Inside MetaBank, the bank behind stimulus payment cards

The company sold its community bank division in November 2019, allowing it to focus on banking-as-a-service solutions

As many Americans receive up to $600 in stimulus payments this month, 8 million of these disbursements will be delivered through prepaid debit cards. 

Prepaid debit cards are one method among a series of vehicles the U.S. Treasury Department is using to deliver funds quickly and efficiently. Cards can help reach tens of millions of Americans who are unbanked or underbanked.

The bank behind the stimulus payment debit cards, Sioux Falls, South Dakota-based MetaBank, told FinLedger it wants to reach underserved consumers. The company, which had $7.2 billion in assets as of the fourth quarter of 2020, also works with fintechs that are developing payments, digital banking solutions, and other financial products, including MoneyLion, Marqeta, Digit and others.

In November 2019, the company sold its community bank division, allowing it to focus on banking-as-a-service solutions. The bank continues to offer commercial loans, delivering $2.3 billion on commercial loan volume in 2020 through its Crestmark division.

FinLedger spoke with Brad Hanson, MetaBank’s CEO and co-president and president and CEO of Meta Financial Group (the publicly-traded holding company that owns the bank) to learn more about the company’s business model. Answers were edited for clarity.

Why is MetaBank participating in the Economic Impact Payment program?
We are a service provider to the U.S. government and we have an existing program in place with them that provides disbursements for different agencies of the government. We feel that it’s important for us to do our part to try and help the government, and help consumers in a time of great need. 

Is this part of a bigger effort to reach customers who are underserved, or have challenges accessing the financial system?
I feel like the people that need it most have the hardest time getting it. They can do an ACH payment into a consumer’s bank account for those that have bank accounts. But other consumers have a much harder time receiving the funds. [With debit cards], they can get cash, they can use the cards, and it’s secure, and it’s very much more cost effective for both the government and the consumer than checks.

I understand that MetaBank is one of the top issuers of prepaid cards, with some partnerships with H&R Block and MoneyLion launched last year. What are your core customer segments in the prepaid area?
We support third parties, so we work with fintechs and financial services companies that are creating products and services across the spectrum, and support them by providing regulatory risk guidance and protecting and managing the money. [We focus] not on direct-to-consumer but in affinity relationships with others, like government and fintechs.

Can you tell us more about some of your prepaid partner relationships, particularly some of the recent tie-ups?
We’ve been working with third parties since we started this back in 2004, so it’s been a long time that we’ve been deploying this kind of banking-as-a-service model that everybody’s talking about now.

MoneyLion is doing very well, and we’re excited about the tax season with H&R Block, and we have many others like NetSpend which is in the direct-to-consumer space, those like Money Network rapid! PayCard and others that are in the payroll card business that provide services directly to employers. We work with rebate companies on a commercial basis, and we do gift cards that are distributed in malls, grocery stores and private label cards.

We also work with faster payments, real time and same-day transactions rather than everything settling days later. 

Why did you move into banking-as-a-service?
I started looking at these opportunities probably in and around the year 2000, when I was working for what is now The Bancorp, which is probably the biggest competitor we have in the prepaid market. 

I looked at gift cards and prepaid cards as an emerging niche area that served a unique population. I saw an opportunity, and through affinity relationships and others, which reduced the cost to acquire [customers], they reduced the cost to service, and they reduce the risk that’s involved with these customers. They allow us to serve a customer segment that other banks were not targeting.

We can serve a lot of those consumers with a little bit of money and by aggregating those make a business model, reducing servicing costs and onboarding costs and create an economic and business model that is profitable and serves [end users] effectively and fairly.

Would you characterize faster payments as a niche area for MetaBank?
I don’t want to call it a niche [but] I guess but these emerging technologies – and anything that helps enable the movement of money–  is really key to a healthy economy. [For example] we’ve done virtual pay with insurance companies, allowing them to pay providers, so that the claims can be paid to providers electronically versus by check.

Would that mean you’re also going beyond underserved end users to broader use cases?

Our focus is to ensure financial access and choice and opportunity for all, which means that the people who don’t have access get a lot of our attention. However, we serve large and small opportunities.

The banking-as-a-service field is getting competitive. What expertise or capabilities set MetaBank apart from its peers?
We’ve been in it longer and we’ve seen a lot. We know how to manage risk and compliance issues, we’ve got the experience and the knowledge to figure out how to [develop] solutions with our partners and we’ve got scale.

[MetaBank’s tools] help us serve many customers across many platforms. When we started this, we went out and made arrangements with most of the processing platforms and card processors. We have 30 different core processing platforms, not just one or two like most banks. We can bring partners to the table, we can make introductions, we can [and] we can help facilitate [relationships] across the whole universe of stakeholders.

What keeps you up at night as you grow your business?
Every time you make a new law or regulation, there’s always an unintended consequence. Maybe on a grand scale, it could be the right thing to do, but those little unintended consequences can impact you.

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