Tax preparation service provider H&R block After working with external banking platforms, the company now plans to offer digital financial services to middle-income households in the United States.
Headquartered in Kansas City, the company has been focused on helping its customers by helping them deposit their tax refunds using the Emerald prepaid debit card. As reported by American Banker, H&R Block intends to offer a virtual bank account starting next tax filing season. This should motivate consumers to use their services more regularly.
While H&R Block did not provide many details at this point, the company’s management has determined that it intends to focus on its current customers, which include those with moderate incomes who may not have access to reliable banking partners to have.
In an interview with American Banker, the company’s CEO Jeff Jones stated that the new service will be inexpensive, high-feature, and aim to “use the reimbursement as an event to fund the account”.
H&R Block has around 10,000 business locations in the United States. The company is committed to transforming its business as it is currently dealing with a competitive environment that is now home to many DIY tax preparation solution providers. The company’s shares have fallen (down over 40% from their all-time high in 2015).
By launching its platform for bank challengers, H&R Block can expect to enter a truly overcrowded market of fintechs exclusively offering mobile or fully digital accounts to consumers who are unsatisfied with regular banks due to their high fees or slower services. The digital bank Chime and Varo could be the main competitors of H&R Block.
However, H&R Block could benefit from its solid market presence and its 8-million-plus user base that already meets the needs of the type of customer it is looking to serve.
However, one of the biggest challenges for H&R Block will be to develop a profitable and sustainable business model that can generate consistent revenue without the typical fees that regular banking services demand from customers.
In 2020, H&R Block ended its relationship with Axos Financial, which provided the Emerald Card. H&R has now teamed up with Meta Financial, which will introduce the new virtual bank account.
Jones previously worked at Uber and Target, then joined the H&R Block team in 2017. He stated that the sale of H&R Block Bank was carried out so that the company would not have to comply with the updated rules that require the company to hold larger cash reserves was the right decision at the time. The sale of the institute to Axos (then BofI Holding) was completed in 2015.
The increasing adoption of DIY tax preparation solutions, accelerated further by the pandemic, poses challenges for H&R Block, according to BTIG analyst Mark Palmer. This could be the reason why the company will be offering new digital accounts.
H&R Block can also change its business model by closing some of its physical locations. The company can also focus more on small businesses.
H&R Block also acquired Wave Financial a few years ago. Wave offers a solution for accounting, invoicing, payroll and payments. It also focuses on SMEs.
H & R Block’s virtual bank accounts can be opened this October. The company’s large branch network, together with the Emerald Card with 2 million users, will provide the corresponding sales channels for the new product range.
“We like where we start given the business we’re in. But make no mistake, we need to translate strategy into execution and product development, which is currently underway.”
H&R Block will continue to offer its consumer credit products, which include a no-fee repayment loan and a line of credit with an annual fee of $ 45 and an annual interest rate of 35.99%.