Juan Dominguez, Director Mobile Financial Services, Orange MEA, talks to Ouida Taaffe in an edited interview about the French telecom operator’s plans for its financial services business.
Mobile banking for all
What do you see in terms of handsets in Africa and the Middle East? How will that impact what you're doing?
Smartphone use doesn’t really impact financial services in terms of customer penetration. What it changes is the way you distribute products and how they’re used.
That’s easier and faster with a smartphone and apps, rather than with unstructured supplementary service data (USSD). But USSD addresses everybody. There will be a normal shift from USSD to digital because smartphone penetration is increasing, and the tariffs are getting lower.
Who is your target demographic currently?
Our main target Is everybody. Usually, the micro credits we offer are used by people who have no bank. But we also address middle class people because it’s a normal product. And it may be that middle class people use it more because they carry out more transactions, have more requirements and so on. Our primary target is to sell to the most people, and then we can try to upgrade them to enhanced financial services.
What are you doing around microcredit?
It's something that we've been pursuing for years. We used to distribute offers of microfinance from institutions or banks, depending on geography. Then we built our own offer, setting up our bank and distributing our own microfinance product.
Today, I think we can say that it's a success because in Ivory Coast we have gained around a million customers in two years and more than two million credits have been disbursed. And it's a trend. People are getting more education on financial services and then they go on to more complex services.
What do people use microcredit for?
We see a mix. And the products people want are not only credit but also savings. Small firms use credit on a more regular basis. So, they take a credit, they reimburse it after two or three days or a week later. Then, they take another one.
Usually it's a big amount and can be reimbursed quite quickly. I would say that people get confident using the product and the more they use it, the more they ask for it. We started with small credits and a 30-day tenor. Now we have increased the maximum amount almost by five. And they can borrow for three months and then six.
How do you price the risk on these loans?
People are borrowing money at bank rates, and we try to minimize the risk on our side based on the data we have from the customers. They allow us to use the data they have with Orange, with Orange Money, which is the primary channel with the telco. But we also have data from Orange Bank Africa.
What are the sort of data points you use?
There is a multitude of data. For example, how long have they been an Orange customer? How long an Orange Money customer? How much money do they have in their Orange Money account? Do they cash-in often? It's a mix of all these things that makes the lending decision.
What about the non-performing loan rates? What sort of level do you see there?
I cannot disclose figures, but it was high at the beginning. That was normal because it was a new product for people who didn't know how to use it. They didn’t understand the impact of non-repayment and so on. But, it is a kind of repeat business. People that didn't repay are no longer on board and, as a matter of course, we are left with the best customers.
Card companies and payments
What role do you see for the big card companies, like Visa and MasterCard in Africa?
The benefit of card companies is that they allow you access to the merchants that already accept cards, so they enable merchant payment from day one without having to rebuild all that kind of infrastructure. It's a matter of interoperability between wallets, bank accounts, wallets and cards customers, and merchants.
How do you see cross-border payments in Africa developing?
We've been developing cross-border transfers for almost 10 years now. Today we have significant numbers in that. I think we transfer more than $2 billion a year. So, the use case is there, the demand is there, but usually it’s more inbound transfers. A lot of central banks allow money to come in. It’s more difficult for money to go out. It will evolve, it is changing today, we are pushing on our side…But there there’s still a need in terms of regulation to allow use cases.
Open finance, open data and a more open world
How do you see open banking affecting what you do at Orange Bank?
Orange bank is a brand-new bank. I would say we don't have enough history to do this kind of stuff. Maybe tomorrow we will go to that kind of open banking. Opening it to third parties and so on, and vice versa. We need to first stabilize and get to profitability and expand our business before moving to the more open world.
What do you want in terms of features and geography?
For me, it's always the same question. It used to be a one-to-one relationship and needs to move to a many-to-many relationship. I think that there will be no more frontiers, between a card and a wallet tomorrow. It should be seamless for the customer.
Maybe what we might do in some countries is issue Visa or MasterCard virtual cards. They’re linked to a wallet and the customer won’t even know that they’re using a Visa or MasterCard product.
Are you looking to move into additional countries?
Since the beginning, the plan was to expand into other countries in the West-African region. So, the next one, will hopefully be Senegal. We have Mali and Burkina planned. We'll see how we go based on the political situation.
It's a business that still has growth in front of it. We are just at the beginning of the story, and we'll move toward, from closed worlds to more open worlds.
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