T-Mobile has signed up for a credit card deal with leading global investment bank Goldman Sachs Group Inc. The agreement to collaborate has been under discussion since last year and was finalized in recent months. So far, neither company has discussed the project publicly, and spokespeople for T-Mobile and Goldman declined to comment.
The venture was agreed on just as pressure began mounting on the Mobile giant to stem the cost of the effort to build a consumer business, dubbed Marcus, which has yet to become profitable. Goldman’s management has been instigating measures to minimize losses in its consumer business and follow through with plans of expansion.
Goldman is now faced with the task of managing existing risks for new sign-ups with T-Mobile customers after analyzing card deals with Apple Inc. and General Motors Co. The Mobile company offers a wide variety of phones and plans, designed to offer services to low-income earners or people with poor credit scores. According to T-Mobile Chief Executive Officer Mike Sievert, the company has been investing in its network which has helped attract more customers than ever before.
“Our prime percentage is up several points from a year ago, and we’re getting more and more,” he told analysts on a call last year.
It may take years for banks to make money on new card offerings as lenders also need time to cultivate a large portfolio of customers who reliably pay their debts. There are also costs for marketing and rewards programs.
There is no guarantee that card partnerships will be successful after a launch. This has attracted analysts to Goldman’s consumer unit including the Federal Reserve. Officials at the regulator have been conducting questionnaires regarding the business’s practices and development.
If the launch of the new card is successful it would give the Mobile services provider a financial product to pitch to 88 million regular monthly subscribers which would provide competition with the existing card offered by Verizon Communications Inc.
The business collaboration with Goldman Sachs Group sets the stage for the companies to design a rewards program and other features that can turn customers into longtime and consistent users of their services. T-Mobile customers’ willing to pay their bills with their cards, for example, would strengthen relationships with both companies.
