John Legere, president and CEO of T-Mobile, has a great line in coming late to the party while looking like the host. The company’s mobile money initiative is its latest “innovation” and is a great example of T-Mobile as a slow-follower that nonetheless looks good. There are important lessons in here, how you speak about innovation being one of them.
Leger says of mobile money:
T-Mobile is becoming a bank. The initiative, “Mobile Money,” basically transforms T-Mobile into a bank like Chase or Bank of America. Its bright pink retail stores are your branches; T-Mobile employees are now tellers. After a nominal cash deposit, T-Mobile will give you a free checking account and mail you a Visa debit card.
It is an interesting move by them, particularly after US Telcos have been the reason for holding back mobile devices as payments’ instruments by blocking access to the SIM for NFC. They waited too long, now the industry has HCE, an NFC standard that doesn’t need the Telco, allowing startups, banks, etc to issue Over The Air payments for NFC. I’d suggest T-Mobile’s move is actually an attempt to learn what payments are about before everyone eats their lunch. That being said, their offering is VERY basic, not sure of the real value. It’s exactly the same at GreenDot’s product which now has over $800bn in deposits
The telecom provider is using the Bancorp Bank to provide a package of very basic banking services: a prepaid Visa card; a mobile app customers can use to deposit checks, pay bills, transfer funds and reload cards; and access to AllPoint’s partner network of 42,000 ATMs to withdraw cash.
With this offering, T-Mobile is following in the footsteps of GreenDot (with its GoBank account) and Walmart (with its Bluebird account), as well as Serve from American Express, Moven, Simple and Plastyc. All are targeting the underbanked – the 68 million Americans who don’t have full-service bank accounts – with low fees and mobile apps. T-Mobile is the second telecom carrier in the U.S. to enter this sphere — Sprint was first with Boost Mobile, which offers bank-esque services through mobile devices.
It is 20 years now since people in the mobile sector started to talk about mobile carriers as the next wave of banks so this activity has been a long time coming. It is nearly a decade since M-Pesa began offering mobile banking and as Scott points out startups like GreenDot are now well established.
But there is strong logic in Legere’s way of talking up his new initiatives. The T-Mobile (US) stock price has been on a roll. Yes, some of that is on the back of Sprint merger talk but it’s also to do with how the markets are currently evaluating the mavericks.
Gurufocus says of Sprint and T-Mobile:
AT&T and Verizon are expected to generate over $83 billion of combined free cash flow between 2013 and 2015, while Sprint and T-Mobile are expected to burn an unhealthy $10 billion of cash together as they cede market share.
Sill, that share price si headed up. There’s a reason for that. In a recent study of innovation across 5,000 companies, using data and analysis provided by MarketPsychData we found that innovation reputation is closely correlated with stock price rises, 12 months out. What that means is, the more you can talk up a reputation for innovation, the better the stock price performance, at least over 12 months.
But that relationship only holds true for the top 10% or so of companies, ranked by innovation reputation. That means you have to really talk up the innovation angle and become a big booster for your innovation efforts.
There is a double gain for T-Mobile. The stock price benefits and they are able to make their “innovations”on the back of well trusted technologies and strategies imported from other sectors (like paying for account switching). Maverick, it is not. Successful, certainly for now.