By Roy Timor-Rousso, GM APAC/EMEA, Kandy
The new voice in the telecom industry may not be voice at all. It may just be “bank.”
Orange, which has around 28 million mobile clients in France alone, is taking a majority position in Groupama Banque, elbowing in on the banking industry, which is undergoing massive disruption.
Their plan? To bring banking services to their customers through trusted mobile applications and experiences.
Orange Bank is expected to launch in France in early 2017, with a plan to convert two million mobile subscribers, or around seven percent of their base, to financial services.
The company plans to expand into Spain and Belgium afterwards.
This is a brilliant move, as leading “formerly known as telecom” companies continue to push into more and more services, with payments and now banking being obvious adjacencies.
Why is mobile banking better for consumers in the developed and developing world?
In the developed world, banking is made much more convenient for people on the move, who no longer need to visit a branch office or ATM.
In emerging markets, significant progress has been made over the last few years greatly aided by mobile banking.
According to the World Bank, the number of people worldwide with an account grew by 700 million between 2011 and 2014.
Sixty two percent of the world’s adult population has an account; up from 51 percent in 2011.
Three years ago, 2.5 billion adults were unbanked, while today it’s two billion, a 20 percent decrease.
Another study – this time the ING International Survey on Mobile Banking from July 2016 – found that mobile banking is gathering momentum with nearly half of European smartphone or tablet users active, with another 16 percent planning to switch to mobile banking in the coming year.
The opportunity is tremendous in emerging markets, where Orange has signed agreements designed to strengthen their presence in three West African countries: one with Bharti Airtel for the acquisition of subsidiaries in Burkina Faso and Sierra Leone and one with Cellcom regarding the acquisition of a subsidiary in Liberia.
Orange already offers some financial services via Orange Money, which it launched in Ivory Coast in 2008. The service, which enables users to pay bills and transfer money, now operates in 14 countries and has 18 million customers.
Stéphane Richard, Orange’s Chairman and CEO, described the Groupama acquisition as “a major step forward in our ambition to diversify into mobile financial services.” He said the move “aims to bring mobile banking into a new dimension”.
Thierry Martel, Groupama’s Chief Executive, said that the deal would enable his group to leverage Orange’s technical know-how and expertise in digital services.
Orange’s majority acquisition of Groupama came less than a month after its attempt to acquire Bouygues Telecom fell apart.
This move would have consolidated France’s telecoms market, and the shift in strategy is being watched closely by other telecoms and financial institutions around the world.
The same goes for financial analysts tracking the valuation of both telecoms and banks. French banks are under investor pressure to close branches, reduce headcount and embrace new technology to improve their balance sheets.
For example, Société Générale’s stock rose when it announced at the end of 2015 it would close 20 percent of branches by 2020.
The government of France still owns nearly a quarter of Orange, a former state monopoly. They are clearly on board, confirming the new services will include current accounts, savings, loans insurance services and payments facilities.
The digital platform designed for mobile phones will use Groupama Banque’s banking license and will continue to serve nearly half a million customers with deposits over €2 billion (end of 2015).
As disruptive as all this sounds, this is great news for consumers whose lives will be transformed by these mobile banking and payment services, as long as all the security, reliability and support are fully baked into these emerging applications.
And these benefits are not just for consumers – businesses are moving to digital and mobile banking equally as fast with plenty of upside benefits.
I say bravo to Orange and Groupama for taking this step, which may actually prove to be another step in its transformation path.
They have taken on the challenges necessary to integrate telecom and banking, which is no small task, but can result in tremendous benefits for the bank, service provider, consumers and the businesses who sell to those consumers.
The biggest perceived threat is fraud so any bank and service provider looking to go to market together will have to solve for mobile device, web and network security, mobile authentication, transaction verification and embedded security in order to ensure the banking applications are safe.
Another challenge is ensuring regulatory compliance, as well as even more reliable service; yet another is developing software to support the business model for these “micro mobile exchanges.”
Let’s see how the market – and markets – respond to Orange and Groupama’s bold move!