Next month, Telefonica Deutschland will introduce two banking apps for its subscribers: a direct smartphone-to-smartphone money transfer service and a digital wallet. The transfer service, which is secured by a username and password, allows money to be sent using only mobile phone numbers, from one mpass account to another, in a matter of seconds, and works with iOS and Android systems. The PIN-protected digital wallet, called O2 Wallet, requires a special SIM card and enables customers to pay in shops in Germany and worldwide that accept the PayPass payment system.
We think Telefonica is one of the more forward-thinking and creative MNOs, and is certainly wise to try and add consumer-oriented services to bolster its business. However, we are not convinced that the creation of banking apps is a winning move. While we love the idea of developing innovative services that benefit subscribers, we think they are best geared to local markets, where competition is relatively fragmented.
With this offering, on the other hand, Telefonica is encroaching on the turf of financial industry giants, which have strong, long-term relationships with their customers. We don’t see how a network operator can prevail in such a battle. Commercial banks already offer smartphone-based check deposit services, and there is no reason why they could not implement money-transfer apps as soon as they desire to do so. If the big financial institutions decided to compete in this field – which is, after all, their area of expertise – Telefonica’s service would be very vulnerable. In short, we don’t think taking on the banks in such a fundamental banking application is a good move.