On Wednesday, T-Mobile announced its new Mobile Money service would go nationwide after a trial in the Miami area from November to January. The new service offers a prepaid Visa card with various bank-account-like features behind it. The below comment may be attributed to Jan Dawson, Chief Analyst at Jackdaw Research:
T-Mobile has focused its Un-Carrier efforts on undermining the competition in wireless services, kicking off a mobile price war. But until now, T-Mobile has shown little recognition that it needs to go beyond wireless services to build sustainable growth in the long-term. Mobile Money is the first sign we’ve had 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.
Serving the unbanked has been the key to success for mobile money services in the rest of the world, but with most of the US population having a bank account, the unbanked population here has been largely ignored until now. The two major existing mobile money services in the US – ISIS and Google Wallet – are both focused on people who already have bank accounts, and are arguably solutions to a problem that doesn’t exist. On the other hand, T-Mobile’s Mobile Money service isn’t really a mobile money service at all – it’s a banking service that happens to be owned by a mobile carrier. Making purchases still involves a plastic Visa card and not the mobile device. That may be a technicality, but it’s actually somewhat brilliant in that it avoids all the technical issues associated with most mobile money services. And there’s a good-sized target market for these services: the FDIC’s latest estimates showed that 8.2% of US households, representing about 17 million adults, don’t have a bank account, and these customers are prime candidates for T-Mobile’s service. Another 51 million adults live in households that have bank accounts but regularly use check-cashing, payday loan or other non-bank financial transactions which could be eliminated with T-Mobile’s service. T-Mobile has in the past served many customers in the sub-prime credit segment, since it has a high proportion of prepaid customers, although its Un-Carrier strategy has boosted its postpaid base. As such, T-Mobile’s customer base is a better fit with this segment of the population than the big three carriers, which sell mostly contract services to people with good credit.
The challenge with this service is that there is no obvious short-term revenue opportunity for T-Mobile. The services are all free to T-Mobile customers, who are the target market, except for the sort of fees T-Mobile itself has to pay and will pass on to consumers. This has to be seen today as strictly a competitive differentiator and not a revenue opportunity, though I would expect T-Mobile to offer a broader range of financial services over time, and perhaps try to make some money on those. For now, though, this is another marketing effort from T-Mobile that will cost money rather than make money for the company.