O2 Pre-Paid Cards To Shake Up Market

By Alison Steed and Liz King

MOBILE phone giant O2 has joined forces with NatWest to launch two cash cards, as the start of a foray into the world of personal finance.

The cards are fee free pre-paid Visa cards, which the firm hopes will allow people to “better manage their spending money by never going overdrawn and with real-time balance updates sent to their mobile phone”. They will be available to O2 customers mid-August.

Ronan Dunne, O2’s UK chief executive, said: “The strength of our brand and relationship with our customers gives us the ideal opportunity to take O2 into a completely new market. By bringing a fresh, transparent and customer-focused approach to pre-paid cards, we plan to drive this market and take a significant share. In partnership with NatWest, O2 Money is delivering new ways of helping our customers better connect with their money. We have a strong and successful track record of innovation and O2 Money will represent a launch pad into a wide range of mobile banking services."

The cards – Cash Manager and Load & Go – allow you to ring-fence disposable income and since you cannot go overdrawn, you cannot spend more than is on the card. When available, they can be used in the UK, abroad and online.
You can add money to the card with either regular or single online transfers, and will get updated balances sent to your phone each time you make a transaction. Cash Manager is totally free of charges within the UK – although some ATMs will charge for withdrawals.

Load & Go is available to O2 customers who are 13 or over, and parents can add money to the card on their child’s behalf. Anyone under 16 who applies for a card will have a letter sent to their parents or guardians informing them of the application.
This card cannot be used in some online sites, such as gambling sites, and money can be loaded onto it at 20,000 locations countrywide, including O2 shops, PayPoint and e-pay networks. If the card is lost, it can be blocked and replaced, which adds security, said Mr Dunne.

Andrew Hagger of Moneynet.co.uk, said this tie-up will shake up the pre-paid cards market.
He added: “As well as being an excellent customer retention tool for O2, it will give the prepaid card industry a bit of a kick up the backside. While there are many cards on the market, the associated fees and usage costs are often prohibitive, even for those with a poor credit history who are unable to apply for mainstream plastic.

“With many consumers now faced with a less than perfect credit history due to the recession and/or unemployment, the demand for a fee free card could be quite considerable – even if it means switching phone provider to get it.

“This is a well timed joint launch from NatWest and O2 and may well be followed by other telecoms operators as mobile banking is likely to be a growth area for future generations.”

Louise Bond, personal finance expert at uSwitch.com, said: "These fee free pre-paid cards have hit the market at exactly the right time in the economic downturn. The biggest problem is, they are only available to O2's 16.3m customers and could be seen as a new business carrot, particularly for pay as you go users.
"Historically, pre-paid cards have been geared towards people with dubious credit records, who are unable to secure even a basic bank account. 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.”
Pre-paid card charges can be severe. For example, you may be charged up to £9.95 to take a card out, a monthly fee of £4.99 and £1.50 to take cash out at ATMs, said Ms Bond.
She added: “As if this wasn't enough, they actually charge consumers up to 2.95 per cent to load money onto the card. Even on a budget of just £200 a month, consumers will have to fork out as much as £141 a year just to spend money on some of these cards.
"Now it seems O2, the leading mobile provider, and Natwest are trying to appeal to a wider audience with the launch of the Cash Manager and the Load & Go, tapping into a whole new market.
“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. 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."
Helen Page, managing director of Marketing and Innovation at NatWest, said: “More people than ever are using their mobile phones as a means of managing their money and NatWest is always looking at new ways of incorporating the mobile phone into our services, to ensure our customers can interact with us as easily as possible. These cash cards, delivered in partnership with O2, are the first step on the road towards a more advanced mobile banking service, and the closer alignment between mobile phones and payment technology.” 

The O2 Money cards will be available to apply for from mid-August on O2’s website. For more information, please visit http://o2money.o2.co.uk