In late January, T-Mobile surprised everyone when it unveiled its newest service, “Mobile Money,” a line of Visa-branded prepaid debit cards consumers can use and load with access to 42,000 free in-network ATMs nationwide and zero overdraft and maintenance fees.
To contextualize T-Mobile’s latest move, examining their shifting brand as a cellular carrier will be vital, as we analyze the limitations of their financial services since their expertise lies in a non-financial sector. First, we start by putting their transition into perspective.
T-Mobile vs. banks
Though T-Mobile’s foray into the banking realm was met with surprise, T-Mobile is hardly the first non-bank entity to launch a prepaid debit card, and it is now one of several “neobank” competitors, which include Simple, Moven, GoBank, and AmEx Serve.
A 2012 survey conducted by the FDIC found that 28.3 percent of U.S. households were “unbanked,” meaning that just over 28 percent of households have ventured outside mainstream banking for services like check cashing, money orders, and payday loans.
However, T-Mobile’s vast customer base and distribution network as well as marketing strength are reasons why the launch of Money Mobile has made a splash, steadily steering their brand into uncharted territory and pioneering a hybrid of new features and services for phone subscribers as well as financial consumers.
T-Mobile wasted no time in announcing new services and features that have grown their customer base, such as their Un-Carrier 4.0 Initiative, which offers to pay up to $350 in early termination fees for individuals and families who switch from other carriers to T-Mobile, as well as reimburse new customers up to $300 for trading in their old phones.
According to some industry experts, T-Mobile’s Mobile Money should worry bankers. The card’s perks as well as the company’s established customer base represent a very real threat to traditional financial intuitions, as T-Mobile has introduced an attractive Visa card package that enables customers to bank without using a real bank.
Here is what Mobile Money offers:
- 42,000 in-network ATMs with no fees (out-of-network ATMs cost $2 per withdrawal, plus the fees the ATM operator charges)
- Free replacement for loss or stolen cards
- No overdraft or maintenance fees
- Free activation
- Free monthly maintenance
- The ability to keep money in a checking account and make deposits as well as pay bills
- A smartphone Mobile Money app available for iPhone or Android phones that has helpful banking features — customers can take pictures of checks through the app to move money into their checking account, pay bills, add money, view one’s account, transfer funds, and even locate ATMs.
- Free bill payments and free transactions to other cardholders
- The ability to deposit cash at T-Mobile stores
- Direct deposit
- The ability to have your tax refund deposited directly to the card
- The ability to withdraw cash back at the register through retailers, just like with a bank debit card
Is safety an issue?
Banks do not inherently provide extra safety coverage when compared with non-bank competitors, such as T-Mobile. In fact, in Mobile Money’s contract, there are two sections on customer protection, “Our Liability for Failure to Complete Transactions,” and “Information About Your Right to Dispute Errors.” Here are the most noteworthy points:
- “If we do not properly complete a transaction from your Card on time or in the correct amount according to our Agreement with you, we will be liable for your losses or damages.”
- “In case of errors or questions about your electronic transactions, call (866)306-9636 or write to… if you think your statement or receipt is wrong or if you need more information about a transaction listed on the statement or receipt.”
- “You must contact us within one hundred twenty (120) days after the transfer allegedly in error was credited or debited to your Card Account. You may request a written history of your transactions at any time…”
- “We will determine whether an error occurred within ten (10) business days after we hear from you and will correct any error promptly. If we need more time, however, we may take up to forty-five (45) days to investigate your complaint or question. We will tell you the results within three (3) business days after completing the investigation.”
In general, customers and experts have responded positively regarding Mobile Money’s customer service to respond promptly and urgently to fraud or errors. Of course, well-established banks have more experience dealing with these sorts of issues, but there is no reason to feel unsafe when “banking” with T-Mobile.
Are there disadvantages?
Though T-Mobile is tantalizing potential customers with its low-cost pricing strategy, there are a few downsides to the new Mobile Money card. For instance, customers must have a minimum balance of $125 in order to use the card at the gas pump.
Additionally, T-Mobile is advising customers to be wary of using Mobile Money for restaurant, hotel and rental car payments, because these types of purchases are ones that may require a hold on a large percentage of funds.
Most importantly, T-Mobile customers get bigger breaks on their prepaid cards than customers of other carriers. For example, non-subscribers are charged fees for monthly maintenance (accounts with less than $500), in-store cash deposits, lost or stolen cards, international transactions, and ATM balance inquiries. All these charges make it much less appealing to use T-Mobile as a financial services provider if you aren’t a T-Mobile phone customer.
In general, Mobile Money looks to be a promising contender as a prepaid debit card offering many free and useful features that competitors have yet to match, though non T-Mobile customers do not receive as many perks.