N26, Revolut, Monzo, MonaBanq, B for Bank, Compte-Nickel (now Nickel)… fintech companies are playing an increasingly important role in the French banking landscape. These financial startups have a number of advantages (internet culture, focus on the user, commercial dynamism, no opening fees, no income requirements, etc.). But is this growth threatening traditional banks?
Read more on the subject and find the most important finance news in the world with our companion app Born2Invest.
Banks remain essential
In France, the share of financing for non-financial companies carried out by bank credit stood at 63% in 2019. The advent of fintech companies, therefore, does not call into question the role of banks as the main financial intermediary in France. However, a recent analysis shows that between 2010 and 2017, retailers have made an effort to simplify their organization, which reflects an evolution of their business model in parallel with the rise of the fintech sector. Over the period studied, all the banks in our analysis have indeed reduced the number of their operational segments. Currently, banks have several options in the race to digitalize in order to maintain the link with their customers in the long term: invest directly in new technologies and innovation, or buy fintech companies.
Regarding the first option, French universal banks have been strengthening their organic growth by making significant investments for several years. For example, Crédit Mutuel approached IBM in 2018 to deploy artificial intelligence solutions. More broadly, European banks have spent 30% of their IT budgets on new technologies, and 40% for U.S. banks. In both cases, this type of investment is expected to increase in the coming years.
So banks have already taken an important step in innovation. However, they cannot rely on their investments alone to evolve in the current environment. This is why some have opted for external growth through fintech takeovers. For example, Crédit Mutuel – Arkéa has invested in startups specializing in both financing, investment banking, and payment methods (including the buyouts of Leetchi in 2015 and Budget Insight in 2019).
Similarly, BNP Paribas acquired the neobank Compte-Nickel in 2017 with the objectives of strengthening the digital offering and expanding the distribution network to tobacconists to win new customers. This trend is expected to continue. Indeed, the PwC FinTech 2.0 study states that 82% of traditional financial institutions plan to strengthen their partnerships with fintech companies by 2022.
Complementarity is therefore emerging in the landscape between two types of players with different strengths. On the one hand, the French universal bank holds a phenomenal amount of data, which is essential for the digital transformation of the banking business. On the other, fintech companies have acquired real know-how in terms of innovation, agility, cost reduction, and customer experience, especially in the payment services segment (74 entities identified in December 2019 in France).
Thanks to this combination strategy, traditional banks could thus become truly inventive banks “ready to take on specialized roles within this new open ecosystem, with collaborative support from qualified fintech partners,” as CapGemini’s WordlFinTech Report in 2020 highlighted.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in Maddyness, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
Why Plant-Based Meat Could be the Future of the Food Market
Despite this incredible development and potential, vegetable meat is not the only alternative coming into play in this new era....
Uruguay Incorporates Cannabis Clinic into the Health System
Since its legalization in 2013, cannabis has aroused the interest of many Uruguayans, especially those of legal age, because it...
Bitcoin’s Price Forecast: Novogratz Recommends Buying on Price Decline
Although Bitcoin remains in an uptrend, some experts believe that now is not the time to follow Michael Novogratz's suggestion...
Rich Countries Have Only Donated 13% of the Vaccines Pledged
As for Pfizer-BioNTech, AI claims that it has supplied Sweden (10 million inhabitants), nine times more vaccines than all low-income...
Allianz Morocco Enters the Capital of EMOB
Allianz Morocco has become a 33% shareholder in EMOB's capital. The company is positioned on the electric and eco-responsible mobility...
Biotech2 weeks ago
iDoctus, Accelerating Digital Health to Grow 50% by 2021
Cannabis2 weeks ago
Recreational Cannabis in Argentina, an Unavoidable Debate for the Congress in the Making
Featured2 weeks ago
The Fintech Ecosystem in Latin America is Strongly Developing: Finnovista
Featured2 weeks ago
PwC’s Climate Targets Were Validated by the SBTi Initiative