Why T-Mobile rolled out a boring financial account
Last week, T-Mobile launched a new banking service called T-Mobile MONEY. I thought it would be a mobile money account, operated by a mobile service provider. Do you remember Isis? The US mobile wallet platform funded and created by AT&T, T-Mobile and Verizon, not the terrorist group. That’s what they decided to do five years ago. But instead, T-Mobile is launching a low-cost, mostly digital checking account, with the help of a partner bank and bashing financial institutions in the process. Like so many other branchless banking options, T-Mobile uses a high interest rate (4% on the first $3,000) to attract attention, customers, and “hot” money. Mercator Advisory Group recently published a report on Digital banks only and examines their impact in the United States
Market watch published an article that seeks to put into perspective why T-Mobile would introduce such a mundane product. It is less about a desire to outperform traditional financial institutions than to get closer to their customers:
So why do so many types of businesses offer banking services?
“It makes the relationship stickier,” said Greg McBride, chief financial analyst at personal finance website Bankrate. “Banks realized long ago that customers are much more sticky if they connect direct deposit, debit card and online bill payment to a checking account.”
“Sticky” implies that it is difficult for customers to switch to a competing company. A 2017 study by Bankrate and Money Magazine found that the average American adult had the same primary checking account for 16 years, and more than a quarter of adults had the same account for more than 20 years.
For a company like T-Mobile, converting a wireless subscriber to a current account holder would then reduce the likelihood of them switching their cell phone plan to AT&T or Verizon.
“We’ve proven that when we invest in our customers, they’re happier and stay with us longer,” a T-Mobile spokesperson told MarketWatch.
Bank accounts are rich in information about consumer habits. This single account helps determine how much money a customer makes, where they spend that money, and if they try to save that money. “If you’re in a consumer-facing business, whoever has the most data wins,” McBride said.
Analysts have argued that this same logic underlies Apple’s decision. offer a credit card with Goldman Sachs.
Preview by Sarah CaveDirector, Debit and Alternative Products Advisory Services at Mercator Advisory Group