Canadian mobile carrier Rogers has filed to become a bank under Canada’s federal Bank Act, which will allow it to pursue more mobile payment services and a “niche credit card opportunity” for consumers, a Rogers spokesman told CBC. While it may look odd at first, perhaps banking could be the next stop for carriers. They already handle a lot of payments from consumers and have long-term billing relationships with users.
Rogers isn’t looking to build full-service physical banking locations, but will try to follow more in the footsteps of retailers that offer their own credit cards. But the move also puts Rogers closer to the action on mobile payments and in a better position to take a share of the revenue from payments made over cell phones. The new bank will be called Rogers Bank. Rogers is also reportedly looking to launch its own near field communication digital wallet soon with Visa and TD Bank.
Mobile payments, as we’ve noted, are poised become a $670 billion market by 2015, so it makes sense for carriers to want to benefit from this opportunity in emerging mobile wallets, especially as they get crunched on voice and SMS revenue and deal with exploding data network costs. Carriers in the U.S. are also looking at playing a part in mobile payments, including Verizon, AT&T and T-Mobile, which have banded together to form Isis, an NFC digital wallet platform. But after making an attempt to build their own payment network, the carriers opened to more credit card and banking partners that merchants were more familiar with.
Rogers isn’t the only carrier looking in this direction. Telefonica O2 UK also filed for an e-money license with the UK Financial Services Authority in February to become a payment service provider as part of a larger push into mobile payments. This would allow O2 to offer pre-paid accounts for peer-to-peer payments or to pay merchants for things using contactless NFC applications. In Asia, carriers like Docomo have become banks or like SK Telecom have partnered with banks. And other telcos in third-world countries offer their customers mobile payment services.
Mobile analyst Chetan Sharma said the move makes sense for Rogers and others because all carriers are trying to figure out where their next revenue stream is coming from. He said building a banking service can not only bring in revenue but also provide more services for consumers. He believes Rogers will be looking to integrate its banking service into a digital wallet that allows people to pay through their handset.
Rogers “is trying to see if they can extract more value by keeping a portion of these transactions and another impact would be to reduce churn, keep consumers a few months longer and increase the lifetime value of users,” he said.
He said the challenge for Rogers will be in seeing how serious it is in building this business, which will take a significant investment to succeed. He said the carrier will also need to work out its relationships with other banks. Sharma said it’s unlikely U.S. carriers will follow in Rogers’ footsteps because of the added scrutiny these days on banks and the necessary investment it would take to get such a service going.
It’s unclear how consumers will take to this option. Operators historically have had poor consumer approval ratings, lower than banks. So it’s not certain that operators would be trusted as a financial institution. But increasingly, consumers are putting more charges on to their cell phone bills through services like Zong, Boku, Billtomobile and others. That highlights the value the cell phone operators play because they have an ongoing billing relationship with consumers. Expect more carriers to find ways to get in on the mobile payments action. You can hear more about mobile payments at GigaOM’s Mobilize conference on Sept. 26 and 27 in San Francisco.
Image courtesy of Flickr user Jeffery Simpson.