Orange results reported today included the first information on their recently launched digital bank “Orange Bank”. This was launched on 2 November 2017 and had 55,000 customers by the reported year end. So far the impact on Orange is negative due to the launch costs and IT investments required to support the commercial launch.
They have ambitious aims of attracting 2 million customers (roughly a 2.5% market share) and the timing looks good as more and more people carry and use smartphones for daily services. Also, legislation such as the EU’s “Payment Services Directive 2” is allowing new entrants to access account data for customers and initiate payments. It opens up banking to other companies that can be innovative in the use of customer data and usage, potentially allowing new cross-selling avenues and generally reducing the “stickiness” that traditional banks have had with their customer.
It is early days with Orange Bank and it is likely to be loss making for a number of years during its build out, but potentially it adds more value for creditors of Orange providing an additional diverse stream of earnings that taps into the growth of on-line, smartphone linked transactions rather than just the sale of a generic “data allowance”. For the incumbent banks, it will require more investment in innovation to prevent the loss of customers and the disintermediation that has hit other industries such as retail. There could be some complacency in the sector – Philippe Brassac, chief executive of Crédit Agricole in an interview with the Financial Times recently commented …”Orange Bank? Ah, I had trouble combining the two words. It’s not a bank. Annoying? Maybe. But frankly it’s a mono-player on mobiles that does nothing more than what we offer.”
Certainly Orange starts the process with a strong brand and a large customer base that is increasingly tech savvy, so the gauntlet has been thrown down and we await to see if the banks pick it up.