A few years ago, the mobile operators were highly excited about mobile money services, believing this would be an essential element of consumer behavior, which they could control and secure via the SIM cards. But cloud-based alternatives emerged from Google and the smartphone makers, and m-payments proved another false dawn for operators in developed markets – but not in emerging economies, especially some African countries, where telcos like Vodafone and Orange are playing a significant role in the local economies.
Today, there are an estimated 690m people who use mobile financial services and over 100m of them live in Africa. The biggest name is m:pesa, which Vodafone and its subsidiaries operate in Kenya and other countries. Now Orange – which has identified mobile money as one of its key growth strategies, in Europe and emerging markets – has joined with pan-African MTN Group to launch an m-money service.
Both operators have extensive footprints in Afria, and their new service, Mowali, will enable interoperable m-payments across the entire continent, regardless of the users’ mobile service provider. This is the way MNOs should be thinking about digital services – not how to tie users in through the SIM card, but how to drive usage and revenue even from customers on other networks. However, Orange and MTN have a good headstart in terms of their own subscribers, serving 100m m-money users in 22 African countries.
“By providing full interoperability between platforms, Mowali will provide an important step forward that will allow mobile money to become a universal means of payment in Africa,” said Orange CEO Stéphane Richard. “Increasing financial inclusion through the use of digital technology is an essential element in furthering the economic development of Africa, particularly for more isolated communities.”
He added: “By joining forces with another of Africa’s market leaders, MTN, we aim to accelerate the pace of this transformation in a way that will change the lives of our customers by providing them with simpler, safer and more advantageous services.”
Last month, the GSMA’s director general, Mats Granyrd, said that mobile financial services were a vital weapon against global poverty, telling a conference that “mobile financial services are helping to lift nearly 700m of the world’s poorest people out of poverty”.
Granyrd commented on the Orange launch, saying: “The creation of Mowali will help to further transform mobile financial services throughout the African region. It demonstrates the mobile industry’s continued leadership and commitment to driving financial inclusion and economic empowerment through industry collaboration. The GSMA is proud to support its development.”
Orange is also working on mobile banking in its home country of France, but this is a longer term project – in an update last week, the telco said Orange Bank would take six years to break even in France. However, it forecast that its banking revenue would grow fourfold between 2018 and 2022.
Banking is one of the “enriched services”, as Orange calls them, which it hopes will turn it into a digital services provider. Richard has outlined a strategy to become a fully integrated operator with three interdependent roles – connectivity, addressable markets (consumer and B2B), and enriched services.
“All existing players need to adapt or they may face extinction,” Ramon Fernandez, deputy CEO for finance, performance and Europe, said in an investor presentation in London. “Our entry into enriched services should be viewed as both defensive and proactive. It is a key lever to stimulate growth at group level, beyond what the more mature telecoms business can offer, especially in Europe.”
Fernandez said Orange would not consider a purely over-the-top approach in Europe but sees the advantage of leveraging its network assets to differentiate its services in terms of performance, security and other factors.
In 2018, revenue from Enriched Services should reach €3.8bn, he said, about €2bn of that comingmfrom IT and integration services, about €900m from content services, €300m from IoT, and €300m from Orange Money (in France and Africa). This represents about 9% of total group revenue in 2018, but that should grow to 13% by 2022.
In France, Orange aims to reach net banking income of about €200 per customer per year by 2026 (it is currently about half that amount) and to reach 2m customers. Costs per customer are currently about €400 per customer per year, but it plans to reduce that to €150 by 2026.
“We are enabling the digitising of most industries and segments,” Fernandez added. “As a result, industry frontiers become blurred and a position in one sector can stage a bridgehead into entry into an adjacent sector.”
Orange Bank will be extended to other European countries, starting with Spain and Romania, in 2019. It then plans to add two or three new countries per year. One of the services with which it will launch in Spain will be smartphone financing, indicating its plan to integrate its various activities as tightly as possible to create propositions that are hard for non-telco rivals to match.
“Our unique positioning allows us to compete with both traditional banks and OTT/fintech players,” said Paul de Leusse, CEO of Orange Bank. “We consider that we are selling a banking application, not a banking relationship. This is the difference. A basic banking application that democratizes the user experience.”
Another MNO in a developed market, T-Mobile USA, is also expanding into mobile banking with a new services called Money. The US operators have had various forays into payments – including the Isis joint venture between Verizon, AT&T and T-Mobile – but currently TMO is the only one with an offering, and the market is dominated by Apple, Google and Samsung, plus apps from the retail banks.
TMO will offer its subscribers a 4% annual percentage yield (higher than most US banks), and they can deposit at least $200 a month into the account (on up to a $3,000 balance).