Mobile phone firm O2 to call into banking

Wednesday, 15 July 2009 11:45

Mobile phone operator O2 is to step into banking services.

In a partnership with NatWest, the firm is launching two fee free pre-pay Visa cards to its 16.3 million customers, which could herald the start of a wider move into mobile banking.

The UK personal finance market is now awash with names not traditionally associated with banking - such as motoring organisations and supermarkets - but this is a first for a mobile provider.

Ronan Dunne, O2 UK chief executive, said: "O2 Money will represent a launch pad into a wide range of mobile banking services.

"We believe that we are at the start of a journey towards the coming together of phone and wallet and we intend, through O2 Money, to be at the forefront of this trend. This launch represents an important step towards O2 becoming a leading service provider with mobile at its core."

Helen Page, managing director of innovation at NatWest, said the new cards would "really raise the bar, in terms of the added value customers will get from the interaction with their mobile phone".

At a time when banks are struggling to come out of the recession, the decision from O2 to enter banking has been described as bold.

Kevin Mountford, head of banking at moneysupermarket.com said: "It is a bold move for a non-traditional financial services brand to enter the banking sector, especially at a time when customer confidence is so low; it will be interesting to see how O2's customers take to the prepaid cards.

"It is also surprising to see NatWest partner with a white-labelled solution at a time when most banks will be looking to cut their third party ties."

He added the Cash Manager and Load & Go cards from O2 Money seemed to be attractive product offers aimed at two distinct segments - those that are in need of better money management and younger users that don't fit into the typical banking model.

Louise Bond, personal finance expert at uSwitch.com, welcomed the cards for hitting the market at the right time.

"Historically, pre-paid cards have been geared towards people with dubious credit records, who are unable to secure even a basic bank account," she said.

"However, the fees and charges that are generally levied on these cards have always been hefty, particularly given that they are designed to help people in financial distress."

She explained in some cases the annual cost of prepay cards could be £141 - with some charging for cards upfront, usage fees, cash withdrawal fees and monthly subscriptions.

"These fee free cards could be the perfect solution for people that either struggle to manage a monthly budget or just want to ring-fence their spending money away from the money spent on their mortgage and bills," Ms Bond said.

"Consumers cannot incur penalty fees or charges as they can only spend the balance of the card, and will be updated via their mobile every time the balance changes."

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