expansion – Through New Product and Services Launch •

In August 2013, AccountNow announced its next step in the integration of its recent nFinanSe acquisition – transforming the nFinanSe branded product to the READYdebit Gold brand at 15,000 leading retail locations, including Dollar General and Cumberland Farms

"READYdebit Gold underscores our commitment to serving retail customers where and how they want to be served. And partnering with leading retailers, known for high quality and value, is a perfect next step for AccountNow as it executes its strategy to establish primary financial relationships with customers.“ – Jim Jones, CEO, AccountNow

•

In January 2012, AccountNow teamed up with ezTaxReturn.com, a leading tax preparation software company, to offer taxpayers one of the fastest tax refunds available. Through this service customer can e-file and get their tax refund faster when they direct deposit their refund on AccountNow prepaid card – It is six to eight weeks faster than waiting for the US Treasury to mail a refund check and also eliminates any uncertainty of postal delivery and does not involve any additional check cashing or load fees to have tax refund money added to the card accounts

Expansion – Through Strategic Alliances •

From July 2013, consumers can purchase the popular AccountNow Gold Visa Prepaid Card conveniently while shopping for their groceries at BI-LO and WinnDixie Stores. Previously, the AccountNow Gold Visa Prepaid Card was available only online or by invitation. AccountNow announced the launch of the new AccountNow Gold Visa Prepaid Card, its first AccountNow branded prepaid card sold through a retailer

"Consumers are increasingly embracing the benefits of prepaid cards as a convenient alternative to checking accounts because they no longer have to worry about bank credit checks, overdrafts and ever rising fees. We are especially pleased that millions of Winn Dixie and BiLo customers can now purchase the AccountNow Gold Visa Prepaid Card while they shop for groceries, to cost-effectively manage their finances.” – Jim Jones, CEO, AccountNow

Source: Company website, Sutherland research

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AccountNow’s Strategic Initiatives (3/3) Updated Technology to Provide Ease •

In September 2013, AccountNow launched its new mobile website. The new mobile site features smartphone-optimized images and navigation buttons that work easily with a finger click. Customers log into their account, sign up for an AccountNow Prepaid Card, retrieve direct deposit account information for payroll, benefits, or tax refunds, find a local ATM, and check their card balance faster than ever

“The same fast and easy experience our customers enjoy on our website is now faster and easier on their smartphones. The new mobile interface is easier to read with large buttons designed for quick navigation. It’s the fastest way to access your prepaid card account.” – Jim Jones, CEO, AccountNow

Frequent Upgrades •

In August 2013, AccountNow announced that effective October 1, 2013 prepaid cards originally issued by First California Bank will become inoperable and will be replaced by a new AccountNow Gold Visa Prepaid Card sponsored by MetaBankTM with special promotions – Also, customers with nFinanSe branded cards have been offered a new replacement READYdebit Gold Visa Prepaid Card sponsored by MetaBank

Source: Company website, Sutherland research

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Green Dot’s Strategic Initiatives (1/4) Continued Investment Strategy •

During 2014, Green Dot intends to continue investment in new products and programs, new features for existing products and IT infrastructure to scale and operate effectively to meet strategic objectives. Some of the key incremental strategic investments are listed below

Key Initiative

Primary Rationale

2H13 Investment

Distribute products in 20,000+ new doors

Growth in the core prepaid business

USD 12-14 Mn

Development of a new suite of prepaid products

Growth in the core prepaid business

USD 12-15 Mn

Transfer issuance of the Wal-Mart MoneyCard portfolio to Green Dot Bank

Operational efficiency/cost savings, risk mitigation, increased strategic alignment with its largest distribution partner

USD 3-5 Mn

Expansion – Through Strategic Acquisition •

In June 2013, Green Dot agreed to acquire the Walmart MoneyCard portfolio from GE Capital Retail Bank – Under the terms of the agreement, Green Dot Bank will assume certain liabilities of GE Bank and transfer the deposits under the Walmart card program

•

In June 2012, Green Dot completed the enterprise-wide integration with its latest acquisition, Bonneville Bank, renamed Green Dot Bank – Green Dot successfully completed a highly complex enterprise-wide integration project to facilitate the issuance of the company's suite of MasterCard and Visa prepaid debit card products from its own bank – Issuance of the first cards from Green Dot Bank began in early June 2012

Source: Company website, Sutherland research

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Green Dot’s Strategic Initiatives (2/4) Expansion – By Introducing New Products •

In October 2013, Green Dot and Wal-Mart announced the expansion of the Walmart MoneyCard reloadable prepaid debit card line to include six new card types designed to meet the needs of their growing customer base. Issued by Green Dot, Wal-Mart prepaid debit card portfolio will now include nine cards, which will be available in more than 4,100 Wal-Mart stores nationwide

“This new category of prepaid debit card products represents a thorough understanding of the customer gained through years of experience in defining the category with Walmart. We are thrilled to have the privilege to serve millions of Walmart shoppers with the largest selection of prepaid debit card accounts, all issued by Green Dot Bank. Green Dot's corporate mission is to reinvent financial services for the masses, and this represents yet another step in that direction.” – Steve Streit, Chairman and CEO, Green Dot Corporation

•

In April 2013, Green Dot and UniRush announced the launch of the RushCard Live Reloadable Prepaid Visa Card [www.RushCardLive.com], a new prepaid card, which will begin rolling out to thousands of Green Dot partner retailers nationwide

"We believe that launching RushCard Live will be helpful in expanding our overall category sales by providing our retailers with a differentiated and innovative product with strong brand appeal.” – Steve Streit, Chairman and CEO, Green Dot Corporation

Taking on Competitors •

Concurrently, with the launch of Bluebird, by American Express in all Wal-Mart stores across the US in October of 2012, Green Dot introduced new risk controls in 2013, which caused Walmart MoneyCard enrollments to drop over the same period by an incremental 10+% Y-o-Y, creating a significant headwind for growth, in addition to any headwinds from Bluebird competition – Bluebird is designed to attract a customer segment interested in an alternative to a traditional checking account. The product features no monthly fees and free reloads at Wal-Mart

Source: Company website, Sutherland research

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Green Dot’s Strategic Initiatives (3/4) Expansion – Through Extended Relationships •

In March 2014, Green Dot announced a new reload technology ‘Reload @ the Register’ to improve cash reloading process – The new technology lets prepaid cardholders simply go to the register at any participating retailer to conduct their cash reload transaction. The cashier reloads the prepaid card along with any applicable reload fee and swipes the customer’s prepaid card through the retailer’s existing POS card terminal. The retailer’s terminal is connected to Green Dot’s data processing center where Green Dot is able to see the transaction in real-time – This real-time transaction method allows Green Dot to immediately credit reloaded funds to the customer’s card account without any further action required by the customer or the retailer

“For the retailer, it means that they will no longer have to provide shelving for paper reload chits, which will reduce in-store labor to re-stock and maintain those products. For the prepaid program manager, it means a more intuitive reload process that’s easier for their cardholders to learn. And for prepaid cardholders, Green Dot’s Reload @ the Register service allows them to enjoy a faster, easier and more intuitive reload transaction without having to fuss with the intermediary step of transferring funds from the paper chit to their prepaid card.“ – Helena Mao, General Manager, Green Dot Reload Network

Promoting Brand Promise •

In September 2012, Green Dot launched a new national TV advertising campaign for the company’s market-leading suite of prepaid debit cards. The 30-second spot, titled “Break Free”, used an original song to sum up Green Dot’s simple value proposition: its reloadable prepaid card is a truly hassle-free alternative to a traditional checking account – The spot was scheduled to air through 2013

“The strategy behind this energetic and optimistic ad is to communicate the Green Dot brand promise in a way that really sticks with consumers.” – Julie Mazman, SVP-Marketing, Green Dot Corporation

Source: Company website, Sutherland research

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Green Dot’s Strategic Initiatives (4/4) Ushering in the Next-generation Consumer Banking •

•

In January 2013, Green Dot introduced GoBank, the first bank account designed from scratch to be opened and used on a mobile device. Launching in limited release, with general availability to come later this year, GoBank is fast, fair and feature-rich, allowing consumers to interact with their money in a way that is immediate, intuitive and intimate – In addition to its consumer-friendly pricing model of no overdraft fees or penalty fees and no minimum balance requirements, GoBank makes it easy to send and deposit money, build a budget and find an ATM, with a massive network of more than 40,000 fee-free ATMs, more than twice the size of Chase or Bank of America In June 2013, Green Dot Corporation’s GoBank announced that it has been opened for general availability. Since January 2013, GoBank has been an invite-only service for beta members – A GoBank account is an FDIC-insured bank account, which is specially built for the smartphone generation – designed from the ground up to be opened and used on a mobile device

“Creating GoBank, the world’s first bank account designed to be used entirely from a mobile device, has been a labor of passion for everyone involved in the project. GoBank seeks to reinvent the traditional checking account in two key ways. Firstly, GoBank is a feat of technology that brings traditional bank accounts into the era of the app. Secondly, GoBank is a feat of consumerism that offers consumers a wide array of features and services with fair, simple and transparent pricing. We’re very proud of the product and are hopeful that consumers will be attracted to GoBank’s high tech/low price proposition.” – Steve Streit, Chairman and CEO, Green Dot Corporation

Source: Company website, Sutherland research

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Total System Service, Inc. (TSYS) acquired NetSpend in Feb 2013 for USD1.4 Bn • •

Total System Service, Inc. acquired NetSpend in February 2013 The acquisition was intended to meet TSYS’ strategic goal of diversifying its business, becoming a more innovative payment solutions provider and expanding its role within an area of payments with expected high growth – This acquisition complements Total System’s long-term growth strategy to enhance its top-line growth through a diversified portfolio

“ With the acquisition of NetSpend, we plan on growing the prepaid program management business and converting the largest pipeline of accounts in our history over the next two years.” – Philip W. Tomlinson, Chairman of the Board and Chief Executive Officer, TSYS

•

With this acquisition, TSYS now has a product that directly engages consumers, has two new products to offer merchants, a GPR solution and a reload network, and also two new products to offer banks, GPR and payroll cards

“With the NetSpend acquisition, TSYS gains entry into one of the fastest growing areas of payments, which is expected to double over the next 4-5 years. The acquisition complements our already strong presence in the prepaid processing space.” – Philip W. Tomlinson, Chairman of the Board and Chief Executive Officer, TSYS

• •

TSYS expects the acquisition to enhance its footprint in the prepaid industry as well as boost its inorganic growth profile Along with diversifying TSYS’ business basket, NetSpend will help the company to penetrate deeper into the electronic financial services market

“NetSpend has a leadership team with deep prepaid experience and a differentiated product offering customized for the consumers it serves. The opportunity to capture greater market share is within our reach. NetSpend’s mission is to empower consumers with the convenience, security and freedom to be self-banked, which aligns with TSYS’ brand promise to improve people’s lives and businesses by putting people at the center of payments.” – Philip W. Tomlinson, Chairman of the Board and Chief Executive Officer, TSYS

Source: Company website , Sutherland research

www.sutherlandglobal.com July 7, 2014

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