Decoding Orange Bank Initiative

EY Team is at your disposal for more information

Pierre Borg

Partner @ EY FSO – In charge of Customer & Digital for EMEIA

Mail: pierre.borg@fr.ey.com – Tel : +33 6 85 30 27 38

Axel Duplan

Senior Manager @EY FSO – Strategy Customer and Innovation

Mail: axel.duplan@fr.ey.com – Tel : +33 6 31 27 41 83

Justine Esnault

Consultant @ EY FSO – Strategy, Customer & Innovation for EMEIA

Mail: justine.Esnault@fr.ey.com – Tel : +33 6 61 86 36 40

Sandra Rodrigues

Consultant @ EY FSO – Strategy, Customer & Innovation for EMEIA

Mail: sandra.rodrigues@fr.ey.com – Tel : +33 6 99 67 73 09

Executive Summary

Orange Bank at a glance
►Following the acquisition of Groupama banque, the leading French telecom operator Orange has revealed end of April 2017 Orange Bank its 100% mobile banking
►Orange Bank commercial launch is motivated by the combination of strong internal assets and favorable external factors
•Internal assets (complementary to existing assets provide by GroupamaBanque) : highly recognized and valued brand (particularly for its 28 Mcustomers in France), its powerful distribution network, its advanced digital know-how and its ability to offer cross-market offers to provide differentiated customer experience
•Positive market drivers : Mobile becomes the key channel for banking interactions, Growing competition (GAFA, fintechs, neobanks), Favorable regulatory banking environment, New technologies & Innovations
►Strong room for growth expected for the French online banking market over the next decade : the online banking market in France still has a strong potential for growth, with an estimated customer base around 17 M by 2027 (vs ~3 M in 2017)

Orange Bank business plan assessment
►Business model rationales
•The overall identified strategy of Orange is to better connect customers and acts as a service aggregator to serve customer every day needs
•OB business model in a nutshell : Increase customer loyalty and new income activity, and more marginally acquire new Orange customers
•The long standing strategy based on household centric convergence (“Customer lifetime value oriented”) could allow Orange to propose a quasi-free Orange bank value proposition
►Business model outputs
•Overall : the OB business case appears to be conservative in terms of subscribers forecast, and not surprisingly with a fall expected of the Annual net bank income (<50€/ year / subscriber as a standalone offer, or even 15€/ year / subscriber in a B2C convergent scenario) •Revenues focus : the projected Orange Bank revenues are relatively modest over the next 10 years, with €50m estimated in 2018 (vs. €400m for all Orange group financial services) ►Costs focus : the rise of Orange Bank activity, both in terms of marketing and structural costs, may weigh heavily on the operating profitability for at least 5 years ►Breakeven analysis : despite huge investments (€400m Capex planned in 10 years) and a modest revenue forecast, Orange Bank becomes economically viable after 5 years of exercise Orange Bank offer vs. competition
►Overall, Orange Bank offer takes the best-in-class features from 100% Mobile banks, and plays on three differentiating factors :
•No minimum individual income / Main banking services available free of charge
–Scoring capabilities inherited from telecoms activities
–Income generation strategy
On short term : priority on B2C converged clients (which explains the aggressive pricing strategy upon the launch)
On mid-term / long term : strong Orange capabilities to develop incremental ARPU on top of its basic offer
•Multi-accounts aggregation
•Advanced integration of a Digital assistant
–Basic IA applications at the beginning (limited to money transfers)
–Orange Bank announces a lot of features with the digital assistant such as providing advice on a product or pre-filling some forms. The performance and relevance of those features will have to be analyzed once launched

Orange Bank Customer experience
►State of the art customer experience expected for Orange Bank on Mobile (“Me too” with neobanks), with some key challenges already identified on customer support automation (based on AI)