Orange has announced a far-reaching partnership with French insurance group Groupama that will help Orange establish a mobile banking venture. The mobile-first Orange Bank is planned to go live in France in 2017, followed by other European markets such as Spain and Belgium. Orange has a solid track record in mobile money services and m-payments, alongside an existing mobile banking venture in Poland. But the partnership with Groupama – which could see Orange take a 65% stake in the group’s banking arm – is a marked acceleration in Orange’s ambitions for financial services.
Disrupting banks in mature markets is an uphill struggle for telcos
Orange views financial services as a long-term strategic play and aims to generate €400m ($436m) in revenues from this segment by 2018 (as set out in its Essentiels2020 roadmap). This revenue target is modest compared to Orange’s overall group revenues (€10.3bn in 3Q15) but is nonetheless highly significant for a telco. Orange needs to make bold moves to realize its financial service objectives, and the partnership with Groupama and launch of a mobile bank should be viewed in this context. But it is uncertain how effectively Orange will be able to position itself as a challenger bank in France and other mature European markets.
Along with the majority of telcos, Orange has made the biggest impact on financial services in emerging markets, where mobile network infrastructure is far more ubiquitous than traditional banking infrastructure. This has enabled telcos to be at the forefront of mobile financial services (MFS), particularly for the unbanked. Orange has established a strong portfolio of MFS in emerging markets in the shape of Orange Money, in partnership with banks such as BNP Paribas, Ecobank, Bank of Africa, and Equity Bank Kenya.
In contrast, telco forays into financial services in mature markets have had limited success, and they have focused on payments and m-commerce applications rather than banking. Orange has the most experience in mobile proximity payments, notably with Orange Cash and the collaborative CitZi service. Dedicated mobile banking services in mature markets are a recent development. In 2014 Orange teamed up with mBank in Poland to launch Orange Finanse, a mobile-first digital banking service.
The Orange mobile bank is looking to tap into increasing consumer demand for digital banking services, and more specifically mobile banking. According to 5,540 global respondents in Ovum’s 2015 Consumer Insights Survey, 60.3% regularly checked their accounts via mobile; 40.9% conducted mobile money transfers on a regular basis; 38.1% paid utility bills via mobile apps regularly; and 24.5% used more advanced MFS products such as loans, insurance, and savings – once again on a regular basis.
The challenge for Orange is that all the major retail banks offer mobile banking applications of some kind. Orange will also face competition from a rising tide of mobile-first banking providers. Examples here include BNP Paribas’s Hello bank! (France, Italy, Belgium, and Germany) Fidor Bank (Germany), Simple (now part of Spanish bank BBVA), and BankMobile (US).
Orange aims to differentiate and disrupt by leveraging its mobile credentials, reputation, and customer base, to provide a mobile-first banking service with a focus on millennials. Orange will develop banking services on the back of Groupama Banque, which although not a major French bank has concentrated on digital services. Orange will draw on its network of 850 stores in France to support its banking service, which might go against the idea of a pure-play mobile bank but will provide an effective sales and marketing channel. We expect Orange to complement mobile banking services with mobile payment applications given its strong focus in this area. We also expect Orange to use its broader expertise in consumer digital services, where it has a track record of innovation in TV and video services.
Digital Consumer Insights 2015/16: Mobile Commerce, PT0073-000005 (December 2015)
Eden Zoller, Principal Analyst, Consumer Services