The Federal Reserve has cleared the way for Green Dot Corp. to purchase Bonneville Bancorp., the first time a prepaid card company has won approval to buy a bank, the Huffington Post reports.
Green Dot's business has been peddling prepaid Visa and MasterCards, which consumers pay to obtain and pay to use.
The Associated Press reports that the prepaid cards issued by Green Dot function much like debit cards but are not linked to bank accounts. The money that customers load onto the cards is instead pooled together and held in accounts at third-party banks, which issue the cards bearing the Green Dot name.
Prepaid cards have grown increasingly popular, especially among those who do not have bank accounts.
Last year, consumers loaded $41 billion on prepaid cards, up from $29 billion in the previous year and $19 billion in 2008, according to Mercator Advisory Group, the Associated Press reported.
With its own bank, Green Dot will eventually be able to issue its own prepaid cards and it hopes to market new types of cards. The company also sees the deal as an opportunity to move into online banking.
Steve Streit, Green Dot's CEO, told Huffington Post that the idea would be to give workers a place to deposit their paycheck. "We have always thought that there was a compelling need for a low cost, simple account where you can get wages," Streit said. “That process has not changed much over last 100 years."
© 2013 Moneynews. All rights reserved.