Online banks, such as Boursorama, and other Nobanks on FinTech, like the Nickel account, have a market share of 6.5% according to a survey by the French Prudential Supervisory Authority (ACPR / Banque de France). ). But the difficulty of finding an economic model raises the question of their durability.
Who said the bank was not a competitive market? The new entrants of the sector, which we call online banks – as Boursorama or Fortuneo emerged in the 2000s, often as online brokers – or “neobanks”, a more recent term applied to the start-ups of the Fintech proposing Basic mobile current account services (like the Nickel or Orange Bank account) have made a real breakthrough on the French market. According to a survey by the Autorité de Contrôle Prudentiel et de Resolution (ACPR, backed by the Banque de France) published on Wednesday, October 10, they have won 4.4 million customers cumulatively at the end of 2017. Figures that had already been made public by professionals in the sector but that the ACPR details and dissects.
“The new banking players have gradually managed to settle in the French banking landscape yet mature [they] have actually gained market share: 6.5% of the French are now customers and especially a third of conquests customers were realized by these new players in 2017. By their commercial dynamism, they have become key players in retail banking in France, “explains the study.
With their easy-to-use apps and offerings, they have attracted 1.3 million customers in 2017, representing 33.5% of customer wins of the year.
The ACPR does not go into detail but some figures are known: Boursorama is leader with more than 1.5 million customers and Account Nickel claims more than one million accounts opened. ING Direct is close to one million customers including 400,000 current accounts (the rest in booklets) while Fortuneo would have 400,000 customers in France. Hello bank! BNP Paribas had 350,000 at the end of 2017 and Monabanq would have 310,000. Orange Bank did not update the 100,000 customers identified in March. If we look at the current accounts, these actors would have 3.1 million according to the ACPR, or about 3.9% of the total estimated at 80 million accounts.
“By the end of 2020, the strategic plans of the new banking players are based on a total of 13.3 million customers, a tripling of the business in three years,” notes the ACPR.
In comparison, in retail banking in France, BNP Paribas and Société Générale have 6.7 million and 8 million customers, respectively.
Very disparate actors
However, it is a set of disparate actors, some of whom have been on the market for a dozen years, others for a few months. A large number of them are in fact subsidiaries of banking groups such as online banks (Boursorama of Société Générale, ING Direct of ING, Fortuneo of Crédit Mutuel Arkea, BforBank of Crédit Agricole, Monabanq of Crédit Mutuel CM11-CIC ) or the Nickel account (acquired by BNP Paribas). Some are unincorporated brands like Hello bank! BNP Paribas and Carrefour Banque’s C-Zam account.
Very few independent startups: the German N26 (1.5 million customers in Europe, more than 200,000 in France) and the British Revolut which now claims 3 million users in Europe, including 375,000 in France. The ACPR also included Orange Bank but also My French Bank, La Banque Postale, which is not yet launched, but not Morning (ex-Payname), bought by Bank Edel (Leclerc). Some of these players do not have a 100% digital model: this is the case of Orange Bank, whose offer is sold 60% in the stores of the operator, C-Zam (box to buy in hypers) and Nickel, whose account necessarily opens at a tobacconist.
Competitive rates, bonuses, little income
Despite these differences in profile, these online banks, in full strategy of conquest, all have “very competitive pricing practices, even offensive”, ie broken prices, or almost all-free. Which makes their business model complicated. The ACPR, which was able to analyze the financial results of 8 out of the 12 selected institutions, observes that “with a few rare exceptions, these new players have not been able to achieve a positive net result in 2017”.
Account Nickel claims to be profitable since last year, Fortuneo would be profitable for several years. Last September, Revolut announced that it generated a loss of 14.8 million pounds in 2017, exceeding its revenues (12.8 million pounds, approximately 14.6 million euros). Boursorama suffered a loss of 48.8 million last year (including 20 million excluding exceptional items). Orange Bank has increased its losses in the first half, to 68 million euros, mainly because of the “acquisition costs of customers of the new banking and digital offer” had explained the telecom operator. This is one of the black spots of their model.
“Commercial offers such as welcome or sponsorship bonuses can in particular be a significant item of expenditure (up to 24% of net banking income),” the net banking income, in other words revenues, notes the ACPR.
But these companies generate only low income, “on average seven institutions 138 euros per year and per customer,” says the study, with large differences (Orange Bank has a GNP of 26 million in the first half when Boursorama has 160 million euros in GNP last year).
“For all these actors, 20% of customers systematically report more than 80% of revenues and for many of them more than 90%”, stress the authors of the study.
These revenues are also strongly dependent on “the margin on deposit drawn from demand deposits and booklets (on average 55% of GNP)”.
In search of a sustainable business model
The regulator observes that “in their strategic plans, the majority of new banking players expect to achieve positive results in 2020”. They hope to reach “the critical size sufficient to amortize the cost base associated with the implementation of a banking relationship” and become the main bank of their customers, in order to increase the amount outstanding and the number of products sold to each. The improvement in profitability will also pass through “better control of the cost of risk” believes the ACPR (risk of fraud especially).
“The study institutions with the best financial results also have a lower risk burden,” notes the banking policeman.
The ACPR thus highlights “the uncertainties weighing on [the] development prospects” of these new players. Groupe BPCE (Banque Populaire Caisse d’Epargne) has also given up the idea of launching in France Fidor, the German neobanque bought two years ago. For its part, La Banque Postale has delayed the launch of its mobile bank.
“If the strategic plans of some institutions could be too ambitious, it is nevertheless difficult to judge profitability projections for actors whose strategy of innovation and development can induce profound transformations of the sector”, write cautiously the authors of the study.
The bank supervisor recognizes that these players play a role of spur, technologically and commercially, the market, or laboratory for large groups: “they have emerged as key players in the future transformations of retail banking . ” It remains to be seen whether they will still be there in 2020.