Mobile banking, as has been explored many times before, has a huge potential to open up
banking services to people across the developing world. This time, however, the focus is on the world’s largest economy as T-Mobile, the mobile operator, rolls out a financial services via its Mobile Money brand aimed at customers who do not have a bank account in the US. At the most recent estimates this group runs into tens of millions.
Mobile Money teams a prepaid Visa card with a mobile app, offering subscribers access to everyday banking services such as depositing cheques/checks via their smartphone, withdrawing money from ATMs, and sending money to friends and family directly. T-Mobile customers will pay no reload fees in stores, no monthly maintenance fee and no withdrawal fees at 42,000 in-network ATMs – writes Alaric’s Andy Brown.
The scheme is part of a very clear aim on the part of the company to shake up the status quo. After striving to be your ‘un-carrier’ as a mobile network, T-Mobile now wants to be your ‘un-bank’ too.
But T-Mobile is not being completely radical. The card is issued by The Bancorp Bank, supported by Visa. It is very much part of the mainstream card network. It does offer a range of low-cost financial services, but it is not as complete as Kenya’s M-Pesa network, for example.
However, we are seeing a clear dissonance between the mainstream banking sector and a large swathe of consumers. There are roughly 70 million un-banked consumers in the US – people who do not have a bank account – often poorly paid or out of work. But there is also a growing number of consumers who have voluntarily chosen to remove themselves from the system. According to a report from Aite Group, these so-called de-banked consumers “are looking to escape the traditional banking system, not because they have to, but because they want to”.
From the rhetoric heralding the scheme we can get a feel for what T-Mobile is trying to do. John Legere, president and chief executive officer of T-Mobile, said in a release to mark the launch: “Millions of Americans pay outrageous fees to check cashers, payday lenders and other predatory businesses – just for the right to use their own money. Mobile Money shifts the balance of power for T-Mobile customers and keeps more money in their pockets.”
It seems that the clear intention here is not to replace banks by attacking them head on, but to offer an alternative for those without a bank account, whether by choice or by accident, who end up at the mercy of other players in the payments sector.
Both sets could be well-served by the T-Mobile scheme, which seems to combine some of the most convenient aspects of new payment technology – a prepaid card with mobile functionality.
In a sense what we are seeing is the blurring of the lines between the kind of services you can offer people. It’s because of the disruptive nature of mobile payments that suddenly a phone operator like T-Mobile can go into banking so easily.
But, by the same token, banks are able to flip this around and offer mobile services to customers. Just as T-Mobile can make its financial offering appealing to existing phone customers, banks can use their incumbent payment network to attract people.
One example where this is happening for real is in Spain. There, Bankinter has entered the fray by becoming a mobile virtual network operator. Consumers can sign up for smartphone deals on its website. This bank is innovative and is pressing mobile payments on all fronts.
For example, last year it announced a new scheme that would allow customers to turn their phone into a one-time use credit card for use in shops and restaurants. This system used secure virtualisation techniques and a two-factor authentication process to ensure security.
Whether it’s harder for a bank to become a mobile operator, or vice versa, the point is that the presence of mobile and the very nature of the technology itself are driving change. It is truly upsetting the status quo, largely for the good, but it means that being an established player is no guarantee of success. In a mobile world, only the forward-thinking innovators will succeed.