consignment fund has a minority shareholding in it. Lemaire added that France has been investing significantly in infras
Paris, France General Overview & Fintech Landscape
First Edition
Paris, France, is a strong European financial center through its history of creating top banking and insurance companies, and it is now becoming a budding hub for fintech and technology companies to set up shop as well. According to the World Economic Forum’s Global Competitiveness Report, France remains a stable competitive environment, and its largest improvement is in the categories of innovation and sophistication. The report goes on to explain that while France has relatively low levels of efficiency of both the goods and labor markets that have traditionally weighed down competitiveness in France, the French government pushed through wide-ranging labor market reforms in July 2016 against considerable opposition in a move that should ultimately boost competitiveness. And with this in mind, there are many assets that France can leverage to continue to create a competitive and flourishing environment for businesses. In an interview by Instinct Business with the president of France FinTech, Alain Clot, he explains that France has a strong domestic market of more than 67 million consumers, and in 2015 and 2016, France was a champion in business creation within Europe. In addition to this, France also has world-class skills in data science and computer science, as well as the aforementioned historical financial culture, making it an excellent location for fintech companies to grow and find strong talent. According to a market study on French fintech from Flanders Investment & Trade, France has had late development in the fintech sector compared to the UK and Germany. This is in part due to the fact that the French banking sector consists of a number of strong players offering a universal model that makes it difficult for new players to enter the market. However, since Brexit, France has been discovering new opportunities. In particular, in the aspects of availability of suitable people and the presence of key players in the financial world. This report gives a quick overview of the French fintech landscape - particularly in Paris - and offers insights into benefits of entering this market, as well as some information on legal initiatives that are taking place to make France an even more attractive market in which to expand a company or start a business.
Attracting European Companies During a press conference in late 2016 around the topic of Brexit, French government and financial services leaders explained France’s current climate for the financial sector and the attractiveness of the region for businesses wishing to expand into mainland Europe. They explained that according to the European Financial Centers Index, Paris ranked number 1 in the EU, and is an international business center with the presence of major corporates, including BNP Paribas Fortis, AXA, Crédit Agricole and Société Générale. In the context of the Brexit, Paris is a leading financial center in the European Union, with several competitive advantages, including:
The Parisian marketplace is especially attractive in the financial sector for these topics:
Fintech Growth in Paris According to a Working Group chaired by Stanislas de Bentzmann, CEO of Devoteam, Paris is experiencing a phase of rapid growth and now ranks on par with Berlin. Paris intends to consolidate its position of European leader in terms of Fintech investments. The four main strengths of Paris:
France is also getting even more digital friendly – there is a new government plan 2017-2020 worth €10 billion that includes €4 billion of own capital contributions, aimed in particular at venture capital and innovative initiatives (i.e., blockchain). With this in mind, there are a few French fintechs that have already started to develop at an international level, including Younited Credit, Lydia and Lendix. In part two of Instinct Business’s interview with Alain Clot, while Paris is experiencing strong growth, he explains that there are still a few obstacles to keep in mind for fintech companies in France. Fintech is not a monolithic sector. There are areas where the ability to generate revenue remains limited. For example, this is the case for robo-advisor platforms that are developing all over the world but remain behind in France. However, some French players such as Yomoni, Wesave or Advize are considered as potential emerging leaders. In regard to a neobank, on the other hand, where consumers have a greater degree of maturity compared to new users, there are already models (e.g. N26, Revolut) with strong acceleration. The acquisition of some of them by traditional banks shows their value and growing importance. The recent buyout of Compte-Nickel by BNP Paribas is one example of the phenomenon. The weight of charges still prevents startups to develop. However, this is being addressed Through government initiatives and working groups that are trying to tackle this and foster a more open and attractive market for startups to flourish. Finally, there is a lack of political vision for the financial center. Clot explains that one of the keys to success for the sector would be, “that the community and the state say: Finance is a big strategic area that we will support. We need a great industrial vision for finance. We must not forget that the City of London is the first job creator, the largest contributor to taxation, the first positive factor in the United Kingdom's trade balance and a huge factor of sovereignty. That's why today, despite all our qualities, we are now only the seventh largest financial center in Europe. We need to find breath, vision.” However, according to an interview with Digital Minister Axelle Lemaire, France is very well-positioned in the fintech market for several reasons. First, the size of the payment market, with around 65 million payment cards circulating in France. Second, some historical players in this field, like Gemalto or Ingenico, were founded in France. Third, French engineers are arguably the best in the world, a key point for this sector, particularly hungry for talents and technical competences. This is one of the reasons why blockchain technology is
developing so rapidly in France with numerous applications, chiefly in the financial field. A fourth key support mechanism for French fintech is smart regulation. A series of new laws have boosted the development of fintech in France. For instance, the government has allowed transactions of non-listed securities to rely on blockchain technology. The Digital Republic law set a threshold under which no authorization is needed from the regulators to start a business in this field. Last but not least, French regulatory authorities are well-known for being very meticulous, which results in quality authorizations that are valued everywhere in Europe. And they have set up a one-stop shop, which streamlines and speeds up authorization procedures for those who want to settle in France, whether or not it is due to Brexit.
Legal Initiatives According to a market study from Flanders Investment & Trade, there are recently a number of new laws that have come into force in France that create a legal framework for financial services as well as fintech. Some of these new laws include: •
Law n ° 2013-100 of 28/01/2013: a number of European economic and financial rules were incorporated into French legislation: o A new definition of electronic means of payment was put into place: "the digital equivalent of cash money, stored on an electronic medium or a server" o This also marked the end of the banking monopoly for electronic payment instruments: "Établissements de monnaie électronique" (EME) can issue and manage electronic payment instruments and offer payment services.
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The French executive order (ordonnance) on crowdfunding, adopted in May 2014, creates a framework for the participants and ensures legal recognition of crowdfunding platforms.
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The DSP2 directive regulates the conditions in which a financial service provider gains access to the financial data of a customer.
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Digital Minister Axelle Lemaire has also pointed out that new labor laws and fiscal regulations “have significantly lowered the burden on businesses. In the 2017 budget, we've cut taxes for companies who employ staff in France, cut taxes on shares distributed by startups to their employees, and enabled business angels to make tax-free investments in French startups.”
Investing in Spaces and Infrastructure for Tech to Flourish French companies and officials are also investing in spaces for fintech and innovation to thrive. Station F has become the largest startup incubator in the world with 30,000 square meters of space, and the aim is to host no fewer than 1,000 startups in the space. According to French Digital Minister Axelle Lemaire, this private project is led by successful entrepreneur Xavier Niel, and symbolizes the maturity of the ecosystems and the will of entrepreneurs to reinvest to support the ecosystem. It has full support from the French government, and a national deposit and consignment fund has a minority shareholding in it. Lemaire added that France has been investing significantly in infrastructure across the country as well. In 2013, the government launched a €20 billion investment program to spread ultra-fast optic fiber internet broadband all around the country. It's being rolled out now and by 2024 every city or village in France will be connected to high-speed internet.
Fintech Landscape Fintech investment in France is on the rise. According to Flanders Investment & Trade, investments in French fintech companies amounted to nearly $21 million, and rose to more than $87 million in 2015 – figures that seem difficult to believe only two years later. Indeed, in October 2017 alone, French fintechs raised €88 million. And, in early January 2018, Ledger raised $75 million (€61 million). French entrepreneurs from the fintech sector have united in the France Fintech interest group, established in June 2015. France Fintech is managed by Alain Clot and by a management committee composed of 10 members. The main tasks of the association consist of promoting French fintech abroad and representing the sector with the government and investors. France Fintech, as of 2016, had 70 members divided into six domains from the fintech sector. A recent survey conducted by Deloitte among 2,000 respondents in France showed that French people currently make little use of fintech solutions. Indeed, according to an EY report, the fintech adoption Index of France lies beyond the worldwide trend, 27% versus 33%. This is mainly due to ignorance: only 1 in 4 people in France are familiar with innovative financial services. The most frequently used application is to consult a central overview of its entire financial situation (across different banks), which was only used by 9% of respondents. Services related to savings and investments (such as financial planning or advice) and other products such as insurance and money transfers are currently only used by 2% of those questioned. Once these services have been explained to the French, a large part is interested in using these services in the future. This illustrates that there are great opportunities in France. French fintechs can be found in all areas of the fintech market: payments, crowdfunding, insurance, etc. New players are added to the market every day, which is why it is almost impossible to give an overview of all players on the market. The French are the largest users of checks in Europe. Since 2000, however, the check has been gradually replaced by other payment instruments such as direct debit and the debit card. The use of the check has decreased by +/- 6% a year in recent years, an evolution that is expected to continue in the coming years, owing to the new system of "paying third" at a doctor's visit. In addition, the French authorities want to discourage the use of the check, a payment instrument that lends itself to fraud and, moreover, is expensive in processing for the banks. The expectations of users of means of payment (consumers, traders, government, etc.) are sometimes contradictory. Ease of use appears to be an essential point in addition to safety. Two elements that are not always easy to combine and that also have a cost price.
The last few years have been characterized by a steep rise in mobile banking. The traditional French major banks follow the example of their AngloSaxon colleagues and offer their customers mobile, user-friendly apps mainly for applications that can be used for the general management of the account. For the traditional banks, the main focus is on resisting the many startups that are primarily competing with the banks, mainly because of ease of use. There were hardly any complex technical thresholds to offer these apps, the French banks simply waited for the momentum when the use of apps was generally well established. A study by the French Ministry of Economic Affairs showed that the boom of smartphones and tablets continues in France. 35% of the population has a tablet and 50% has a smartphone. In 2017, KPMG's Fintech 100 ranking included three more French companies than in 2016. Among them, Lendix ranks in the Fintech Leading 50, in 45th place. The other five French companies on the Fintech 100 list: Alan, IBanFirst, Lydia, Payfit and Qonto. According to a report from Business France, €2 billion in venture capital was raised by startups in France in 2016 (EY), and the average amount of time it took to start a business in France was 3.5 days (World Bank, Doing Business, 2017). France ranks first in Europe for the number of high-growth companies in the technology sector (FT 1,000: Europe's Fastest Growing Companies) and there was a 750% increase in investment in fintechs in France between 2014 and 2015 (Accenture).
Let’s Talk Payments notes that the largest fintech segment in France, as of 2016, was digital payments, with a transaction value that reached nearly $88 billion. See the map below for an overview of some of the French fintech companies that have been actively innovating in this space. One such company worth mentioning is BlackFin a private equity firm focusing exclusively on financial services, operating in Paris, Brussels and Frankfurt. They are addressing the needs of entrepreneurs at all stages of development across continental Europe through three funds: BlackFin I and BlackFin II for growth equity, and BlackFin Tech for venture capital.
Source: France FinTech - Spring 2017
Interested in seeing how B-Hive connected with the local community in Paris? See below for a recap of our visit to the Paris Fintech Forum 2018.
Recap: Paris Fintech Forum 2018 brings together fintechs and financial services companies B-Hive attended Paris Fintech Forum - an international event in the center of Paris where leaders of banks, insurers, telcos, regulators and fintechs from all over the world exchange thoughts on the future of their industry in the digital age - alongside several partners and members of our community. Apart from a booth showcasing how B-Hive promotes innovation and collaboration within the financial services industry, we also hosted two matchmaking sessions on January 30. The morning matchmaking session was a good opportunity for our members to pitch in front of international corporates and attendees. Thank you to Amplyfi, Digiteal, Elimity, Gambit, GuardSquare, In the Pocket, Inventive Designers, Juru, Kuzzle, RiskConcile, Signaturit and UnifiedPost for such fantastic pitches! We hope you enjoyed the opportunity to pitch, network and explore new potential business opportunities! The afternoon matchmaking session also provided our partners with the opportunity to listen to the pitches of startups and scale-ups from all over the world - from regtech to insurance to robo-advisory. Thank you to our pitching companies and to our partners - BNP Paribas Fortis, Euroclear, Flanders Investment & Trade, imec, ING, the LHoFT and SmartFin Capital - for joining our afternoon matchmaking. Committed to highlighting the strengths of Brussels as a financial center, FIT will award the five best companies with a welcome package to Belgium. Stay tuned for the announcement! B-Hive member RiskConcile had to say this about the matchmaking session: "Thank you B-Hive for organizing the matchmaking session in Paris and bringing us in front of an interested audience! Through the matchmaking we could meet several interesting contacts at once and thus leverage on your network for our own business development." A few of our members and partners also hosted other activities and sessions throughout the conference as well. Birdee was featured in a panel on roboadvisory around the globe - with an impressive exhibition area to boot - and BNP Paribas Fortis hosted sessions for startups on collaboration and co-creation in financial services, and had CEO Jean-Laurent Bonnafe take the main stage for an interview. B-Hive members Juru and Features Analytics also had booths to
showcase their solutions. The B-Hive community's presence was certainly felt in Paris! As Corentin Poels and Joris Vanvolsem, Innovation Synergists at BNP Paribas Fortis, put it, Paris Fintech Forum included many high-level attendees, from CEOs, ministers, influencers and more. They said it was a fantastic international reach of the participants and fintechs, and it included a good mix of pitch sessions, panels, keynotes and expositions. There was a strong build-up of the communities: B-Hive, BNP Paribas Group and governments throughout the event, and the quality of the content and the deepdives into hot trending topics were really different from last year's topics. Belgian Minister of Finance Johan Van Overtveldt also took the main stage to discuss the future of finance in Europe in the fintech age. During the panel, Minister Van Overtveldt talked about B-Hive's achievements and what Belgium is doing to foster innovation and scaling. As he explained, “financial services and high tech should keep working together to foster innovation and create more value." Couldn't agree more! Finally, B-Hive joined the Luxembourg House of Financial Technology (LHoFT) for an evening cocktail reception, where we officially signed an MoU that will allow us to collaborate and cooperate through areas of mutual interest: you can read all the details here. Luxembourg Minister of Finance Pierre Gramegna and Belgian Minister of Finance Johan Van Overtveldt heavily support the initiatives and are excited for this formal collaboration. It was a busy and exciting two days for B-Hive in Paris - we thank everyone whom we had the chance to meet for a great conference!
About B-Hive B-Hive is a European collaborative innovation fintech platform that brings together major banks, insurers and market infrastructure players. Together, we work on common innovation challenges and build bridges to the startup and scale-up community. We aim to put Brussels on the map as the smart gateway to Europe and leverage on the opportunities offered by the digital transformation for the financial services industry. We believe that building bridges between important fintech hubs and the Eurozone enables both European and non-European companies to grow and expand.
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