T-Mobile TMUS, +1.78% doesn’t just want to be a company that provides you with cell phone service and cable television. It also wants to be your bank.
T-Mobile is rolling out a mobile-banking service, called T-Mobile Money, nationwide, the company announced Thursday.
The bank accounts are being offered through a partnership with Customers Bank’s CUBI, -2.58% digital banking subsidiary BankMobile. (T-Mobile is effectively marketing checking accounts.) But experts say Chase JPM, -0.73% Citi C, -0.97% and Bank of America BAC, +0.00% won’t become concerned anytime soon.
‘Banks figured out a long time ago that customers are a lot stickier if connect direct deposit, a debit card and online bill payment to a checking account.’
The accounts have no monthly, transfer or overdraft fees and no minimum balances. Consumers will receive a debit card, which can be used at no cost at 55,000 in-network Allpoint ATMs. T-Mobile won’t charge its own fees when account holders use out-of-network ATMs.
The checking accounts will offer an annual percentage yield of 4% for balances up to $3,000. Balances in excess of that amount will earn 1% APY. The accounts are insured by the Federal Deposit Insurance Corp.
A wide range of financial services firms have also decided to get into the banking business, from digital investment firm Wealthfront to student-loan lender SoFi.
Also see: Why a T-Mobile-Sprint merger could be ‘devastating’ for consumers
Not all of these roll-outs have been successful of course. Robinhood, the stock trading platform, erroneously claimed that its planned cash accounts would be insured. They were not, and Robinhood stopped signing up consumers for the product.
Amazon AMZN, -0.17% has long been rumored to want to get into banking services. In 2017, it rolled out a service called Amazon Cash that enables people to use a gift card to add money to their Amazon account. Experts said it’s part of an effort to attract more unbanked or underbanked customers.
So why are so many types of companies offering banking services?
A banking customer is a long-term customer
“It makes the relationship stickier,” said Greg McBride, chief financial analyst with personal-finance website Bankrate. “Banks figured out a long time ago that customers are a lot stickier if connect direct deposit, a debit card and online bill payment to a checking account.”
‘Banks figured out a long time ago that customers are a lot stickier if connect direct deposit, a debit card and online bill payment to a checking account.’
“Sticky” implies that it’s difficult for customers to switch to a rival company. A 2017 study from Bankrate and Money Magazine MDP, -0.20% found that the average U.S. adult had the same primary checking account for 16 years, and more than a quarter of adults had the same account for over 20 years.
For a company like T-Mobile then, converting a wireless subscriber into a checking account holder would then reduce the likelihood that they would switch their cell phone plan to AT&T T, +0.25% or Verizon VZ, +0.45%
“We’ve proven that when we invest in our customers, they are happier and stay with us longer,” a T-Mobile spokesman told MarketWatch.
Companies want access to your data
Bank accounts are rich with information about consumer habits. That one account provides a lens into how much money a customer makes, where they spend that money and whether they’re trying to save that money. “If you’re in any consumer-facing business, he who has the most data wins,” McBride said.
Analysts argued this same logic underpinned Apple’s AAPL, +0.36% decision to offer a credit card with Goldman Sachs GS, -0.96%
T-Mobile looks to the ‘unbanked’
Like the Amazon Cash program, T-Mobile Money appears designed to appeal to Americans who don’t have a bank account. For these people, their wireless bill may be one of the most important ones they pay each month.
Read more: 4 biggest mistakes most people make with credit-card rewards
But like many of the new banking services, there are some catches. For starters, the 4% interest may sound appealing, given that big banks tend to offer less than 1% APY. A customer would only earn $125 on a balance of $3,000 as anything above that only receives a 1% APY.
Smaller community banks and credit unions often have even more competitive rates for their online checking accounts, said Brian Karimzad, co-founder and head of research at MagnifyMoney. For instance Consumers Credit Union offers rewards checking accounts with no fees or minimum balance requirements that earn 5.09% APY.
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