Orange Has Bold Ambitions For Financial Services

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by Tim Mulligan

Last week, Orange held a press and analyst briefing to discuss its plans for Orange Bank and the progress to date.

Orange is one of Europe’s leading converged telcos. It is aggressively rolling out fibre broadband services across its footprint. This strong focus on connectivity has represented a key pillar of its strategic focus. However, it is not immune to the challenges of competing head on with the tech majors. Therefore, it is paramount that Orange moves into new services. Content is a key area as underlined with Orange Cinema Services, exclusivity for HBO content in France as well as a partnership with Netflix. This culminated with the creation of a dedicated entity, Orange Content to manage distribution.

The move into banking and money services reinforces the need for further diversification. In the highly competitive direct-to-consumer telco landscape, Orange cannot afford to rest on its laurels. Banking is an area that can enable the company to add more value to its customer base and thereby more deeply embed itself into the everyday lives of its users. Other pan-European converged providers have yet to follow Orange in launching a banking service.

The group’s first foray into financial services was the launch of Orange Money in Africa, ten years ago. The service offers mobile-native deposit and money transfer services and is available in 17 countries. A great example of how Orange is leading the way with the introduction of innovative direct-to-consumer services. To date it has accumulated more than 40 million customers, of which 14 million use the service on a monthly basis. It now plans to generate revenue of €800 million ($912 million) by 2023 and for the service to reach 30 million customers.

Orange is a relatively newcomer to the French banking market. A year on, it has gained 200,000 customers. This feels modest to MIDiA Research. However Orange aims to attract 2 million banking customers in France within the next ten years.

Underlining the scale of its ambition for its financial services division, the company plans to roll out Orange Bank across all the markets where it currently operates. Its first international market will be Spain in 2019. This will be a real test given the competitive and cut-throat nature of the Spanish telco market which is awash with multiplay bundles and aggressive promotions. All providers are seeking to differentiate their services beyond price alone. The addition of Orange Bank should act as an important differentiator for Orange. However, it faces the same challenges as its home market in raising awareness and gaining consumer trust.

Despite this, Orange is taking a sensible approach in the way its bank offering differs from traditional providers. It has a vast retail presence thanks to its own branded stores. Orange claims that 60% of new accounts in France have been opened in store. Furthermore its heritage in telecoms and better understanding of users should give it a competitive edge and enable optimised customer segmentation.

Underlining its ambition, Orange claims that the launch in Spain and ongoing development costs in both countries are expected to cut between €500-600 million ($570-684 million) from the Group’s core operating profit by 2023. In order to transform itself, it needs to continue to upgrade and align its IT systems, secure bank licences, and train staff to manage the challenging transition into becoming a financial services provider. Alongside this significant investment, Orange will need to allocate increased marketing spend to raise awareness and effectively articulate its value proposition to customers in all the markets where it plans to roll out the service.

In addition to Spain, Orange plans to launch its banking service in Belgium, Poland and Slovakia between 2020-2023. Overall, it is targeting 4 million banking customers and €500 million ($570 million) in net banking income across its European footprint within five years.

Overall, Orange has outlined bold moves for growth in the financial sector. This is largely a defensive move, but is leveraging its network and retail presence to add value for customers. Being a challenger will allow it to bring novel features to market. Raising awareness and building consumer trust remain vital. There are plentiful opportunities.

MIDiA Research believes that Orange should strongly consider bundling banking services into its multiplay bundles. This further differentiates its offerings compared to rivals and underlines its position as one of Europe’s leading converged providers. Also, it could offer family banking plans as some telcos have done with fixed and mobile tariffs. For sure, this is a long term project with no guaranteed success. Therefore, Orange should be acknowledged for taking calculated risks in its innovative approach to growing its business.

All eyes are now on Orange’s Hello show with its expected announcements focusing on 5G, Internet of Things and artificial intelligence in its quest to diversify further, protect its base and move into new areas.

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