“Operators should brace themselves for fierce competition from incumbent banks. For example, BNP Paribas acquired 95% of branchless bank Compte-Nickel in April 2017, in response to Orange Bank’s imminent launch in France,” says Enrique Velasco-Castillo, Lead Analyst for Digital Economy Strategies.

Operators’ low-cost approaches in high-income countries to mobile financial services (MFS) – such as mobile wallets or person-to-person (P2P) payments – have mostly met with failure. Competition from banks and services such as Apple Pay have caused operator initiatives to stall. However, some operators refuse to quit, and are redoubling their efforts by launching digital banks. Digital banking presents an attractive, albeit risky, option for operators that have the appetite to compete against incumbent and new challenger banks.

Despite the challenges, MFS remains an area of strategic importance as operators launch digital banking initiatives

Rapid smartphone adoption and lower barriers to entry for challenger banks in Europe (due to regulatory changes) have spurred the emergence of new players in the banking sector. New digital banks that have launched in recent years include Atom, Monese, Monzo, Osper, Starling, and Revolut in the UK; N26 in Germany; Gobank, Moven and Simple in the USA; and Root in South Africa.

Orange, Telefónica and Telenor are taking advantage of these new regulatory conditions by offering their own digital banking services. Their approaches differ, but range from mobile banking apps that use a third-party bank’s white-labelled platform (as Telefónica O2 is doing in Germany) to investing in becoming a full-fledged digital bank; an approach favoured by Orange in France.

For a more-detailed discussion of the mobile banking initiatives for Orange, Telefónica and Telenor, see Analysys Mason’s report Digital banking operator case studies: Orange, Telefónica and Telenor.

The report provides:

• a discussion of the changes in the banking industry that are being driven by regulation and consumer behaviour, and the ways that operators’ mobile financial services strategies are shifting to address those changes
• an analysis of recent operator mobile banking initiatives, including:
  • Orange Bank (France)
  • Telefónica O2’s banking app (Germany)
  • Telefónica Movistar Consumer Credit (Spain)
  • Telenor Banka (Serbia)
• a discussion of the role that innovative features such as artificial intelligence (AI), bots and feature-rich mobile apps may have in helping operators to differentiate and capture market share from traditional retail banks
• an overview of the new mobile-centric banks that have emerged in Germany, the UK and the USA, and what operators can learn from them.

Analysys Mason is a global consulting and research firm specialising in telecoms, media and technology [www.analysysmason.com]