New T-Mobile Prepaid Card Presents Opportunities and Risks for Blackhawk Network

It’s best known for its Gift Card Mall displays of retailer gift cards and other prepaid cards in grocery stores, but prepaid card services provider Blackhawk Network Holdings Inc. is a force in general-purpose reloadable (GPR) prepaid cards. It had a GPR business even before 2010, when it launched its PayPower Visa card. Now Blackhawk’s GPR business could be in for a boom thanks to a deal to distribute mobile telecommunications provider T-Mobile US Inc.’s new Mobile Money by T-Mobile program centered on a Visa prepaid card and a smart-phone app.

Bellevue, Wash.-based T-Mobile, a subsidiary of Germany’s Deutsche Telekom AG, is the nation’s fourth-largest mobile carrier, with about 45 million customers. T-Mobile, which bills itself as the “un-carrier” to differentiate itself from larger rivals Verizon Wireless, AT&T, and Sprint, is no stranger to prepaid phone plans—its MetroPCS prepaid unit had 9 million customers at the end of 2012, according to the company’s annual report for that year.

Teri Llach, Pleasanton, Calif.-based Blackhawk’s chief marketing officer, wouldn’t predict her company’s cardholder goals for the program, but says it is a big opportunity. “It’s very exciting,” Llach tells Digital Transactions News. “This product has such great features for the T-Mobile customers.”

Issued by The Bancorp Bank, the prepaid card and companion mobile app are being billed by T-Mobile as an alternative to standard checking accounts. The card has no activation or monthly fees and provides no-cost withdrawals from the 42,000 ATMs in Cardtronics Inc.’s surcharge-free Allpoint ATM network. Cardholders can pay bills through ATMs, enroll in direct deposit, and deposit checks through remote deposit capture using their phones.

T-Mobile is aiming for a market of what it says are 68 million American adults who have few or no traditional banking accounts and often use high-cost financial outlets such as check cashers, whose services can cost a household hundreds of dollars a year. “It’s ridiculous that families, especially those who can least afford it, have to pay so much for basic check-cashing services that many of us take for granted,” Mike Sievert, chief marketing officer for T-Mobile, said in a statement. “Mobile Money levels the playing field to put money back in consumers’ pockets for important things–like bills, groceries, or vacations.”

But Mobile Money also puts T-Mobile into competition with American Express Co.’s Bluebird and Serve prepaid programs, prepaid card program manager Green Dot Corp.’s GoBank mobile financial service, and others that are all seeking business from so-called un- or under-banked consumers who for whatever reason shun traditional banks, notes prepaid industry researcher Ben Jackson, a senior analyst at Maynard, Mass.-based Mercator Advisory Group Inc. There are other risks, too.

“There are lots of people that are unhappy with their phone provider,” Jackson says. “People will ask, ‘Do I want to tie up my financial life with my phone provider?’”

Still, Jackson says Blackhawk, which also owns the REloadit reload network, knows its way around GPR territory, and each new cardholder will add scale to its platform. “It’s a way for them to take the experience they gained with their own PayPower card,” he says. “It could be a logical extension for them. Prepaid is all about volume.”

Llach says the demographics of the prepaid market are changing, and the pool of potential customers for T-Mobile and Blackhawk is substantial. “Prepaid debit is becoming much more adopted by [the] general population,” she says. “That overall category is becoming much more mainstream.”

Blackhawk, majority owned by supermarket chain Safeway Inc., will supplement T-Mobile’s advertising for Mobile Money with its own marketing effort that could include social-network and digital advertising, according to Llach.