Green Dot (NYSE:GDOT) isn't exactly a household name in the fintech space, at least not in the way companies such as Square (NYSE:SQ) and PayPal (NASDAQ:PYPL) are. But this under-the-radar fintech stock has an exciting market opportunity to pursue and could be a big beneficiary of the digital transformation age.

In this Jan. 14 Fool Live video clip, Fool.com contributor Matt Frankel, CFP, explains Green Dot's massive growth potential to fellow Fool.com contributor Brian Withers. 

Matt Frankel: And it's a company that's been around for a while called Green Dot, ticker symbol is GDOT, which I will put in the chat. Green Dot is a different fintech company. There's two main parts of their business. They're best known for their proprietary banking products like prepaid debit cards. If you've ever checked out in the Walmart (NYSE:WMT) and you see the little rack of prepaid money cards at the cash register, those are all Green Dot products. So Walmart's their biggest partner with that.

The other side of their business is called banking as a service, or BaaS. Green Dot, they have a banking charter, which is a really unique part of the business that they really haven't leveraged to their advantage so far. What banking as a service is, is they let other businesses use their banking infrastructure to create their own banking products. When you think of a company like say, Apple (NASDAQ:AAPL) or Uber (NYSE: UBER), it's not advantageous, or is it practical in most cases for those companies to actually become banks or to acquire banking subsidiaries of the road. That would create a regulatory nightmare. They don't want to do it. They don't want to have to keep that much capital on hand, etc. What they do is, they create products for these companies using their banking charter and banking infrastructure that those companies can then use for their employees or customers.

Just a couple of examples on the customer side: Apple Pay Cash is a Green Dot-powered product, Apple Pay's person-to-person transfer service. That's a Green Dot product. Uber uses Green Dot's infrastructure to instantly pay their drivers for rides. If you pay for an Uber drive, that money will instantly show up in the driver's account, and that's a Green Dot product. Just recently, Intuit (NASDAQ:INTU) partners with Green Dot for their refund anticipation debit card; that's a Green Dot product for TurboTax. Google Pay just announced they're going to start doing Green Dot bank accounts through their platform. So there's a bunch of cool applications to this, and it's really still in its infancy.

The idea of companies partnering with banks to create products is not a new idea. I mean, I've had a Delta (NYSE: DAL)-branded American Express (NYSE: AXP) card for about a decade now. This isn't a new idea, but the applications are just getting so enormous as FinTech continues to evolve. For example, you can custom-design bank accounts to give to your employees that have specific benefits. You could custom-design customer-to-customer payment apps. If someone wants to transfer, say, a gift card to another customer, you can create an application for that using banking infrastructure. You can create your own prepaid debit cards as a small business, which is something that would be a really nice touch for a lot of businesses to have but isn't practical right now.

So that's the banking as a service side of the business, which is the most exciting growth part of it. They're not giving up on their proprietary prepaid and other banking products, which the company targets people who aren't well served by the traditional banking system. There's a lot of people in the United States that don't have bank accounts for one reason or another. So this is not their first time launching a bank account. They've had the GoBank account for a while. They just launched one called the Go2Bank that, I think, actually has potential to be a needle-mover. Their previous banking products, yeah, you didn't need to pass a credit check to get them. You didn't need to go to a branch-based bank and open it up. You can just buy a card, a debit card, and start using checking account functionality.

But there wasn't anything really unique about that that other people or other companies weren't offering. The Go2Bank that they just announced, has some really unique features that I think are going to appeal to this subset of the population. A $200 built-in overdraft feature is something that's unheard of on a prepaid bank account or a non-bank bank account. Early access to a paycheck. If people have their paychecks direct-deposited and build up a record of that, Green Dot's going to let these people get their paychecks early. I don't know of any other bank that does that without having to borrow the money and pay interest. The accounts also linked to a high-yield savings product, which is another rarity in the underbanked market, and a secured credit card to help people build up credit, to be able to get eventually more traditional financial products.

So a really unique product. Their prepaid card business has been understandably declining for some time. With things like as Brian has said, the Cash App, the need to go to Walmart via prepaid debit card is much less than it used to be. A lot of people just use their phone to Venmo or Cash App money to people. But Green Dot's trying to approach it from the banking side, because as of now, this could change in the future. Cash App doesn't have checking account functionality. It is impaired to a high-yield savings platform. It doesn't provide overdraft protection, things like that. They are thinking outside the box and offering what these other fintechs aren't doing in order to bring in a new customer base. I don't want to say steal share from PayPal and Square; it's just not the same customers they're going after. It's a different need. There's definitely room for, say, the Cash App in this new Green Dot account to coexist.

Green Dot, it's also worth noting: It has been a founder-led company from its beginning until about less than a year ago. They brought in a new CEO. His name is Dan Henry, a big fintech veteran. He co-founded some pretty impressive companies. He called the stock, let me get this quote right, the "after-Christmas sale of a lifetime" recently. For a CEO to say that about their own stock is pretty rare and makes you take a second look. CEOs generally don't want to misrepresent their valuation or anything like that or cause people to speculate or anything to that effect. For the CEO to come out and say that was a pretty good sign to me.

The original founder was a guy named Steve Streit, who did a great job in the prepaid business. He pretty much pioneered the prepaid debit card business. But Dan Henry stood a great job of leading them into the next phase of their company. Brian, are you familiar with Green Dot at all?

Brian Withers: Well, I know. I've read a couple articles you've had on it and I was just poking around on them. Whereas Square is followed by 96,000 Motley Fool members who've clicked on favorites and it's a $104 billion market cap, Green Dot is followed by 2,000 members, which you're probably one of them. [laughs] It has a market cap of $3 billion. These are two very different companies in their lifecycle, and this market for them, I think is just huge.

Frankel: Green Dot is definitely the older of the two, and you said there are about 2,000 people following them, I bet the other 1,999 heard about it from me on the podcast, then. [laughs] Like you said, just to get to this comment really goes along with just what you said. Shri says, "Well, Green Dot is only a $3 billion company compared to other fintechs. It seems very small in market cap."

It is, and it's not that it's an early-stage business. Green Dot has been around since the '90s. The Walmart prepaid MoneyCards and things like that have been around for a long time. The banking as a service part is still in its early stages. It still has that legacy prepaid debit card business where it still gets most of its revenue from, by the way. That's something that concerns investors. The banking as a service part is new, and they are yet to really prove that they can build out a innovative checking account product for people without a bank account that can compete against things like the Cash App and Venmo and things like that. They have a lot of potential, but they still have a lot to prove, which is why they're such a small company. If you look at price to sales, they're a lot cheaper than all these other fintech companies.

Withers: Oh, yeah.

Frankel: If things go well, then there could be a lot of upside there.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.