Joëlle Randriamiarana
Lecturer and researcher in finance and accounting
University of Rouen Normandy
Pascal Barneto* (Photo)
Professor
University of Bordeaux
Stéphane Ouvrard
Associate Professor of Finance/Accounting
Kedge Business School
*Faculty member of the Business Science Institute
Article originally published on The Conversation France.
N26, Revolut, Monzo, MonaBanq, B for Bank, Compte-Nickel (now Nickel)... fintechs are playing an increasingly important role in the French banking landscape. These financial start-ups 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? In a recent research article, we show that, more than a risk, these new players represent an opportunity for the historical brands to evolve in the digital era.
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 fintechs therefore does not call into question the role of banks as the main financial intermediary in France. However, our 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 fintech. 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 fintechs.
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.
Complementarities
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 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 fintechs 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, fintechs 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.
Article translated from French with https://www.deepl.com/translator
Read also...
Pascal Barneto's articles on The Conversation France.
Pascal Barneto's articles & books via CAIRN.Info.