New mobile competitors are calling, and they want your lunch.
How many nibbles can a credit union absorb before its sustenance is devoured by hungry competitors? That’s the question financial tech guru Jim Marous, senior vice president, business development at New Control, asks.
“You can’t sit there and do nothing. The marketplace is changing completely. You need to take action to defend yourself,” Marous said.
That is why Marous pointedly asks: Does T-Mobile want to steal 30% of your customers?
Mobile Money, introduced by T-Mobile in late January, is the immediate threat. A mobile app coupled with a prepaid Visa card, the product does not presently involve paper checks but, beyond that, it can do much of what a conventional share draft account can do.
The carrier’s slogan is compelling: “Bring your money to T-Mobile, and free yourself from checking fees at the bank.”
For starters, T-Mobile said it is going after what it claims are 70 million Americans who are unbanked or underbanked. There are competitors in the niche, such as American Express’s BlueBird, but some in this group are credit union members.
And, Marous said, their continued loyalty cannot be taken for granted.
Note: In a Miami trial, T-Mobile said it was surprised that some 40% of the Mobile Money users were credit-worthy, so-called post-paid accountholders (as opposed to prepaid). These are individuals who well could be credit union members with share draft accounts, Marous said.
Why would they leave? For one thing, basically no fees.
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The other allure is that Mobile Money enters the market as a robust, mobile first product. Built in alliance with Delaware-based The Bancorp Bank, which provides private label banking services for numerous partners, and Blackhawk Network, a leading prepaid card, T-Mobile’s Mobile Money is feature rich.
Customers get fee-free withdrawals from 42,000 Allpoint ATM locations, $0 reload fees at T-Mobile stores, $0 monthly maintenance fees and $0 purchase fees. And, because the backbone is a Visa prepaid card, merchant acceptance is broad.
Deposits will be FDIC insured, via Bancorp.
For Mobile Money customers, the 3,000 T-Mobile stores will function as a kind of branch. Safeway, with around 1,300 stores mainly in the central and western U.S., has said it will come aboard to support the T-Mobile financial services product.
T-Mobile, incidentally, is on record saying it has no interest in making a profit from this product. What it hopes to gain instead is tighter customer loyalty, which is no small thing in an industry where “churn” - customer loss - is a plague on profits.
The other T-Mobile win with Mobile Money: it is loudly portraying itself as the consumer’s friend.
“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,” John Legere, president and chief executive officer of T-Mobile, said in a prepared statement.
Isn’t T-Mobile an also-ran in wireless? Yes, it is the fourth biggest carrier in the U.S. (with 45 million subscribers, compared to Verizon’s leadership position with 118 million), but Wall Street rumors are plentiful that a merger of T-Mobile with No. 3 carrier Sprint (55 million customers) is in the works.
Even if that comes to nothing, T-Mobile is majority owned by Deutsche Telekom, Germany’s leading telephone company, with annual revenues in the vicinity of 58 billion Euros (roughly $80 billion).
The big question is will Verizon and AT&T pile on and offer financial services to their consumers? Both, along with T-Mobile, already are involved with Isis, the NFC-based tap and pay technology.
Experts are hanging back on offering predictions about what the two biggest carriers will do.
As for Sprint, it has had a financial services product very similar to T-Mobile’s for some months. Called Boost Mobile Wallet, it had pilots in Los Angeles and New Jersey early in 2013, and by year end, it had rolled out nationally. It is offered to customers of Boost, a Sprint prepaid brand.
But Sprint is beginning to make this Mobile Wallet (dubbed Sprint Money Express) available to Sprint postpaid customers, said Kevin McGinnis, vice president of development & technology at Pinsight Media+, a mobile media company associated with Sprint.
McGinnis also said the company was looking at rolling out a version of the wallet to its Virgin Mobile customers, another prepaid offering. However, no timetable has been set for that.
Like T-Mobile’s Mobile Money, the Boost offering is built around a Visa prepaid card and a mobile app. Add the T-Mobile and Sprint offerings together and in the vicinity of 100 million consumers have possible access to a mobile wallet via their wireless carriers.
Should that cause indigestion for credit union executives?
McGinnis is noncommittal on this score, saying Sprint did not enter the Mobile Wallet space to disrupt traditional financial institutions, but rather to make its customers’ lives easier.
“Our Mobile Wallet customers are used to standing in line,” he said, pointing to check cashing stores and also to businesses that handle foreign money transfers.
“We are giving them an improved experience with mobile,” he added.
For instance, he indicated that mobile remote deposit capture lets the customer deposit a check with a few taps on a phone screen, no lines involved.
As for whether Sprint is looking for profits from its Wallet, McGinnis said “it’s early to say we will accrue financial benefits. It may improve [customer] retention in a no contract world. We don’t need to look at this as a profit stream. This will generate greater loyalties, and it will unlock future revenue streams.”
So, now should credit union executives be scared? Marous, for one, thinks so.
“Credit unions just aren’t keeping up with new technology, that’s the problem,” said Marous.
And he made it plain that to stay in the race, “you have to keep pace, you need to keep innovating. Most credit unions aren’t.”