The Bancorp Bank, which provides the bank charter behind "neobank" media darlings such as Simple, added a major distribution partner to its belt this week: T-Mobile.
The partnership positions the bank to acquire customers quickly by distributing its new Mobile Money prepaid card and associated mobile app at T-Mobile's physical stores and websites and through aggressive carrier-branded marketing campaigns.
"The key for us is the partners we elect to work with have significant distribution," says John Barbella, senior vice president at The Bancorp.
Surely, its newly announced T-Mobile partnership fits the bill. The carrier has some 45 million customers and about 3,100 retail locations an advantage the prepaid product would have over Simple, Moven and others.
"T-Mobile and other telcos offer storefronts all over the country," says Jennifer Tescher, president and chief executive at the Center for Financial Services Innovation. "It's a higher-touch channel for sales and service, which is a challenge in the prepaid arena."
Still, Barbella says The Bancorp Bank does not have a projection on customer acquisitions through the new prepaid card. It does intend to target the underbanked with Mobile Money, a product that lets customers load up to $10,000 onto their card and app. The app also lets customers pay bills, deposit checks with a camera, and send money to fellow T-Mobile subscribers, among other conveniences typically associated with checking accounts.
T-Mobile, meanwhile, positions Mobile Money as a way for existing subscribers to save on fees such as check cashing charges.
The on-boarding process is the same for subscribers and nonsubscribers. All will need to provide personal information like Social Security number, name, address, and date of birth. The information must be provided prior to preloading the card or taking cash off the card. "There is no shortcut in place to leverage the information that T-Mobile has about the customer," Barbella says.
Mobile prepaid apps have been surfacing in recent months as a means for companies to vie for the nation's 68 million underbanked and unbanked consumers.
"We have seen these types of programs out there," says Barbella, citing programs from Walmart and American Express as two examples.
What's intriguing about Mobile Money is that a carrier could tout the services and provide an access point that could have advantages over a bank. People own smartphones "regardless of their economic standing," says Barbella. "[Carriers] have a much more diverse audience."
T-Mobile has already trained its in-store employees on the product and will soon roll out a video touting Mobile Money services. Then, T-Mobile plans to sell its card through partner merchants in the coming months. For instance, Mobile Money will be available at Safeway stores in February.
For to-be Mobile Money customers, the in-store experience works like this: 1. Pick up a card at a T-Mobile store and pass it to a sales clerk; 2. Provide personal information and then load $20 to $500 in cash onto the product (after registering the card, a person can load up to $10,000); and 3. Activate the card by phone, online or through the Mobile Money app, and then register it to use services like bill payment and direct deposit.
Mobile Money expands the financial services T-Mobile offers customers, which already include installment loans for handsets. T-Mobile declined to comment on whether it will expand its financing options.
Eventually, Mobile Money could pressure consumers to consolidate accounts, should they have both bank and carrier accounts but that's a ways off.
"It will appeal more to the underbanked, and in time, it could cascade with the younger generations," Barbella says.
Jim Marous, senior vice president of corporate development at New Control, echoed those sentiments in a blog post on Bank Marketing Strategy published Thursday.
"While the talk initially is that the product is for those who have been 'left behind by the banking system,' the reality is that the target audience could expand well beyond its already surprisingly large 'underbanked' base to include the digital natives that every bank wants to serve," writes Marous.
In recent months, large banks have opted out of offering prepaid services while newer bank entrants coming forth have been few and far between. "We believe the market is fairly small," Barbella says. "[Prepaid] is difficult to enter."
Mobile Money could help T-Mobile, and in turn The Bancorp, make customer relationships stickier because of digital features like bill pay, direct deposit and mobile deposit and other services that motivate customers to reload the cards.
"The biggest challenge we face in prepaid is retention," says Barbella. "If you use bill pay, you will stay much longer than if you don't."
Mobile Money also offers the latest example in a larger story of how brick-and-mortar continues to fade into the banking background for some consumers. "Banking is a verb rather than a noun," says Barbella. "It's a shift that we are starting to see. Go where it's most convenient for me. I may have a cell account but not a banking account so I go there. If I have both: do I move one to another?"