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Orange Bank: fintech as new element for differentiation

Friday 3 November 2017 | 10:51 CET | Market Commentary

Orange has launched its Orange Bank in France, delivered as a completely mobile application. Orange Bank offers an account with bank card and various services, such as payments and balance checks. It also comes with a virtual adviser, based on IBM's Watson AI software. The new service may end up becoming an important part of Orange's business. 

The project started with the takeover of Groupama (65%) in April 2016. Orange originally planned to launch the bank in early 2017. A year after the takeover, Orange finally announced its plans, with the important price details. Banking with Orange Bank would be free if customers perform at least three transactions per month, otherwise they pay EUR 5 per month. Early trials with Orange employees did not go as well as hoped, leading to the launch being delayed to November. 

Orange has two targets with the service: EUR 400 million in revenues from financial services (including other m-payment services offered mainly in Africa) in 2018 and 2 million customers for Orange Bank within ten years.

Orange Bank brings together a number of important elements:

  • AI. Artificial intelligence can be deployed at various levels. This can benefit customer service at Orange Bank, although it also has specially trained staff for this. 
  • Fintech. Orange shows innovation by combining a banking licence with fintech. 
  • Differentiation. The telecom sector is desperately in search of a way to differentiate its services. A bank is clearly different.

Differentiation

Internet speeds, converged services, content and handsets are well-known ways to differentiate, but have largely been exhausted  (speed, convergence), become too expensive (content) or made difficult by regulation (handset credit and debt rules). A broad interpretation of net neutrality allows for zero-rating (such as Vodafone's Passes) and bundling of non-telecom services in the offering. 

We've already seen a number of non-telecom services on offer. Providers such as Orange Poland and NLE offer energy services, Altice USA just announced plans to offer Nest smart home devices, Vodafone provides insurance, and Comcast is selling solar panels. The common factor in all of these is recurring revenues. Operators benefit from the revenues and can leverage their billing platforms. 

Is the consumer interested?

The bank is an important part of Orange's strategy, alongside consolidating its position in Africa and the Middle East and setting up its own content division. The services are planned to expand to include also loans and mortgages, strengthening the profit model. To start, the service will only earn money on inactive customers (EUR 5 per month). If the bank expands to other countries where Orange is active, it may become an increasingly important part of the business. Only time will tell though whether consumers really want to bank with their telecom operator. 



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