IDC Comment: Orange launches France’s first mobile-only bank
21 Apr 2017
London, 21 April 2017 - At its “Hello” showcase event in Paris yesterday, Orange announced the launch of Orange Bank, its mobile-only retail banking service. The offer will include a current account with debit card and overdraft protection, and an interest-bearing savings account. Additional services, such as credit and insurance, are planned. All transactions and interactions between the customer and Orange Bank will be carried out using the Orange Bank app on the customer’s smartphone. Orange Bank will be available in France from mid-May to Orange staff, and from early July to the general public.
Now that the age of revenue growth in traditional mobile services is over, IDC is constantly advising telcos that their corporate strategy must include diversifying into other industry sectors. So we can only applaud Orange for doing exactly that. This is a bold move by Orange, involving a substantial investment in preparing the Orange Bank service, and more substantial investment to come in marketing it. As we commented early last year when Orange started negotiations with the financial services provider Groupama Banque (in which Orange subsequently acquired a 65% stake), we believe that Orange’s banking strategy hinges on disruption, through offering an approach that is more in tune than traditional banks with the increasingly mobile-centric way in which people live their lives.
With near-ubiquitious smartphone uptake, and increasingly mature smartphone usage patterns, the time is definitely ripe for a mobile-only bank. Indeed there is already a significant amount of mobile banking usage in France, with 34% of French people using their mobile to check their balance, and 11% using their mobile to transfer money, according to Deloitte’s 2016 Mobile Consumer Survey. The idea of mobile banking plays well into Orange’s strengths, especially its strong association with customers’ phones, and its reputation as a trusted and secure provider of services. At first sight the mobile application for Orange Bank looks well designed, and it not only supports all the capabilities of traditional bank accounts, but also offers some innovative and useful features – most notably, perhaps, the ability for a customer to suspend the operation of their own debit card temporarily, if they believe it may have been lost or stolen, but are not certain.
Customer acquisition for Orange Bank is likely to be gradual for quite some time, as Orange is well aware from its experience of offering banking services in Poland. (Its Orange Finanse service was launched there in late 2014). For retail banking customers, moving accounts is a complicated and tedious business, so customers tend to churn only if they are very dissatisfied with their current bank, or if they are offered a very attractive incentive to switch. Orange Bank will therefore rely heavily for customer growth on first-time banking customers, that is, mostly people under the age of 20. There is some cause for optimism here: this generation is now entering the workforce, and it lives on its smartphones. According to the French telecoms regulator Arcep, 95% of French people aged 18-24 are using smartphones, compared with 55% of the French population (aged 12+) as a whole. But even these statistics underplay the extent to which smartphones are central to the lives of today’s young adults. By offering an excellent mobile-only banking experience, by focusing its marketing on the right demographic, and by keeping modest expectations for early success, Orange has the potential to establish itself eventually as a leading French retail banking brand.
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