How Netspend Makes Money

Netspend makes money through a variety of fees on its prepaid cards

Netspend is a company with prepaid cards that offers an alternative to checking account debit cards, credit cards, and cash. Customers provide the company with their names and addresses, and the company mails them personalized cards that they activate and load with funds. The cards are operated by Mastercard and Visa. The company also offers prepaid business solutions, such as payroll cards, tip solutions, and a fintech platform.

Key Takeaways

  • Netspend is a company with prepaid cards that offers an alternative to checking account debit cards, credit cards, and cash.
  • Netspend makes its money through a variety of fees, such as the monthly plan fee, transaction fees, ATM withdrawal fees, replacement card fees, and inactivity fees.
  • Netspend operates in the prepaid card industry and is one of the key players, along with JPMorgan, Brink's, Mango, Kaiku, and American Express.
  • The company that owns Netspend, Global Payments, was looking to sell Netspend in 2020 for $2 billion, but still owns the business. In 2021, Global Payments announced it will offer Netspend's cards on Amazon Web Services.

Netspend's Industry

The prepaid card industry was valued at $1.73 trillion in 2019 and is expected to reach $6.87 trillion by 2030. The most popular type of card is a general-purpose card, followed by gift cards. The popularity of prepaid cards is due to the fact that they allow the end-user to set their cost limit in accordance with their budget. Furthermore, prepaid cards are becoming an alternative to cash and other cards for both personal and business use where users would prefer not to link a card to a credit or debit account.

The key drivers of growth in the industry are the increased desire for cash alternatives, the continuing growth of Internet users, and the ability to add funds to prepaid cards through a variety of methods (e.g. direct deposit).

The main companies operating in the space are American Express, BBVA USA Bancshares, Brink's, Green Dot, H&R Block, JPMorgan, Kaiku Finance, Netspend, Mango Financial, Mastercard, and PayPal.

Netspend offers Visa and Mastercard prepaid cards to its customers. State and federally regulated financial institutions partner with Netspend to issue the cards, which are insured by the Federal Deposit Insurance Corporation (FDIC). The cards allow consumers to add, spend, withdraw, and manage money.

Customers can access features such as person-to-person bank transfers, direct deposit of employer or government checks, text alerts, a rewards program, budgeting tools, and a tiered-rate savings account option.

Netspend is based in Austin, Texas, and is a wholly-owned subsidiary of Global Payments. The company operates over 130,000 reload points, where consumers can purchase Netspend cards and load them with cash.

The locations include retailers, check cashing locations, convenience stores, grocers, pharmacies, insurance providers, and tax preparation companies. Netspend also provides payroll card solutions that let employers directly deposit paychecks into their employees' card accounts.

Fundraising and Financials

Netspend was launched with just $750 of seed capital in 1999. After four funding rounds over the following decade, which raised $5.3 million, the company raised $204 million in its 2010 initial public offering (IPO).

Netspend offers its customers two service plans: The pay-as-you-go plan and the monthly plan. The pay-as-you-go plan has no monthly fee, is for individuals that aren't sure how often they'll use the card per month, and who primarily use the card to shop and pay bills. There is a $1.50 per purchase fee on all transactions.

Netspend offers financial solutions for an assortment of industries, such as financial services, retail, restaurant and hospitality, construction, the gig economy, offering solutions such as program management, earned wage access, disbursements, and paycards.

The monthly plan is for individuals who use the card often and make many transactions per month, with the option of having the card funded via direct deposit. The monthly fee is $9.95 and there are no additional costs for transactions. There is a reduced monthly plan for $5 available to customers that make a total of $500 in payroll or government benefit direct deposits during the calendar month.

For both plans, Netspend charges $2.95 per automated teller machine (ATM) withdrawal (both domestic and international), $3.95 for cash reloads, $.50 for a balance inquiry via ATM, and $5.95 per month if there is inactivity on the account after 90 days.

The company also charges fees for check requests, additional statements, additional card issuance, card replacement, ATM transaction decline fees, replacement card fees, and expedited card delivery.

Netspend has served over 10 million customers and has over 130,000 reload locations.

History and Leadership

Netspend was founded in 1999 by Bertrand and Roy Sosa, a pair of Mexican-born immigrants seeking a more effective way to pay bills and make online payments without needing to sign up for a credit card. The company went through four rounds of funding followed by an IPO in 2010.

The company has partnered with a variety of companies over its history, including PayPal, WesternUnion, Major League Baseball (MLB), United Airlines, and Walmart. Netspend was acquired in 2013 by Total System Services. Total System Services was then bought by Global Payments in 2019 and operates as one of its reporting segments.

The Sosa brothers are no longer involved with Netspend.

Recent Developments

In 2020, Netspend's parent company, Global Payments, was looking to sell the division for approximately $2 billion. Since then, no sale has taken place and as of January 2022, Netspend still operates as a division under Global Payments.

In August 2021, it was announced that Netspend's prepaid cards will be available for purchase on Amazon Web Services.

What Is a Netspend Card?

A Netspend card is a prepaid card offered by Netspend and operated by Visa or Mastercard that is not linked to a credit or debit account. A customer orders a prepaid card with a specific amount of money on the card and can use it for a variety of transactions. Once the balance is depleted, a cardholder can reload the card with additional funds.

Where Can I Reload My Netspend Card?

There are a few ways to reload your Netspend card. A card can be reloaded through direct deposit from your paycheck and at a variety of reload locations, which include places such as CVS, 7-Eleven, Walmart, and Rite Aid, which can all be found through Netspend's "Reload Location" finder on its website. Cards can also be loaded through bank transfers and PayPal.

What Is the Monthly Fee for Netspend?

Netspend offers two prepaid cards: a pay-as-you-go card with no monthly fee and a monthly fee card. The no-fee card charges $1.50 for every transaction while the monthly fee card costs $9.95 a month and all transactions are free.

Article Sources

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