Should Telcos Become Banks?
Should telcos become banks? That's one of the questions we asked the telecom industry in an industry survey conducted in late November ahead of Light Reading's annual 2020 Vision Executive Summit, where the results of the survey were first unveiled.
A resounding majority -- 88% -- of the 189 respondents to the survey believe telcos should not go down this particular diversification route, even though service providers are desperately seeking new revenue streams as voice revenues dry up, data revenues stagnate and capital/operating cost pressures increase.
The question is very particular: This is not about whether telcos should offer mobile finance services -- this is about whether they should become fully fledged, accredited banks.
It's likely that among the 12% that voted in favor of telcos becoming banks were employees of Orange, the French service provider giant that has taken the leap into the banking world. In 2016 it acquired a majority stake in Groupama Banque before launching Orange Bank services in France in late 2017.
In late 2018, Orange unveiled plans to offer banking services in seven European countries by 2023, setting itself a target of attracting 4 million banking customers within six years.
Then only weeks ago, as part of its Engage2025 plan, Orange announced the following:
- In financial services, Orange Bank, having attracted 500,000 customers in its two years of operation, will be launched in all European countries where the Group operates, by 2025. Banking services such as micro-credit will also be launched in Africa & the Middle East from 2020 to extend the range of services already offered through Orange Money. Capitalising on the success of offers combining banking and telecoms (device financing, cash back on shop purchases, etc.), Orange Bank will develop new products relating to payment, credit and insurance, and is working on a specific digital banking offer for professionals and small businesses. Orange Bank will break even in Europe towards the end of 2023, with nearly 5 million customers and around €400 million in net banking income. Orange Bank Africa will reach nearly 10 million customers by 2023 with net banking income of about €100 million.
Orange, for one, believes that becoming a bank makes strategic sense as the lines blur between the communications sector and other verticals and as pressure grows to derive revenues from non-traditional services.
Further results and insights from our year-end survey will be published on Light Reading in the coming days.
— Ray Le Maistre, Editor-in-Chief, Light Reading