T-Mobile enters mobile banking with T-Mobile Money
T-Mobile recently launched its new mobile banking service, T-Mobile Money. In their press release, T-Mobile Money takes on big banks, contrasting the fees and low interest of those accounts to its own fee-free, 4.00% APY mobile banking account. T-Mobile is hoping to disrupt the banking industry, attract unbanked and underbanked consumers, and most importantly, add to its mobile ecosystem to drive customer stickiness.
Image source: Business Wire
T-Mobile Money’s best APY is only available to existing customers, and on balances of up to $3,000, provided there’s a monthly deposit of $200. Customers earn 1.00% APY on balances above $3,000. The service is available to non-T-Mobile customers but they are only eligible to earn 1.00% APY.
Tried-and-true disruptor approach
T-Mobile has built an image as a disruptor in the wireless space, systematically identifying and addressing common consumer complaints with the industry, and building hype around each improvement. This approach has been largely successful for the self-proclaimed “Un-carrier.” According to the recently published American Customer Satisfaction Index (ACSI) Wireless Service and Cellular Telephone Report 2018-2019, T-Mobile has the most satisfied customers of the US mobile network operators. ACSI cited T-Mobile’s value and ease of billing as key drivers of its customers’ satisfaction. In fact, T-Mobile has experienced 24 consecutive months of greater than 1 million total customer net additions.
Banking on its reputation
T-Mobile Money’s marketing consistently leads with disruptor messages, such as “Banking. Just Better.” The approach appears to be working, as positive discussions mentioning T-Mobile Money on Twitter and Instagram have created interest in the new banking service.
- 82% of tweets and Instagram posts about T-Mobile Money are positive.
- 11% of mentions are negative, with some complaints that it takes too long to process transfers.
Source: Infegy/Mintel: Twitter and Instagram mentions of “t-mobile money” or “tmobile money” (excluding mentions from @tmobile) 04/15/19 – 06/06/19
More ecosystem than disruption
Despite its marketing emphasis on disruption, T-Mobile Money is more about building a mobile ecosystem that T-Mobile hopes its customers will buy into and never want to leave. T-Mobile Money adds to a gradually expanding series of value-added perks and optional services built around mobility. With wireless service at its heart, the ecosystem now includes benefits such as free Netflix, taxes and fees rolled up, T-Mobile Tuesdays freebies and more. T-Mobile also branched into pay TV with its TVision service and is expected to announce a streaming video service this year, along with a fixed wireless product.
T-Mobile Money’s structure (with the high APY for wireless customers only) and its marketing approach speak to the emphasis on existing customers. After a brief awareness push during the week of April 22, which consisted primarily of direct buys on washingtonpost.com, T-Mobile significantly reduced online ad spending and focused more attention on email. So far, it has sent two big email waves (4+ million each) to notify customers about T-Mobile Money, one coinciding with the awareness ramp up in April, and the other a month out, at the end of May.
T-Mobile already enjoys a low postpaid phone churn rate of 0.88%. By adding valuable services like T-Mobile Money, along with all of its other perks, T-Mobile is hoping to continue increasing customer loyalty. Additionally, while it seems unlikely that T-Mobile Money would be the sole motivator for consumers to switch to T-Mobile, its availability as part of the larger ecosystem could make T-Mobile an attractive alternative to other carriers.
Opportunity for the unbanked or underbanked
It seems unlikely that consumers who are happy with their current bank would switch to T-Mobile Money, despite the attractive APY. Savvy consumers will weigh the 4.00% APY on balances up to $3,000 against the benefits they are already receiving from their current bank, such as rewards on debit purchases. Generally, consumers do not switch banks often. A recent JD Power study found that only 4% of consumers switched their primary bank in 2018, which was down from 8% in 2016.
While T-Mobile Money may not appeal to consumers who are happily situated with their current bank, it could be an attractive option for those in need of a bank account who are limited by options or circumstances to obtain one. While a $200 monthly deposit is required for the 4.00% APY, there is no such requirement to maintain an account with a 1.00% APY. With no monthly transfer or overdraft fees, and fee-free, in-network ATM usage, the service may appeal to the unbanked and underbanked, regardless of whether they are T-Mobile customers or not.
Challenger banking providers, also referred to as neo-banks, are popping up left and right. Banking providers such as Goldman Sachs and Square come from outside the traditional retail banking space, while others, such as Chime and Aspiration, are pure startups backed by heavy venture capital investments. T-Mobile Money is certainly the first telecom entrant, but it won’t be the last to cross industry lines.