Why would a large multinational telecommunications company want to start a bank? It would when it figures out that a significant portion of its 250 million customers use their mobile devices to do their banking. That is what Orange S.A., formerly France Telecom S.A., has been attempting to do over the last year. And after two false starts, the new bank, also called Orange, went live in early November 2017 with its own mobile banking platform.
Background Info on Orange S.A.
Orange S.A. is a huge Paris-based telecommunications company that provides mobile, landline, Internet, and cable services throughout Europe. The company employs more than 150,000 people in France and other parts of Europe while generating nearly $50 billion in revenue.
After conquering the European telecommunications market, Orange is now targeting the financial market with its launch of one of the continent’s first mobile-first banking platforms. One of its main competitors is N26, a German fintech startup that has more than 600,000 customers around Europe. Orange is expecting to grow its customer base to more than 2 million within a few years.
Launch Delayed Due to Technological Glitches
Once described by its CEO, Stephane Richard, as the biggest IT project in France, Orange is relying on its technology prowess to establish its product’s superiority from the start. That maybe why industry observers think it a little unusual that, after the major announcement of its launch in early 2017, the bank has had to retreat twice in the face of some technological glitches. According to Richard, the launch was delayed twice because the customer experience did not meet the high standards of excellence it is promising. He did point out, however, that hundreds of accounts have been opened and are in daily use as part of a beta program. He insists the product will not be launched until all of the problems have been eliminated. The latest launch target date had been set for November 2.
The mobile banking platform offers free services such as basic checking, debit card, savings accounts, and money transfers. Users will be able to track transactions and balances in real time. The app is expected to support both Apple Pay and Android Pay. Orange mobile communications customers will be able to subscribe to the bank’s services through an app on their devices. Orange will also add a physical footprint by creating space in their retail communications stores to accommodate a section for banking services.
Orange Bank’s Big Bet
It’s not every day that you see a large technology company decide to open a bank. That would be like Google, AT&T, or Apple adding banking services to its mobile applications, which may not seem too farfetched except that it wouldn’t be likely to happen in the U.S. with its much stricter banking regulations. It also wouldn’t do too much for their profit margins as banking startups can struggle for years before realizing profits.
Orange is obviously betting on the fact that the tens of millions of potential customers already using its telecommunication services would be willing to change banks if all they have to do is click on an app. There is strong evidence that millennial banking customers prefer a mobile banking app over traditional brick and mortar banks, as successful startups like Chime and Simple in the U.S. have shown. In Europe, Berlin N26, which is backed by PayPal founder Peter Thiel, has grown from zero to a half million customers and they have nowhere near the marketing reach of Orange.