O2 UK enters personal finance market with NatWest

LONDON (Reuters) - Telefonica's (TEF.MC) O2 took a first step into the personal finance market on Wednesday by launching two cash cards with Royal Bank of Scotland's (RBS.L) NatWest to help customers in Britain manage their money.

The Visa (V.N) pre-pay cards can be loaded online or at O2 and other stores and used in retail outlets that accept Visa debit cards. Customers will receive SMS text alerts every time they make a payment, along with a real-time account balance.

"What we're announcing today is the start of a journey," Ronan Dunne, O2's UK chief executive, told journalists. "The mobile phone and the wallet are starting to converge. We want to create a bridgehead into this market and establish credibility."

Dunne cited research estimating that the mobile payments market could be worth $600 billion (365 billion pounds) by 2013, with 110 million users in Europe alone by 2014.

Mobile operators and retail banks are keen to find ways to keep customers amid fierce competition, and both Dunne and NatWest's head of marketing and innovation, Helen Page, said they saw mobile money as a valuable instrument to reduce churn.

"Giving customers tools to manage their finances is crucial," Page told a news conference. "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's (DTEGn.DE) T-Mobile, the second-smallest carrier in Britain, has been reported to be up for sale, and Dunne said Telefonica was watching the situation with interest.

"We haven't explicitly said whether we're participating in anything," he told Reuters on the fringes of the event. "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.

One card is aimed at adults and the other at teenagers, with restrictions on use for the latter in certain environments such as gambling shops or websites.

The "cash manager" card for adults can be loaded online, while the "load & go" card for teenagers can also be loaded at 20,000 retail outlets including all O2 stores.

Currently, there are no plans to offer the service to NatWest customers who are not O2 customers, nor to expand the service to other O2 markets outside Britain.

(Reporting by Georgina Prodhan)