Green Dot, the leading general purpose reloadable (GPR) prepaid card program manager, is making the logical step in narrowing its supply chain.  Especially with big retail clients like Wal-Mart, Green Dot must experience relatively thin margins.  For the relatively uninitiated, GPR suffers from many hands at the trough: an issuing bank, a processor, sometimes a marketer and always a program manager.  Typically, these are all separate companies that play together to provide the full functionality of these lovely bank accounts for the underbanked.  Every entity needs to make ends meet and taking one or two out of the chain can make a big difference.

To that end, our friends at Green Dot have an offer in to pay $15 million (plus $10 million more post deal) for all the assets of a little one branch bank in Provo, Utah.  Bonneville Bank is located across from a Denny’s about 4 hours north of my favorite place in Utah, Zion National Park (hence the reference to red in the title.  I know, it’s a stretch).

Pundits speculate that this acquisition will allow Green Dot to offer savings accounts and help Bonneville Bank improve its “satisfactory” Community Reinvestment Act ratings.  While I guess both are true, I suspect the reality will be more mundane.  Columbus Bank & Trust, Green Dot’s current issuer, will lose a big account.  Green Dot will continue doing its normal stuff – which is great stuff – but make better margins now it owns its own coveted BIN (bank identification number).

Per a previous post, I still hold out hope that the company will use its IPO to get into consumer lending.  The acquisition of a bank imposes stricter guidelines, but also makes a broader range of credit products possible.