Green Dot has purchased Russell Simmons' RushCard for $147 million. The two companies are both in the prepaid debit card business, and Green Dot will retain the RushCard name and its associated branding with Simmons in order to continue to appeal to the minority communities that RushCard largely services.
Russell Simmons Starts RushCard In 2003
The prepaid debit card business has exploded since the cards began achieving popularity in the early 2000s. One of the first to realize the potential reach of a prepaid debit card system was entrepreneur Russell Simmons.
Simmons began as a music business mogul who started the seminal Def Jam record label, and added other media efforts to his portfolio including All Def Digital, Def Pictures, Narrative, Global Grind, CelebrityTweet and Rush Books in addition to Def Jam Enterprises, also branching out successfully into apparel, helming fashion lines Phat Farm, Argyleculture, and Tantris.
Simmons started RushCard's prepaid debit card system in 2003. Prepaid debit cards allow users to load cash onto them at various physical locations and then use them in the same manner as they would a credit or debit card, including the ability to have their employer load their salary onto the card account using direct deposit, as well as receive federal tax refunds onto the cards via direct deposit.
Prepaid Debit Cards: Huge Market, Huge Players
The cards appeal to the 58 million "underbanked" Americans who do not have a traditional account for a variety of reasons, including suspicion or dislike of banks, lack of ability to meet minimum deposit requirements, lack of required documentation, or refusal of banks to open an account due to previous financial difficulties. As the market has expanded, big players like American Express and Chase have begun offering their version of the prepaid debit cards.
Simmons leveraged his popularity and trust within minority communities to build RushCard into a thriving prepaid card business, which now has approximately 750,000 users. RushCard ran into some serious trouble back in October 2015 when a computer glitch occurred as the company made the switch to a new payment processor. As a result, many RushCard holders were unable to access their own money for many days, resulting in a huge firestorm as they took to the media to vent their anger and frustration. Simmons personally apologized and took to his own pockets to reimburse RushCard holders who had suffered as a result of the computer error.
Now, Simmons will remain the face of RushCard, but the company will be incorporated into Green Dot, one of the biggest prepaid debit card providers.
"Fourteen years ago I embarked on an incredible journey to provide a new financial tool for millions of Americans who had only limited access to traditional banks," said Simmons. "As I have done with my ventures in music, comedy and fashion, I am partnering with the best company in the industry, Green Dot, to expand our opportunities and continue our mission to revolutionize the banking industry. We believe our customers are among the most loyal in prepaid and I want to thank them for their years of support."