O2 enters personal finance market with NatWest

O2, the British mobile phone unit of Spain's Telefonica launched Britain's first cash-card service from a mobile operator on today to give itself a foothold in the promising mobile-money market.

The Visa pre-pay cards issued in partnership with NatWest bank can be loaded online or in stores and used in outlets that accept Visa debit cards. Customers will receive SMS text alerts with an account balance when they make a payment.

Telecoms operators and retail banks such as NatWest, a unit of Royal Bank of Scotland are both fighting fierce competition and tying banking and mobile services is seen as a way to discourage customers from switching to other providers.

"The mobile phone and the wallet are starting to converge. We want to create a bridgehead into this market," Ronan Dunne, O2's UK chief executive, told reporters.

Dunne cited research estimating the mobile payments market could be worth $600 billion by 2013, with 110 million users in Europe alone by 2014.

Helen Page, NatWest's head of marketing and innovation, said: "Giving customers tools to manage their finances is crucial. It's critical to our commercial success that customers stay with us."

Britain's mobile market is extremely competitive, with five operators fighting over the country's population of 60 million. Deutsche Telekom AG has been reported to be trying to sell its T-Mobile UK unit.

Dunne said Telefonica was watching developments at T-Mobile with interest. "We haven't explicitly said whether we're participating in anything," he told Reuters. "To my knowledge, there isn't a formal process going on."

The O2 Visa cards will be available for free to O2 customers from next month and will be free to use within Britain, including at ATM cash machines. Overdrafts will not be possible.

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