Bad Strategy at Meta Bank, Net Spend and Green Dot indicates that they are not in tune with their customer’s input

Exploring the Finances of the Unbanked  [ Think about what this implies here!!!!]

Bad Strategy at

MetaBank and NetSpend

October 14th, 2010

NetSpend and MetaBank have ignored critics of their products. [How does Meta Bank receive input?] Now they are paying the price.

There is a lesson in corporate strategy to draw from this situation. It doesn’t make sense to put so much effort into a financial product, given the degree of regulation associated with the banking sector, and then ignore the reaction of consumer groups and flout your regulator. [ I agree with this statement.]

The risk is evident. MetaBank has seen its shares lose $39 million in value in the last 24 hours. NetSpend was ready to do an IPO that was expected to bring $200 million to the firm. We don’t know how things will go tonight, but it seems to safe to assume that they are going to come back with tens of millions of dollars less in equity.

There are other companies in the prepaid space that do things better. Green Dot made an aggressive outreach to advocates and the Federal Reserve when its acquisition of Bonneville Bancorp was held up. [This report seems to be behind the times since customers are miserable with the Green Dot product already.]

H&R Block takes care of its reputation, as well. Block has a full-time social media staffer that monitors whatever anyone is saying about their company. “Listen, Respond, Resolve,” goes their logic. Richard Breeden brought a person over to Block from the SEC whose sole function is public policy.

What would a better strategy look like? For one, it would involve engagement. MetaBank, and NetSpend indirectly, have had their heads in the sand. [I think they have known exactly what they were doing and went for bust. They just switch names now and then, and move on to a new targeted market. They are not so much the big thinkers and they are the big name changers, and one step ahead of the law types.] Then it makes sense to make a better product. An alternative might have been to make a less expensive loan product. The APR on an i-advance is very high,[yes, this is called usury] no matter how the math is done. In most states, their product avoids usury laws by some obtuse reading of its definition as a loan [ Perhaps they are better at the double talk than I originally gave them credit for being, Haahr is an attorney, right?] (I’m not a lawyer, though, so I can’t say that with confidence). If they had offered a product with interest below 36 percent, they would still have the i-advance. The margin would have been lower, but they’d still be able to offer it to consumers. Remember, these products require a direct deposit.  [And Meta Bank promised to help people improve their credit history by following their plan.]

[I still think that what Meta Bank does is usury and what Meta Bank did through Payoneer was a form of treason. Look up the definition for ‘usury’ and also for ‘treason’ then look closely at Meta Bank’s practices in how they  use debit cards and what happened with the Payoneer/Meta Bank PrePaid Card in Dubai. How was that man assassinated? And why are some people sending clandestine bombs randomly toward the United States? I believe that it is the acts of Meta Bank that brings out this kind of angry response towards us, and the majority of us don’t understand why or how these people could be so angry at us. This is why Meta Bank needs to be stopped.]

One of the issues with offering credit to ultra-low-wealth consumers is that it imposes a real chance that a business will lose its customers. Going back to Green Dot, Steve Streit emphasized that he doesn’t put credit on his cards.  These consumers are often portrayed as people with short-term, one time credit needs. The reality is that many live in a constant cash-flow emergency. They need dollars today, and they will need money next week. They can’t afford to add a 120 percent APR loan to their budget.[ 120 % loan, you say and that isn’t usury? get real!!!!]

It doesn’t make any sense to ignore the reputation of your brand. This is business school 101. Remember the Tylenol product recall? Tylenol probably gained respect and trust from its consumer base by the way it handled that situation. Several big fast food chains agreed to pay for the cost of improving conditions in the Florida tomato farms where their food is grown. That differentiates their brand, while quelling their enemies.[Ok, so the author is giving examples for how Meta Bank could have and should have acted, but didn’t. What prevents Meta Bank from seeing the truth? Meta Bank is on another path headed in another direction entirely.]

MetaBank and NetSpend followed the alternative path. [Yes, of course.] Denying a problem and imagining that it will go away didn’t help BP,  or Tiger Woods.[However, Meta Bank is always the same and the Green Dot is just as bad. Meta Bank should be prohibited from serving the unbanked, but anyone who has any kind of money will not want to do business with them because they will lose all of their hard earned money while Meta Bank is stashing their cut in their Swiss Account.]

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