Fintech E-Book

Yves Eonnet

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 150

Veröffentlichungsjahr: 2018

Beschreibung

Following taxis, hotels, and supermarkets, banks are now part of the industries bound to be disrupted. Hindered by cumbersome branch networks, dragging late behind digital trends, abhorred by many of their clients, our good old banks should worry quite a bit... Has the final word been spoken? Not so sure. Banks still have a few good cards to play... as long as they hurry. Startups, tech giants, telcos: the banking fortress is under attack from all sides! Engaged and visionary, this book shows how traditional banks are both striking back and reinventing themselves thanks to fintechs.

Leseprobe

Acknowledgments

For two explorers of the digital world like us, writing a book has been an unusual, new and slightly intimidating adventure. And, while there are only two names on its cover, this book would not have been possible without a lot of encounters, help and encouragement.

Because he gave us the idea for this book, encouraged us and advised us throughout this adventure, our initial thanks must go to Louis Rougier. We must also give special thanks to Stéphane Marchand for his method, Adrien Guilleminot for listening and for his talent, and Ryan Hindinger for taking the time to read the book and give his opinion on it.

Warm thanks to Frédéric Oudéa for his preface. It shows the confidence that he has placed in us: we want him to know that it is greatly appreciated.

We would like to thank all our customers and partners, on every continent, who are undertaking the transformation of their banking systems in their own countries. They are the real inventors of this new bank that’s on the way. And our principal source of inspiration.

Finally, a big thank you to everyone in the TagPay team, for all the work they have done. This book is theirs too.

Overview

PREFACE

THE BANK IN 2018: DEATH ON CREDIT?

A

FRACTURED BUSINESS MODEL

T

HE TRANSFORMATION HAS ALREADY BEGUN

S

OCIAL

:

THE BIG UNSPOKEN FACTOR

B

USINESS LINES AND ORGANIZATIONS TO REVIEW

A

DIFFERENT BANK IS POSSIBLE

IN THE TECHNOLOGICAL IMPASSE

B

ANKING

,

THE TECHNOLOGICAL BUSINESS PAR EXCELLENCE

A

PIONEER OVERTAKEN

D

OGMAS THAT STULTIFY THE BANK

REACTION INNOVATION

M

ORE AND MORE INCREMENTAL INNOVATIONS

T

HE DICTATORSHIP OF THE ROADMAP

T

HE TIME TO INNOVATE IS ALREADY OVER

W

HAT WILL THE BANK OF THE FUTURE LOOK LIKE

? N

O

-

ONE KNOWS

!

C

LOUD

,

MOBILE

, API

AND REAL

-

TIME

:

FOUR REVOLUTIONS IN ONE

OVERNIGHT, THEY NO LONGER RECOGNIZE THEIR CUSTOMERS

I

T

'

S ALL THE FAULT OF THE MOBILE

I

MPATIENT

,

DISTRACTED AND MERCILESS

,

THIS CONSUMER

T

HE CUSTOMER

-

KING IS DEAD

,

LONG LIVE THE CUSTOMER

-

TYRANT

B

ANKERS

-

CUSTOMERS

:

A DIZZYING GAP IN PERCEPTION

D

IGITATION IN MAINSTREAM

…

GAFA, BATX, TELCOS... THE PHANTOM THREAT

GAFA, GAFAM, GAFIM...

T

HE

BATX,

THE REAL

GAFA

OF THE FINANCIAL SECTOR

T

HE TELECOM OPERATORS LYING IN WAIT

FINTECH: THE ATTACK OF THE CLONES

L

OANS AND PAYMENTS

,

THE MOST COMPETITIVE SEGMENTS

I

NSURANCE

,

PROPERTY

,

TRADING

...

ALL MARKETS ARE UNDER ATTACK

T

HE NEO

-

BANKS

:

SMALL

,

BUT GROWING

E

STABLISHING YOURSELF IN THE MARKET

:

A LONG

-

DISTANCE RACE AS MUCH AS A SPRINT

T

HE BANKERS

NO OR POOR ACCESS TO BANKING SERVICES: THE BLIND SPOT OF THE UNIVERSAL BANK

F

INANCIAL INCLUSION

,

A RISING STOCK

A

PART FROM NO BANKING

,

POOR BANKING

A

PART FROM HAVING ACCESS TO BANKING

:

WHAT ABOUT THE USE OF BANKING SERVICES

?

W

E SAVE PLENTY IN THE DEVELOPING COUNTRIES

S

AVINGS

,

AN ESSENTIAL SOURCE OF FINANCING FOR THE PRIVATE ECONOMY

…

...

AND PUBLIC SERVICES

THE REGULATOR, ENGINE OR ENGINE BRAKE?

E

GYPT

,

A VERY SPECIFIC CASE

F

ROM

A

FRICA TO

A

MERICA

: 50

SHADES OF REGULATION

I

N

E

UROPE AND

F

RANCE

,

THE CENTRAL BANKS ARE BEGINNING TO THAW

W

HEN THE

B

ANQUE DE

F

RANCE BECOMES

TECH

THE BANKING EMPIRE STRIKES BACK

O

NLINE BANKS

:

A REVOLUTION THAT IS FIZZLING OUT

E

VERY BANK WANTS

“

ITS

”

NEO

-

BANK

S

YNERGIES AS YET NOT OBVIOUS

M

OBILE PAYMENT

:

A TRAP SET BY THE TELECOM GIANTS

THE DIGITAL BANK: THE BANK, NEW DEFINITION

T

HE DIGITAL BANK WILL BE IN THE

C

LOUD

T

HE DIGITAL BANK WILL BE REAL

-

TIME

T

HE DIGITAL BANK WILL BE MOBILE

T

HE DIGITAL BANK WILL BE OPEN

T

HE DIGITAL BANK WILL BE SECURE

T

HE FUTURE IS BEING INVENTED NOW

WE SHOULD BE WARY OF VISIONARIES

S

PEED IS OF THE ESSENCE

O

PEN UP OR PERISH

AFRICA SAGA: IN THE LAND OF MOBILE BANKING

T

HE COUNTRY WHERE THE BANK DIDN

’

T EXIST

T

ECHNOLOGY

,

THE NO

.1

BRAKE ON THE BANKING SYSTEM

2007,

WHEN EVERYTHING STARTED

M-P

ESA

,

AN UNCLONABLE SUCCESS

?

WHEN IT COMES TO DIGITAL BANKING, AFRICA IS IN THE LEAD

O

PENING AN ACCOUNT IS

2000

TIMES FASTER

A

NETWORK THAT

’

S BOOMING

T

HE DIGITAL BANK

,

PEOPLE

-

COMPATIBLE

?

WHICH WAY FORWARD FOR THE BANKS?

T

HE TRADITIONAL BANK IS NO LONGER WINNING CUSTOMERS

S

PIN

-

OFF

:

A LOT MORE THAN JUST A

“

BROOM

-

WAGON

”

A

CATALOGUE OF SERVICES FOR THE BANK OF THE FUTURE

RENEWAL WITH THE CUSTOMER

D

IGITAL GIVES MEANING AND THE HUMAN TOUCH

T

HE BANK OF THE FUTURE

:

TWO BANKS IN ONE

A

N AGENT FOR LIFE

?

N

EITHER TOTALLY DIGITAL NOR TOTALLY LAST

-

CENTURY

:

WHICH BANK FOR TOMORROW

?

2021, A BANKING ODYSSEY

100%

OF MY BANKING IN A SMARTPHONE

G

AMIFIED BANKING

?

B

ANKING UNDER CONTROL

V

IRAL AND TRIBAL BANKING

I

NTERFACED BANKING

T

HE BANK

...

BUOYED UP AGAIN

!

AFTERWORD

Preface

In this book, Yves Eonnet and Hervé Manceron share their vision of how banks are being reinvented under the influence of Fintechs.

This reinvention is a means of striking back, they tell us. We have not heard the last of the banks, far from it! And it is an intelligent response… since this reinvention is not necessarily taking place against Fintechs. It can also happen with them. Accordingly, within this constructive collaboration approach and win-win relationships, they stimulate, challenge and drive the banks to reinvent themselves faster and to develop more rapidly differentiating services for their customers. This is the route we have followed at Société Générale and our collaboration with the Fintech TagPay is a good illustration.

Today, our customers want an omni-channel, smooth and seamless experience. They want to be free to choose when and how they enter into a relationship with their bank. Digital technologies are opening up new opportunities; they allow us to offer better services that are simpler, smoother and more personalized, as well as to automate certain tasks that have no added value, and all of this at a lower cost. The aim is to better meet the needs of our customers, since the only issue that should concern us is providing them with added value. In this effort to improve the customer experience, banks and Fintechs strike me as being more like natural partners than competitors.

Start-ups undeniably have the necessary agility and speed to be disruptive, they bring the ideas and the ability to create new products and services very quickly. Meanwhile, banks have built sustainable and trusted relationships with their customers, who in the large majority of cases and despite a certain appetite for more advanced banking technologies, choose to maintain a relationship with their traditional bank rather than seek an alternative. Moreover, banking institutions benefit from expertise acquired over many years, banking networks enabling the distribution of new products, as well as the ability to gain economies of scale. Finally, in terms of data security and protection, banks unquestionably remain a trusted partner for their customers.

Whereas partnerships are beginning to develop between start-ups and banks in Europe, Africa is inventing its own way of using banking services. Its own approach. This is due primarily to the remarkable rise of mobile phones: by 2020, half of Africa’s population is expected to have a smartphone, representing 650 million mobile phones. With this revolution in mobile banking, we can observe a real "Africanization" of banking practices. The situation has enabled Africa to skip certain stages and so have rapid access to banking services that are both intuitive and secure.

For a bank such as Société Générale, well established in the continent for a long time, I fundamentally see in Africa a strategic long-term opportunity, as well as an important and extraordinarily motivating responsibility to support the growth of this continent. Generally speaking, in Africa there are some extremely interesting things taking place from an innovation perspective. To capture them and be inspired, we have for several years adopted a local and open approach with African innovators, forging increasingly close links with them. For example, two years ago we created an Innovation Lab in Dakar, in Senegal. We have successfully built trusted relationships with start-ups, developing projects with them that can be both very simple in terms of their principle yet bring about major advances. Thanks to these relationships, as well as our partnerships with Fintechs such as TagPay in particular, we are in the process of designing a new kind of mobile bank. An alternative model that will enable us to address one of our main challenges in Africa, i.e. a level of access to and usage of banking services which is today too low (under 20% in many sub-Saharan African countries).

In the following pages, Yves Eonnet and Hervé Manceron talk about the future of the banking industry and the closely linked destinies of banks and Fintechs; the constraints that banks must overcome to be among the winners of the new banking landscape; of this Africa - a genuine innovation laboratory - which paves the way for the future of banks in a world combining numerous new technologies.

Their very pertinent analysis reinforces for the reader the belief that the bank of tomorrow will have to take advantage of digital technologies to improve and secure the user experience, while at the same time strengthening its capacity to advise customers, whether individual or corporate, in need of added-value solutions. In short, the challenge is to succeed in innovating by reconciling the best of both worlds, human and digital. And to adapt as much as possible to the needs of our customers, according to their banking maturity.

Banks and Fintechs need each other now more than ever to continue to evolve and redesign the bank and financial industry of tomorrow. To exist side by side as partners of the positive transformations of our world.

Enjoy the book!

Frédéric Oudéa

Directeur Général de Société Générale

1

The bank in 2018: death on credit?

The bank? It’s doing fine, thank you. In 2015 the six largest French banks (BNP Paribas, Société Générale, Crédit Agricole, BPCE, Crédit Mutuel and Banque Postale) had almost returned to their pre-crisis levels and saw profit to the tune of 22.9 billion euros. In 2016, they did even better (23.5 billion euros of accumulated profit).

There is cash in abundance, the customers are still there (52 million customers in the Crédit Agricole group, over 30 million in BNP-Paribas, Société Générale or in the BPCE group...), and together they employ a total of over 370,000 people in France. Financial giants for whom the subprime crisis had about as much impact as a mosquito bite...

Yet, in the corridors of the management floors there is another tune to be heard. “Transformation” going hand in hand with “digitization”, “branch” in opposition to “agile”, and the future does not seem quite so serene. If, at the moment, all the short-term indicators are green, those that provide a glimpse of the future for banks are amber instead...dark amber. Giants? Yes, but with feet of clay.

A fractured business model

Historically, the revenues of western banks have been based on two pillars: interest rates and fees. For example, the former represents over 60% of Crédit Agricole's income (the green bank is the most prominent of all in the credit professions). The latter contribute between 15 and 40% to Net Banking Income, according to the French institutions. Other sources of revenue, such as those generated by market transactions, are cyclical and are relatively small.

But these two pillars are seriously fractured. The low level of interest rates is no longer a novelty, but a constant to which the banks must adapt. Not only are they low everywhere (0.47% for long-term rates in France, 0.93% in the euro zone, and even...-0.07% in Japan), but, apart from the United States where they are stable, they are continuing to fall: -82% in France, -69% in the euro zone, -32% in the United Kingdom over the last five years. It’s complicated making a living under these conditions...even if the big central banks (such as the FED and the ECB) decide to raise the base rates, the loans will no longer “pay” as they did before.

This becomes all the more notable as the banks' safety net (fees on transactions) is also showing signs of weakness. The ever-increasing competition between the established players, the inevitable arrival of new types of players, and the evolution of consumers will inevitably result in charges that will often not be understood by customers already under pressure. We’ll return to this topic later. The analysis, in any case, leaves little doubt: with so much uncertainty about their model, banks do not have many options. Reduce their costs, find new sources of revenue, or more probably both.

The transformation has already begun

For those working in one of these large financial institutions, the prognosis may appear exaggerated, even unfair. Recent years have indeed been characterized by a major transformation of the sector. With, in particular, social impacts that we can still only speculate about.

The most visible aspect? The symbolic -and continuing-decline in the number of bank branches.

1

The subprime crisis triggered this trend. But while many banks have raised their heads again since then, the pace of branch closures continues to pick up year on year. 2016 was the worst year of the decade, with 9,000 fewer establishments.

Our French banks, which are apparently so healthy, are no exception. Banque Populaire and Caisse d'Epargne had already brought down the curtain on 160 branches in 2017, and another 400 will close by 2020. The Société Générale plans to reduce from 2,000 to 1,700 branches over the next three years. As for BNP Paribas, which had already reduced the number of its outlets by around 10% between 2012 and 2015, it plans to continue at this rate until 2020. Has the model of the retail bank with a network of branches had its day? Or, as some executives believe, will the branches survive, at least for business customers? It’s an open question.

Social: the big unspoken factor

In any case this historic model will have a very bumpy ride. Firstly, social: the disappearance of some 20% of branches in Europe in under 10 years has not been a smooth process. In 2016 alone, 453 banks (we are talking here about banks, not branches) went out of business or were absorbed. And more than 50,000 jobs have been lost.

While it may be the lowest figure since 1997, 2.8 million Europeans still work in the banking sector. It’s hard to imagine that the profession will escape significant cuts. In France, over two employees in every hundred in the private sector are in the business...by adjusting to new consumer behaviors, and as a result of digitizing their services and changing their distribution policies, banks will inevitably be cutting back their workforces. Some “unofficial” projections suggest a possible cataclysm: 1 million jobs wiped out in Europe, one branch in every two gone in France...by 2025. In other words, just around the corner. Is banking the iron and steel industry of the 2020s?

Business lines and organizations to review

Let's say these predictions are wrong, and that we stick with those - much more reasonable - ones which the French banks grudgingly admit that they are relying upon. The “social time bomb” would then still be manageable. The big banks, at least, have the means to anticipate departures, to work with the demographic pyramid, and to be generous enough to encourage willing adherents to look elsewhere.

But the change will be too deep-seated and will have too significant an impact to be resolved by “simple” operations to reduce staff numbers even if they are wide-ranging. The calling into question of the model of the account manager physically present in a branch indeed leads logically to a complete rethink of the organization, the processes. And the skills required to be a “good” banker in the years to come. Or put another way, human resources departments are going to have their work cut out!

As we will see in the following chapters, the rupture is not only the result of circumstances. The subprime crisis or the toughening up of the supervisory regulations are not the cause. Even if they are not helpful, they are not the subject of this book.

Rather, the book will address the real roots of the problem that haunts the banks. Roots that are technological on the one hand, and societal on the other. The obsolescence and rigidity of the information systems on which our banks are built actually prevent them from evolving other than through titanic efforts, at prohibitive costs, and therefore without any guarantee of ever catching up with consumers who have fundamentally changed.

A different bank is possible