It has never been easier to open a bank account and make payments on your smartphone, or to take out a loan on your computer. But there’s one small catch: you have to be a private customer. The large-scale adoption of new technology has driven banks to create a plethora of digital services, and even led to the birth of 100%-online banks. However, talk to any of the almost 3.6 million company directors in France and they will tell you an entirely different story, with access to only a small handful of digital services.
N26, Revolut, Kunto… Over the last 5 years, neobanks have brought about a revolution in the banking sector. These independent pure players highlight how quick, easy and secure they make banking for their users. At a time where the whole world is going digital, such 100%-online services offer stiff competition to the more traditional banks who appear to shy away from change. And it must be said that the current state of the economy is not going to help their cause. A cycle of negative rates has forced traditional banks to exercise caution and restraint in the face of a high-risk market.
With this in mind, are neobanks a viable alternative, capable of supporting business professionals in areas where traditional banks continue to stagnate? At the forefront of innovation for private customers, they market themselves around free basic services (a free credit/debit card, no foreign transaction fees, higher withdrawal limits, etc.) and the highest standards of security for banking operations. However, the limitations of such basic payment institutions, which are only aimed at freelancers and simple business entities, soon become visible when we look at medium and large-sized businesses.
While this situation preserves the central role of traditional banks vis-à-vis company directors, the profound digital revolution triggered by neobanks shows that traditional banks still have a long way to go in their transformation.
Traditional institutions are certainly making an effort to adapt, allowing company directors to perform some operations online, such as viewing their statements, transfers and opening business accounts. They have also launched their own online banks in response to new consumer practices, as seen with the likes of Société Générale (Boursorama) and BNP Paribas (Hello Bank). These online banks succeeded in attracting over 4.4 million French customers in 2017 (Source: ACPR), of which 44% made it their main bank (Source: CSA observatory of Online Banks and Neobanks).
However, even if the list of services has grown over the last few years, it remains limited and does not cater to all of a business’s consulting and financing needs. Directors still highly value personal contact with their advisor and cherish the face-to-face meetings, support and wide variety of services that are the mainstay of traditional banks, especially for more complex operations. And many are not yet ready to do without this. Nevertheless, they do expect the banking sector to offer easy-to-use online services for managing and monitoring their accounts.
The next-generation of B2B banks will thus be phygital or nothing at all, paired with a huge expansion of online services. Currently, neobanks and other online banks primarily offer just basic services, while more advanced features such as crowdlending and factoring are only offered digitally by a sporadic number of startups. No specialised offer exists, and so business owners wanting to go digital find themselves forced to work with multiple organisations, wasting both time and energy.
If banks really want to address the needs of directors in France, they will have to look into offering a fully integrated solution and expanding their online activities. There is currently no technological reason that all the various services available on the market cannot be centralised. We simply lack someone willing to take the plunge.
Laurent Cornu, Consulting Director at SQLI