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Orange on track to disrupt banking services

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On 4 January 2016, Orange announced exclusive negotiations with French financial services provider Groupama. According to Orange, the negotiations “could result in the acquisition by Orange of a 65% stake in Groupama Banque”.
John Delaney, associate vice-president: mobility at IDC Europe, offers the following comment on the proposed acquisition:
Through the partnership, Groupama aims to strengthen its online banking business and Orange aims to diversify into banking services. Orange plans to offer all standard banking services as well as savings, loans and insurance services. Its objective is to gain €400-million in financial services revenues in 2018.
The time is starting to look ripe for mobile financial services. Having already replaced cameras, music players and maps, smartphones are now starting to replace some of the things we carry around in our wallets. Although lack of cross-industry agreement on technology continues to hamper the uptake of mobile wallet services, we’re still seeing substantial growth in the number of people using mobile phones to pay for things and to carry out other financial transactions.
As is often the case, things have started to happen more quickly since Apple got on board, when it launched Apple Pay in late 2014. IDC estimates that in 2015, 1.5% of all consumer payments were made using a mobile device, and we expect that to grow to 7,1% by 2020. When it comes to banking, iPhone users are also enthusiastically adopting mobile solutions.
In IDC’s worldwide Consumerscape 360 survey, we found that 40% of regular-screen iPhone users, and 43% of large-screen iPhone users, had used their device for a banking transaction at least once during the previous month.
Among telcos, Orange has been a pioneer in bringing m-finance to developed economies. In 2010 it launched CityZi, a system for using smartphones to buy and use public transport tickets. In 2014 Orange Cash was launched in five French cities, and in 2015 the service was rolled out nationwide. Orange Cash is an app for NFC-capable smartphones which enables users to make contactless payments from a prepaid cash account.
So far, Orange has brought its m-finance services to market in co-operation with the leading French banks. However, with this latest move, Orange is positioning itself to compete with the established banks. In a statement accompanying the announcement of the agreement with Groupama, CEO Stephane Richard said that Orange has a “strategic ambition to … offer our customers Orange Bank services in France from the beginning of 2017”.
For several years telcos have been attempting to diversify into other lines of business, as growth in telecoms revenues has got increasingly difficult to achieve. For the most part, telcos have entered industries such as TV, premises security and IT services using the same business and operational models as established players.
What makes Orange Bank an especially interesting proposition is the fact that Orange is not planning to operate like a traditional bank. Its partner, Groupama Banque, was established in 2003 and has developed to cater to customers’ growing preference for banking online and, more recently, on mobile. Orange’s activities in payment services also indicate a strong emphasis on the mobile app-based approach to service provision.
Thus, we expect Orange to enter the French banking services market as a disruptor: a mobile-only bank taking a new approach that is more in tune with the increasingly mobile-centric way in which people live their lives. “The Uber of [industry sector]” is already becoming an over-used phrase. Nevertheless, by combining its experience in m-finance services and its trusted brand with a radically different operational model, Orange might soon start to look like “the Uber of banking” – first in France, and then elsewhere too.