On the occasion of the Hello Show this Thursday, the CEO of Orange Stéphane Richard launched the service Orange Bank, totally free. How does the operator intend to disrupt the banking sector? Can it be profitable? Our analysis.
"He was missing a bank in the bank," smiles, Stéphane Richard on the stage at Salle Pleyel. This Thursday morning, April 20, at the annual Orange Hello Show, he revealed the purpose and offers of his new service Orange Bank. An announcement as expected and ambitious. The CEO of the telephone company says that "the banking sector has not yet made a digital revolution. These companies are still thinking about usage, we want to think originaly about digital." Thus, Orange Bank will propose to open an account online via an application or with an adviser in an operator's shop. All operations, transfers or sending of documents will pass through this interface. Payment can be made by credit card or by credit card. And if you lose your credit card, you can block it in two clicks. No need to wait until Tuesday to scrutinize your spending on the weekend, movements on accounts will be instantaneous. And in case of problems, Orange has even foreseen the possibility of choosing a virtual consultant based on the IBM solution, available 24 hours a day, and a real expert who will call you within 5 minutes. Unexpected? "No charge card, account keeping or minimum wage, Orange Bank services are completely free," said Stéphane Richard who launches them on July 6. With this new service Orange wants to diversify, at a lower cost, at a time when the telecom market has become mature. Then, he wants to position himself on the mobile payment which is already one of its flagship services of Orange Money in several countries of Africa.
An unprofitable online banking sector
The CEO's ambitions are great. Orange Bank is targeting two million customers within 10 years. The term is cautiously far removed. But it took 16 years to ING Direct and more than 20 years to Boursorama, solidly backed by Société Générale, to reach one million accounts. "However, this comparison must be tempered by the fact that Orange already has a strong brand, that the group will support its bank on a physical network of shops but also on a base of 30 million customers to its telecom services" Pierre Guérin, managing consultant with the consulting firm Investance Partners. "From this point of view, it is the first actor who has the means to attack the traditional banks on their ground." A shared opinion among them: "We must not underestimate the capacities of this A major economic player to conquer many customers, said the boss of a major network bank. "Orange is accustomed to fight in a very competitive sector and can therefore transfer this capacity into the banking world."
Stéphane Richard's ambition is also about the effectiveness of Orange Bank's business model. It promises to break even in the next four or five years - while Boursorama and ING Direct are still not profitable. "This objective of profitability is really a matter of concern, especially as Orange Bank promises to invest in new tools and the training of some of its staff in bank offers that will have a cost," emphasizes Pierre Guérin.
A rare free service
The benefits will also be all the more difficult to reap as the tariff promise is free. A few days before the announcements, the head of a large banking group always dismissed the possibility of such a gratuity. Indeed, banks today have every difficulty in getting paid by placing deposits with their clients, at a time when interbank interest rates remain negative. For a little more than a year, the vast majority of "hard" establishments have had to switch to a fee structure to compensate for this phenomenon - including La Banque Postale, which charges 12 euros per year.
Most online establishments do, of course, offer free of charge - but this measure partly explains their lack of benefits. Marie Cheval, CEO of Boursorama, acknowledged at the time of the launch of a new account for young people in the autumn that she owed her freehold to the defending body because of the persistence of low rates .
Orange Bank will offer only one type of fee at first: a payment for customers who use the credit card less than three times a month, in order to retain its users. "Services are bound to evolve day after day. Secondly, credits could be offered, as well as insurance and real estate services. These activities will pay off, "they say at Orange without detail.
Difficulties to predict
Is the business plan of Orange Bank realistic under these conditions? Observers and competitors remain divided. "When ING arrived on the French market, a large number of analysts pronounced the death sentence of the classic bank" brick and mortar ", reports a consultant specialized in the sector. Today, pure players do not weigh more than 5% or 6% of the market. And when I see the power and results of Agriculture Credit with its 7,000 agencies, I think the revolution is not for now. "He adds that the telecoms operator will have to improve his services and customer relations significantly in order to settle in the landscape:" Operators are now dealing with bugs (network breakdown, chaotic line transfers ...) Will simply not be bearable in the banking world. No one will accept, identically, that a transfer of salary has been omitted on a statement of account ... "
Orange Bank has experienced difficulties in starting up: planned for the beginning of the year, the service will not see the day before the summer. Industry experts say that the operator has increased the number of IT contracts in recent weeks to allow the announcement of the Hello Show. The reason for these delays? The operator was not able to create a bank computer complex ex. It therefore had to rely on that of Groupama Bank, bought to sit Orange Bank. However, the system clearly lacked the flexibility needed to get into start-up mode ...
Richard in start-up mode
Because Stéphane Richard is rightly seen as the boss of a large digital company, he no longer thinks like a classic operator. Like a start-up that launches into a virgin market, it aims to conquer the online banking market as quickly as possible, to win massive users very quickly, even if it is to offer its services free of charge. This is the Silicon Valley tech box method to win the race to winner takes it all. In the second step, their economic model will evolve according to the difficulties encountered and new opportunities for cash inflows ... and to evolve in a high degree of uncertainty.
These elements do not prevent the large establishments of the French banking place from being seized of a visible fever with the arrival of this competitor in a context already agitated. The announcement of the launch of Orange Bank follows slightly that of Carrefour, which "sells" its bank accounts C-Zam to 5 euros in the shelves of its hypermarkets. Nor is it a coincidence that on April 4, BNP Paribas announced the acquisition of Compte Nickel. Impossible for the establishment of the Rue d'Antin to remain absent from the segment of the new banks.
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