The future is bright with Orange Bank … banks and telecoms wake up to the opportunity of platforms and interfaces in a connected world

March 18, 2018

Orange, the mobile phone brand of France Telecom, recently launched its new banking proposition in mainland France. The 100% mobile-based offer is provided by Orange Bank and will be the only French bank to offer a free service that provides real-time balances, mobile payment, innovative uses and a virtual adviser that is available 24-hours a day, 7-days a week.

Telecoms brands have become increasingly questionable in a convergent world of brands and technologies. Their focus on price to the consumer, and infrastructure as asset, have created an every more commoditised brand, and utility nature to the business. What will their role be in the future? Will they be invisible in the fast-evolving tech infrastructure of our lives.

Whilst new voice-driven interfaces like Amazon’s Alexa have the power to reengage consumers more deeply, and to make many brands irrelevant, telecoms tends to have ignored its potential role to do more. Additionally, telecoms have incredible consumer networks – millions often billions of people all connected together. In a C2C, collaborative economy, the power of this network, and specifically the connections between people, could be immense. But most telecoms providers keep doing the same thing, focused on minutes and tariffs, and little more.

Orange’s bank is therefore a interesting step forwards. Of banks themselves suffer many of the similar challenges just described, but together perhaps “connected finance” could provide a useful platform to engage consumers, and with the support of a diversity of other services, provide a useful role in people’s lives again.

With Orange Bank, Orange has not simply transferred traditional banking services onto a digital platform: it has designed them from the outset for use on a mobile phone. In this way, with Orange Bank, 100% of all operations and interactions between the customer and the bank can be carried out using a mobile phone.

  • Pay either with their bank card or their mobile (2);
  • Send money by SMS (3);
  • Temporarily deactivate their card, and reactivate it again if the card is retrieved (4);
  • Check their bank balance in real time (5);
  • And, by interacting with the virtual advisor, get answers to requests 24/7.

For customers who prefer some form of human contact, Orange Bank also relies on the strength of Orange France’s network of stores with its 890 specially trained IOBSP (Intermediaries in Bank Operations and Payment Services) employees in 140 authorized stores in France. From launch, these employees are fully mobilized to accompany customers who wish to open a bank account as they subscribe using the digital interface of the Orange Bank application.

Even if the virtual advisor is able to answer a large majority of questions, customers can also contact one of the advisors of Orange Bank’s customer relations centers in Montreuil and Amiens.

From the outset, Orange Bank offers all the attributes of a traditional bank: a current account, a bank card, an authorized overdraft, a free complementary insurance package, a savings account remunerated at 1% interest. The offer will gradually be enriched with services such as personal loans or mortgages. Each new feature will be proven, measured and improved based on customer feedback. The virtual advisor will eventually be able to perform tasks at the request of customers, such as making transfers or saving.

This is how Patrick Jenkins at the FT sees the Orange Bank launch:

“Think dreamy brands and French telecoms group Orange might not leap to mind. Last month its boss Stéphane Richard discovered he would be tried in a long-running fraud scandal dating from his time as a civil servant. Nor does Orange, 29 per cent controlled by the state, stand for the kind of iconoclasm that has helped the world’s biggest technology groups make aggressive incursions into new sectors, including the fringes of finance. And yet it is Orange that has launched one of the most audacious attempts to break into mainstream banking and challenge tarnished incumbents.

A couple of months ago Orange Bank was launched with a mission to attract 2m clients and shake up the staid world of French finance. The premise is simple. The shift to smartphone banking should put telecom operators, handset makers and the big technology groups in a strong position to go head to head with the traditional banks. In Europe in particular, they will be aided by legislative change. This month, the EU’s Payment Services Directive 2 came into force. Arcane-sounding, perhaps. But it could be the revolutionary spur for consumer banking to gravitate towards our favourite consumer brands.

One of the most surprising legacies of the 2008 financial meltdown is that banks have successfully hung on to their customers despite a decade-long reputational drubbing, caused by crisis, scandal and poor service. Sure enough their brand values have slumped. Back in 2007, before the crisis took hold, there were three banking names in the Brandz global top 20 (Citigroup, Bank of America and Wells Fargo). By 2017, only Wells was left in this report that measures brand value (Citi was down at 59, BofA at 87) and the tech groups were dominant. Asian technology groups such as Alibaba and Tencent have exploited dissatisfaction with traditional finance, hoovering up large chunks of market share.

By comparison the incursions made into financial services by US Big Tech are limited. Google, Apple and Facebook have moved into payments. Amazon has a booming SME loans business. But so far none of them has used its brand popularity as a launch pad into banking proper. Conventional wisdom is that the wall of regulatory demands heaped upon the banks in the wake of the crisis will be sufficient to deter tech companies from a full-on assault on banking. The spoils just are not that attractive. Apple’s return on equity is consistently above 30 per cent, compared with a typical bank RoE of 5 to 10 per cent. Of course, banks are still braced for trouble. The more bits of the value chain that tech companies large or small steal from the banking groups, the more those banks will be reduced to the “dumb pipes” of the financial system.

But Orange has breached the barricades — with some early signs of success. If the client accumulation rate of its first 10 days of operation in November has been maintained, it will have amassed some 200,000 customers by now — double expectations — and be on its way to a target of 2m, even before it has expanded its product range from the basics. Consumer loans and insurance are due to be added to payments and savings this year. Mortgages will follow at a later stage. “Orange Bank has what it takes to disrupt in our view, including a strong brand and already 28m mobile customers,” UBS analysts wrote in a note to clients.

Our obsession with smartphones has helped Orange to number 62 in the latest Brandz ranking — far behind Apple or Facebook, but there is no French bank in the top 100. For Orange, this is predominantly about client retention. The EU’s second payment services directive (PSD2), and the transparent architecture and greater competition it should foster, will prise open the traditionally long-term relationships between banks and their customers.

Turning clients into combined phone and bank customers through financial inducements and other means should help Orange cement them for the long term. And the combined (phone) location and (bank) spending data will help them cross-sell other products effectively. Buttressed by existing payments operations in Africa, Orange’s banking business should make €400m of revenue in 2018, although it is expected to be lossmaking for at least five years. Orange’s move into banking clearly is not founded on a trailblazing economic rationale that other tech and telecoms operators will inevitably want to copy. But if it succeeds in winning custom, it may establish a new model for long-term disruption.”

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