Telenor has admitted defeat in its attempt to run a mobile bank in Europe, with its head of financial services saying Asia is where growth will be found.
The Norway-based operator announced plans to sell 85 percent of its shareholding in Serbia’s Telenor Banka to a little known private investment company last week.
Precise details of the deal with River Styxx Capital were not disclosed, although Telenor will retain a 15 percent stake in the business it launched just shy of three years ago.
Speaking via email to European Communications, Roar Bjærum, Senior Vice President of Telenor Financial Services, is keen to put a positive spin on his company’s decision to hand over the reins.
“This strategic partnership is the most optimal model for the bank to further develop its current business, bringing additional benefits to the bank’s and Telenor’s customers,” he says.
Bjærum does not specify what these benefits would be, but says River Styxx Capital is “an experienced international financial institution with a successful track record in South East Europe”.
Telenor Banka has signed up 300,000 customers to use its services, which include current and savings accounts, cash loans and credit cards, since launching in September 2014, but it is only the 25th largest bank in Serbia in terms of assets, according to data from the country’s National Bank.
Further KPIs are scarce, but the same organisation said Telenor Banka posted the second highest net loss, €7.85 million, of all the country’s banks in Q3 last year.
Bjærum maintains the venture has been “successful”, but it is clear that its gamble to go it alone has not worked out as hoped.
Enrique Velasco-Castillo, an analyst at Analysys Mason, says the decision to sell is “a sensible move” given Telenor Banka is “still a small player in the fragmented Serbian banking market”.
Telenor’s decision is pertinent as Europe awaits the launch of Orange Bank in France.
Alongside Telenor Banka, it represents the most risky attempt by telcos to tackle the continent’s banking space given the two operators had full control of their operations.
Others, such as Telefónica Germany and Orange Poland, have used the infrastructure of other banks to launch services.
However, as Telenor cashes out in Serbia, Orange is also having teething problems in France.
Velasco-Castillo says the barriers to entry remain high.
“Operators aiming to be leaders in mobile financial services in Europe need to invest heavily to develop a defensible position against incumbent retail banks and new digital entrants,” he explains.
“Technology (AI-powered assistants, and multi-functional apps) will only provide short-term differentiation.
“Ultimately, operators should focus on the fundamentals of retail banking services: security, trust, customer service, and price.”
Bjærum declines to offer up any advice to rivals, but says financial services remains “a key vertical” for Telenor.
“The competence gained through developing digital services, such as for Telenor Banka, will be key for further growth opportunities for Telenor within financial services,” he says.
“We believe in attractive growth opportunities for financial services – with Asia as a primary growth region – where we are committed to taking a leading position.”
The company owns Telenor Microfinance Bank in Pakistan and has a joint venture, Wave Money, with Yoma Bank in Myanmar, as well as various offerings in Bangladesh, Malaysia and Thailand.
Velasco-Castillo says Telenor has found success in such markets to be much easier to come by.
It remains to be seen whether Orange is successful in France, but Telenor Banka is another salutary lesson in the pitfalls operators face in diversifying their businesses.