7 Reasons Mobile Money From T-Mobile Should Worry Bankers

MOBILE STRATEGIES

The cellular company that promised to shake up the wireless industry, has now disrupted the banking industry by introducing a free way for customers (and non-customers) to keep money in a checking account, make direct and mobile deposits, pay bills and get fee-free ATM access to cash with a Visa debit card.

Not to be mistaken for the future Isis mobile wallet (backed by AT&T, Verizon and others), the T-Mobile Mobile Money solution is the latest in a wave of neobank competitors such as Simple, Moven, GoBank and Amex's Serve. The major difference is that this offering comes with a vast distribution network, an established customer base, significant marketing muscle and more.

When I heard about this newest banking solution, I immediately imagined the buzz in the halls of banks and credit unions across the country. Some financial executives would be acting like it is the end of the world as we knew it, while others would immediately fall into the trap of saying, "It's no big deal". The reality is probably somewhere in between. But there is cause for concern. 

While this is not the same as turning smartphones into mobile wallets, it is a solution offered by a wireless provider that has distinct advantages over traditional banks and credit unions. I would also caution those who see this as "just a solution for the 'underbanked' (definition still under discussion)". I think it could be much more. 

In fact, in some parts of the world, mobile phones have become the de facto way for people to handle day-to-day financial transactions (as opposed to banks). The best known example would probably be Kenya’s M-PESA which is currently used by 20 million people and includes loans and savings products.

So, why should Mobile Money from T-Mobile worry U.S. bankers (in no particular order) . . ?

1. T-Mobile Has an Established Customer Base

Unlike the majority of previous neobank entrants in the market, T-Mobile already has an established customer base to draw from. T-Mobile US provides services through its subsidiaries and operates its flagship brands, T-Mobile and MetroPCS, serving approximately 46.7 million wireless subscribers (Bank of America has 55 million customers).

T-Mobile also isn't new to the personal finance arena. By separating the costs of wireless services and devices, T-Mobile already provides customers the option of financing smartphone purchases. According to T-Mobile, they have facilitated billions of dollars in loans for customer phones (all without charging a penny in interest).

"One of the main reasons we're doing this is to deepen our relationship with our customers," said T-Mobile marketing executive Andrew Sherrard.

T-Mobile's cellular pricing strategy (cheap and with no contracts) should correlate well with the demographics they are initially trying to reach. While there are definitely mass affluent and affluent customers who use T-Mobile phones, an above average segment of their customer base probably includes customers without access to traditional financial services and who are looking for lower prices.

Notice in the website marketing, that the term 'prepaid debit card' is deemphasized in exchange for references to a checking account.

Source: T-Mobile Customer Mobile Money Web Page