We decided to buy a bank, and we’ll transform it totally to
a digital bank, says Rennard
Orange is planning to launch its first digital bank in France in early 2017 – offering a 100% mobile banking service, with the operator’s 650 retail outlets for those who need it.
To speed up the process Orange is buying a 65% share in the banking division of an insurance company Groupama, which will retain the remaining 35%.
“We thought it was preferable to buy an existing bank rather than to launch from scratch because it would have taken one or two years to manage that,” says Marc Rennard, the deputy CEO of Orange, and the executive who will run what will become Orange Bank.
Rennard is the person in Orange with more experience of mobile banking than anyone else: until earlier this year he ran Orange’s operations in Africa, the Middle East and Asia, where mobile money is important.
In Africa “there are a lot of poor people”, he says. “The revenue per user is low, and with the support of new lines of business such as mobile payments we are having some success. For example an active user of mobile money brings €1 additional revenue a month, and when your average revenue is €3 a month, €1 is very significant.”
The plan is for Orange Bank to start in France and then expand to Spain and Belgium. The group’s rebranding of its Belgian operation from Mobistar to Orange Belgium in March will help with name recognition there.
The new banking service will be marketed under the Orange brand within Orange’s own distribution network and under the Groupama brand within the insurance company’s distribution networks.
They will offer “all essential banking services over a platform that provides customers with a unique digital experience on their mobile phones”, says Orange. The range will include current accounts – checking accounts as they are known in North America – as well as savings, loans and insurance services, plus payment services.
The combined ambition for the two groups is to attract over two million customers in France.
So what does Rennard say about this ambitious plan? His new responsibilities, since he moved out of the Africa, Middle East and Asia role, include customer experience. “That is the heart of the heart of our plan – and my responsibility will be for all of our footprint.”
All of Orange’s footprint is a big place these days. Its biggest operation in numbers is what is now Orange Egypt, rebranded from Mobinil earlier this year. “Egypt is very big, in terms of customer base more important than France, with 73 million customers. Twice as big. Incredible.”
And Rennard – who will be 60 in 2017 – will head all of Orange’s mobile financial services, “with two main parts: Orange Money, mobile payments, that I know very well, because of Africa, and the setting up of the Orange Bank in France and in some other European countries”.
Orange did not buy a bank to start Orange Money, but for Orange Bank, “we decided to buy a bank, and we’ll transform it totally to a digital bank – to be the second bank of French people, and then Spanish and Belgian people. Totally digital,” he says.
“The bank will be totally different from existing banks,” says Rennard. “We are very happy with this move; it’s a significant move. It is because of the success of Orange Money that we have decided to expand our way of managing financial services, moving to a bank and buying an information system, a compliance system, a back-office system – but we’ll transform all the products.”
Why the deal with Groupama? Rennard explains: “Groupama is an insurance company and it has some shops to provide insurance – but their job is not to be a bank. It has a bank business and it is that we have bought.”
Analysts have pointed out since the Groupama deal was confirmed in April that France is an over-banked nation. The difficulty of closing branches and firing people means France has nearly three times as many branches per 100,000 people as the UK. That makes French retail banks uncompetitive and gives Orange the opportunity to be a disruptive influence.
“We don’t want to buy a lot of people, with many square metres [of branches],” says Rennard. “We will rely on Orange’s distribution network – because in France we have 650 shops that will help us to sell, to leverage. We have huge ambition. We will not build a dedicated network [of branches] for Orange Bank.”
He confirms that the plan is to launch in France first, and that “part of our agreement is to launch in Spain”. Rennard started his career in Orange in Spain, back in 2003 when he was appointed chairman and CEO of the company’s operation in Madrid. A year later he became director of international operations and in 2006 he started a ten-year stint as head of Africa, Middle East and Asia.
Orange Bank will then move to Belgium, aided by the rebranding of Mobistar.
Rennard was clearly happy in the Africa, Middle East and Asia role. His last full year, 2012, “was the best year for us”, he recalls. “But at the end of the day the fact remains that I had been managing that business for ten years.” It was time to move on.
Over the decade Orange’s footprint in the territory expanded from 10 million customers to 115 million – aided by a number of key acquisitions.
“Our strategy has always been to go for organic growth but we’ve always said we’ll consider any possible acquisition to complete our footprint.”
He left the previous role with a flurry of takeover deals – though he is modest enough to admit that the timing was partly coincidental. “We signed two acquisitions from Airtel in Sierra Leone and Burkina Faso, one with Cellcom in Liberia, and one with Millicom in Democratic Republic of Congo. They happened more or less in the same month, so it created momentum. So when we sign any acquisition it could have been six months sooner or six months later.”
Now “we’ll have a tough job to integrate them” into Orange, he says. “We have to prove that we are good guys and that we’ll invest in the country.”
There are other possibilities in Africa for expansion. Orange was sniffing around Togo a few years ago, but that went cold. “It will come back one day,” he smiles.
“It is not a secret that we have an interest in Gambia.” On the west African coast, it is entirely surrounded by Senegal, where Orange already has a business. Gambia is “a beautiful country. Very special,” says Rennard. “But we are not there for tourism.”
His former territory is growing well – by about 5% a year, with a 34% EBITDA rate. “Due to our footprint we have to be profitable to be able to invest. In this part of the world we invest a lot – the average is 18% compared to 14-15% in the more developed areas. So we need a higher EBITDA margin. And Orange Money has 18 million customers, so it’s a great success.”
And of course Orange recognises that many of those 18 million people in Africa have friends and relatives in France. Customers who live in metropolitan France can now use Orange Money to send funds to people in three of its African countries, Côte d’Ivoire, Mali and Senegal.
People in those three countries can withdraw their cash from over 30,000 Orange Money points.
This service will develop gradually and Orange intends to increase the number of points of sale in France. It also plans an Orange Money app that will be available soon in France. “Orange will look to expand the money transfer offer from France to other countries over time,” said the company.
Orange Money was launched in Côte d’Ivoire in 2008, and it is now available in 14 countries in Africa. Orange launched the first international money transfer service in 2013 for its customers between Senegal, Mali and Côte d’Ivoire. Last year, this service was expanded to transfers to and from Airtel Money customers in Burkina Faso, Côte d’Ivoire and Senegal.
Ironically, the success of mobile money led to one of Rennard’s few failures in Africa. Orange bought 51% of Telkom Kenya – the country’s wireline monopoly – in 2007, and tried to build an integrated fixed and mobile operator.
But Kenya is the home of Safaricom, whose CEO, Michael Joseph, developed the very idea of mobile money, which it launched as M-Pesa.
The success of M-Pesa has given Safaricom, now part owned by Vodafone, an unshakeably dominant market share. “The others have a tiny market share between them,” says Rennard. Orange Kenya, as it became, had four million customers, Airtel had seven million, and Safaricom had 24 million.
“We want to be number one or number two in any market,” says Rennard. He had hoped that the competition authorities would allow Orange to win market share, but it was not to be, and in June 2016 the group sold its stake, by then 70%, to Helios Investment Partners.
Rennard does not appear resentful. “The huge advantage of Safaricom is mobile payments, and M-Pesa is very good. Michael Joseph is a great man.”