Orange Becomes a Bank With Groupama Deal

French telecom incumbent Orange is to acquire a 65% stake in Groupama Banque to support a leap into the banking-services arena next year.

The operator has been in exclusive talks with Groupama since January, when it first announced plans to launch a range of banking services in France, under the Orange Bank brand, at the start of 2017. (See Orange May Become Bank With Groupama Takeover.)

Orange Bank launches in Belgium and Spain, where Orange (NYSE: FTE) already operates mobile networks, are set to follow.

Executives have previously told Light Reading and Telco Transformation that Groupama Banque's existing banking agreement and reporting systems will allow the operator to hit the ground running, quickly overcoming some of the regulatory challenges it will face on entering the banking sector. (See Orange Claims Customer Interest in Bank Move and Orange's Paillassot Banks on Groupama Move.)

Shedding further light on its plans in today's announcement, Orange said its banking service will be "specifically designed for mobile usage" and cover services including current accounts, savings, loans, insurance services and payments.

It is aiming to sign up 2 million customers as a "combined ambition" of Orange and Groupama, having previously indicated that about a third of its customers had expressed interest in opening a bank account with Orange.

The target looks relatively modest given that Orange claimed to serve about 28 million customers in France at the end of last year.

Groupama Banque, meanwhile, had about 530,000 customers at the end of 2015, with outstanding deposits of more than €2.1 billion ($2.4 billion) and outstanding loans of around €2 billion ($2.3 billion).

It is a part of the much larger Group Groupama, which operates in insurance and other industry sectors and has about 13 million customers across 11 markets, most of which are in Europe.

Groupama is to retain the 35% stake in Groupama Banque that Orange is not acquiring.

A major challenge for the two businesses will be to avoid any customer confusion on the marketing front: Orange says the new service will be marketed under its own brand within its distribution network but under the Groupama brand where the banking player is already active.

Laurent Paillasot, deputy CEO of customer experience and mobile banking, previously told Telco Transformation that regulations in France made it relatively easy for customers to switch banks and that Orange plans to differentiate itself from traditional banking rivals by offering so-called "cross-market" deals to customers.

Bundling telecom and banking services could represent a further evolution of the "multi-play" model and attract interest from consumers keen to get more services from a single provider.

Orange claims to have been drawn to Groupama Banque by the quality of its business processes and IT infrastructure. It also reckons it will have more scope to develop a "disruptive banking strategy" with the company because banking is not Groupama's core activity.

Financial services form a major component of Orange's Essentials2020 strategy: Its aim is to generate about €400 million ($451 million) in revenues from a variety of financial services by 2018.

"Groupama Banque will bring an existing banking structure as well as considerable experience in managing customer relations remotely within a banking context," said Orange CEO Stéphane Richard in a statement.

Orange expects to complete the deal in the July-to-September quarter. Other terms of the deal were not disclosed.

— Iain Morris, , News Editor, Light Reading Editor-in-Chief, Telco Transformation