The conventional wisdom is that the boom in mobile device adoption will encourage the use of mobile wallets. AT&T is betting that the opposite concept that mobile payments can lead to more smartphone use can also be true.
This mindset is behind the telco's recent pact with Citigroup to issue the AT&T Access More card, which urges consumers to strengthen their ties to AT&T by reimbursing them for the cost of a phone upgrade. The card also promotes the use of Citi Wallet, the issuer's branded version of MasterPass.
Most U.S. residents have a smartphone, but because of the standard contract upgrade cycle, people are regularly in the market for a new device, said Andy Wilson, vice president of national marketing for AT&T Mobility
"We're going to use this to attract new subscribers to AT&T," Wilson said, adding the Citi partnership does not require a long-term contract, making it a softer sell for AT&T. "You don't have to do on an equipment financing plan, and you don't have to pay anything for the phone."
Consumers who spend $2,000 on the Citi-issued credit card in their first three months can earn a $650 credit for the purchase of a new smartphone. Citi and AT&T have successfully partnered before to provide AT&T subscribers with statement credits in exchange for using a co-branded card, Wilson said.
Citi has also successfully used new consumer technology in the past to encourage new payment habits. Notably, the issuer offered the popular and hard to find iPod Mini in 2004 to new customers who agreed to regularly use its online bill pay service. That program was considered effective in attracting customers to Citi from outside the reach of its branch network.
A decade later, consumers' appetites for technology extend well beyond Apple's product line, and the AT&T program is designed to cater to their changing whims while creating a strong tie to an issuer's brand when making online and mobile commerce purchases.
"People are looking for the latest and greatest smartphone. These phones are always popular and we're giving them a discount," Wilson said. People who are already in a contract can still purchase the new phone through the offer. They still have to honor their existing contract, but AT&T is not requiring an additional contract, which is a show of goodwill for the future.
Citi did not make an executive available for an interview. In an email, Ralph Andretta, Head of North America Branded Cards for Citi, also touted the link between mobile commerce, payments and mobile phone plans.
"We designed this new card for todays wireless world, based on the interests of millions of AT&T customers. We believe it will deepen loyalty and sales by delivering terrific value with the opportunity to earn a new smartphone and rewards every time they shop online, Andretta said in an email.
It may not be an easy sell, however, according to Gareth Lodge, a senior analyst at Celent.
"It seems like a slightly odd deal to me, not bad, just I suspect the devil may be in the details," Lodge said. "At a high level, this is very similar to the co-branded cards that airlines or hotels offer, points rewarding spend. As with all rewards programs, consumers need to figure out the value of the rewards to them. In this case, could they achieve a lower cost of ownership by shopping around?"