Orange is in exclusive talks to buy a 65% stake in Groupama Banque, amid ongoing industry interest in mobile finance. Cynics, however, believe telcos will fail to monetise the mobile payments space, which they say will be dominated by Visa, Mastercard and the banks.
Orange (EPA:ORA) is in exclusive talks to buy a 65% stake in Groupama Banque, amid ongoing industry interest in mobile finance.
The French telco said the acquisition would lay the groundwork for its planned launch of its 100% mobile ‘Orange Bank’, which would offer “all standard banking services as well as savings, loans and insurance services.” It said it planned to launch in France at the start of 2017, and subsequently in other European markets such as Spain or Belgium.
If successful, a partnership would aim to “develop a new banking model that will enable Groupama to strengthen its online banking business and Orange to successfully diversify into banking services.”
The two would promote banking services via their network of local branded stores, and those of Groupama subsidiary Gan.
Orange’s five-year strategic plan, announced in March 2015, highlighted mobile banking as one way to diversify into new services by harnessing existing assets. Today, the company said it was targeting €400m (US$429m) in revenue from financial services in 2018.
According to Orange CEO Stéphane Richard, the company will be able to leverage its “strong brand embodying key values such as security and reliability, a solid distribution network and above all the confidence of 28 million customers in France.
This legitimacy in the world of financial services has already materialized with the success of ‘Orange Money’ in the Middle East and Africa region, and more recently with the successful launch of ‘Orange Finanse’ in Poland.
Thierry Martel, CEO of Groupama, said Orange’s technological leadership and the ubiquity of mobile phones would enable the bank to “go beyond online banking applications that are currently available on smartphones in order to transform users’ mobiles into a virtual bank and insurance branch that is always at hand.”
An unproven model
Since the success of Vodafone-owned Safaricom’s mobile payments platform mPesa, which first launched in Kenya, and Telenor-controlled Grameenphone in Bangladesh, telecom operators have been keen to replicate the business model.
So far, this has been most effective in developing economies with large unbanked populations. In developed economies, telecom operators have vied with established payment companies such as Visa and Mastercard, technology groups such as Apple, and banks such as Barclays for dominance among a population in which most have both bank accounts and the ability to pay by card.
In his predictions for 2016, telecoms consultant John Strand said: “The world of mobile payment belongs to the banks with Visa and Mastercard. Visa and Mastercard essentially own the consumer/merchant network, and only niche players can compete against their killer apps.”
He added that mobile operators would struggle to monetise the space.
“Many mobile operators have withdrawn from the mobile payment market because they could not add value or make money,” Strand said. “This also goes for the Internet players that attempt to enter the market.”
