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T-Mobile: The Uncarrier for the Unbanked?

Sarah Thomas
1/22/2014
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T-Mobile isn't intent on just shaking up the wireless industry; now it has its sights set on the banking industry as well.

The self-proclaimed 'uncarrier' unveiled a new Mobile Money service on Wednesday that it says will go nationwide after a trial in Miami that started in November. Unlike T-Mobile US Inc. 's Isis venture, Mobile Money is designed for those that don't have a bank account, letting them access their money and make payments via a T-Mobile-supported prepaid Visa debit card and a mobile app. They can use the app to take a picture of a check and load it on to the prepaid card, which they can then use for payments.

T-Mobile is going after the 8.2% of US households, or 17 million adults, that don't have a bank account, according to the latest FDIC data. Jan Dawson, chief analyst at Jackdaw Research, notes that the service is a good fit for T-Mobile's prepaid customer base, which is more likely to fit with this segment of the population than the big three carriers' contracted customers.

But, he notes, the challenge will be short-term revenue for T-Mobile as the service is free to its customers (though others will have to pay a fee). He said the service is another marketing effort from T-Mobile that will cost it money, at least until it tacks on other services to it.

Why this matters
T-Mobile has so far been shaking up the industry in its core tenets: service plans, devices, and data pricing. Now, it's trying its hand at service innovation, something operators haven't traditionally excelled at. According to Dawson, Mobile Money is the first sign that T-Mobile is interested in going beyond the traditional wireless services business.

"It fits nicely with T-Mobile's branding as a friend of the consumer and a company that does things differently, and the service should provide significant value to people who struggle to qualify for traditional bank accounts," Dawson writes in a research note.

Its announcement follows AT&T Inc. (NYSE: T)'s mCommerce play, announced last week to take on Square mobile payments. Both carriers are also involved in the Isis joint venture, which provides a full mobile payments and wallet service, but has struggled to find traction in the US. T-Mobile's focus on the unbanked may make this venture more successful. Services outside of the US that have addressed this population have been well received, but it's so far been an untapped demographic for US carriers. (See AT&T Offers a Square mCommerce Competitor.)

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— Sarah Reedy, Senior Editor, Light Reading

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DanJones
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DanJones,
User Rank: Blogger
1/22/2014 | 5:05:05 PM
Re: Increasing competition
It just has to be less than the check cashing places and payday loan stores. There's one on the corner down from my apartment, I can go and check what they charge soon.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/22/2014 | 5:01:49 PM
Re: Increasing competition
Good point on the position of their retail locations. Same with MetroPCS, which T-Mo now owns. The proximity is good for the demographic they would be reaching with this. Of all the carriers, it has the best shot at success.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/22/2014 | 5:00:35 PM
Re: Increasing competition
I wonder how much T-Mo is going to charge non-customers to use it. It must be hoping to make back some of its investment with non-customers since it's free to users. That's why new services have to be forthcoming too.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/22/2014 | 4:59:44 PM
Re: TMo Bank
Become Macklemore's official sponsor, so he only wears Magenta at concerts? :)
DanJones
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DanJones,
User Rank: Blogger
1/22/2014 | 3:55:40 PM
Re: Increasing competition
Dennis,

I could see people taking this up if they advertise it heavily. The T-Mobile stores are often close to the check cashing places in parts of Brooklyn, if its cheaper than doing that I can see people switching but yeah definitely a competitive business.

Certainly an interesting idea for a carrier to try.
mendyk
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mendyk,
User Rank: Light Sabre
1/22/2014 | 3:34:18 PM
Re: Increasing competition
The issue with mobile payments is the scale needed to get to any significant revenue. You need to be able to handle millions of transactions to see thousands of dollars. Early movers in developing economies (where the percentage of people without bank accounts is significant) have done well, but growing competition from different types of players is already making those businesses less profitable. It's a nice idea with real populist appeal, but prospects for long-term success are weak.
@jopocop
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@jopocop,
User Rank: Moderator
1/22/2014 | 3:25:29 PM
TMo Bank
When I saw the news, I clapped over the brilliance of John Legere to come up with this kind of collateral business.  I wonder what more tricks is he going to do, such as open up a McD or Starbucks in his TMo stores?  Could work...
DanJones
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DanJones,
User Rank: Blogger
1/22/2014 | 3:04:05 PM
Re: Increasing competition
It makes sense given how popular payday loans places are in the US and how quickly similar schemes have grown in other countries. I'm sure financial analysts might look dimly at the move though.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
1/22/2014 | 11:56:39 AM
Increasing competition
This could be a good move for T-Mobile, but the company might find it costly to provide this service. Others are lowering their fees for prepaid debit cards or getting into the business for the first time, so costs for consumers are getting more reasonable.

Of course the others still charge more than T-Mobile, but even the competitors find the service only marginally profitable. Not sure a loss leader like this is in T-Mobile's best interest, and unsure if Softbank would be interested in this extra expense if it moves forward in trying to merge T-Mobille and Sprint.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
1/22/2014 | 11:56:12 AM
Competition
T-Mobile will have other competition on this (Wal-Mart + American Express) outside of just carriers, but the fact that it's free to its customers should be a big boon. It didn't say what it's charging non-customers though. As Jan mentioned, it could and likely will attach other revenue-generating services to it in the future, making it more of a complete Wallet that it can make money from. 
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