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What do cell phones and checking accounts have in common?
Not much, but that won't stop T-Mobile (NYSE: TMUS ) from rolling out a new service called "Mobile Money," a free-to-use checking account for T-Mobile subscribers.
Mobile Money users will find all the functionality of a basic checking account -- a debit card, fee-free deposits, 42,000 free ATMs, and mobile check deposits -- just by having a T-Mobile cell phone plan.
Here's why T-Mobile wants to be your banker.
1. Bank accounts are expensive, and hated
Most big banks now charge routine monthly service charges just to keep a checking account open. Customers hate the new fees, but they have few alternatives. Other pre-paid card companies like Green Dot (NYSE: GDOT ) charge monthly maintenance fees of $5.95, plus up to $4.95 for each deposit. T-Mobile doesn't charge a fee for opening a Mobile Money account or for making deposits via smartphone or T-Mobile retail stores. Should Mobile Money gain traction, Green Dot and other fee-centric pre-paid card issuers have plenty of reason to worry about their business model.
2. 10% of households don't have a checking account
A 2012 survey by the FDIC found that as many as 10% of American households don't have a checking account. That presents a big opportunity for a company to provide a basic personal finance service and, hopefully, a new cell phone plan at the same time.
3. T-Mobile has the infrastructure
T-Mobile has thousands of American retail locations and associates who speak to millions of customers each year. Consider Mobile Money as a unique upsell. T-Mobile salespeople can pitch Mobile Money each time a current or new subscriber walks through the door.
Let's face it: It's much easier to pay your cell phone bill when you have a checking account. A banking service allows T-Mobile to collect payments from the unbanked more easily by providing them with the free tools they need.
5. Customer stickiness
Remember how I said Mobile Money is free? Well, that comes with a limitation: You have to be a T-Mobile subscriber. If you drop your T-Mobile plan, you'll encounter $5.00 monthly maintenance fees for Mobile Money, along with a bevy of new deposit charges and ATM fees. Customers who use Mobile Money will think twice about moving to another cell phone provider for this reason.
6. Store traffic
You can't sell mobile phones without getting people in the door. Fee-free deposits at T-Mobile locations will keep customers coming back, week after week, year after year. And they'll have to avoid the temptation of upgrading their plan (or their phone) each time they walk through the door.
7. Customer goodwill
I can't think of a better way to build rapport with customers than free them from the service they hate most: their bank. T-Mobile has a unique proposition in that it can save customers hundreds of dollars per year in overdraft fees -- savings that T-Mobile would prefer customers' spend on their cell phone plans.
Can T-Mobile beat the big banks?
Mobile Money is designed more as a service than a bank. The product is built around white-label bank provider The Bancorp, which will keep T-Mobile out of, say, the mortgage business, for quite some time. The biggest losers from Mobile Money are other pre-paid card providers -- companies like Green Dot that don't have a competitive reason to offer completely fee-free pre-paid debit cards to their customers.
Banking's $20.8 trillion secret
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