Green Dot introduces "real" smartphone banking with GoBank

There has not been any real internet bank. At least not until now. Even if you can use PayPal, Passbook or Google Wallet to pay for purchase online or on-site, money has to come from somewhere, which is usually a credit card or even your PayPal balance (which itself comes from a card or bank account). Green Dot, a company that provides prepaid Visa debit cards, has announced a smartphone app which serves as a bank in itself. Called GoBank, it is an aggressive attempt at making true internet banking a reality.

GoBank does not have any brick-and-mortar building, nor any branches. But account holders can withdraw funds from more than 40,000 ATMs without any usage fees. Most of the other services will also be for free. There are no overdraft nor penalty fees. Accounts do not have a minimum maintaining balance, and there are no monthly fees. Sounds too good to be true? There are some fees and charges for only four services: use of out-of-network ATM, using the debit card abroad, adding a personal photo to the debit card, and membership fees. Account members can pay whatever they want for the membership fees.

Bank interaction and signup is through the smartphone app. Users can pay for online and in-store purchases and send money via SMS or email. They can also take a glance at their bank balance without signing in. GoBank can write up a check on the account holder’s behalf, for paying bills and the like. Like Green Dot credit cards, account holders’ funds are linked to a Visa debit card account. Funds can be reloaded from an existing bank account, and can be done through established online transfer methods.

Account holders will also have a debit card, and they can have a Facebook photo printed on it instead of a bank logo. Initially, there will be a limited number of slots for account holders. Only 10,000 people would be allowed to sign up for the beta test. Expansion will depend on the outcome of the beta.

For skeptics of internet banking, it would be good to know that Green Dot bought an FDIC-insured bank in Utah in 2011. GoBank accounts are FDIC-insured. They also bought Loopt in March last year. Loopt has been better known as a mobile location app developer even before the iPhone was introduced.

The app seems to be the right app at the right time. The most likely signups will come from iPhone or Android users who transact regularly on the internet, and are dissatisfied with their banks. This is a huge potential market which has remained largely untapped. After all, Green Dot calls this sector — mostly in the below-40 demographic — as “underbanked,” which means users are not satisfied with traditional banks and the limitations of traditional accounts.

Internet banking has a long history. Most banks and credit card companies will usually have their own customer portals where the client can check their balances and transfer money from one account to another. However, operations of these internet banking services are tied with their established banks, and a client has to go to a branch to sign up for services at some point. With GoBank, all bank transactions are done purely online.

GoBank is available as a free iOS and Android app, and can be downloaded from the iTunes App Store and Google Play Store, respectively.

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