Mounir Mahjoubi, the French secretary of state for digital affairs, spoke to Joy Macknight at the Money 20/20 Europe conference about the value created through bank-fintech partnerships and how France is fostering an attractive environment for fintechs, which is of growing importance due to Brexit.

Mounir Mahjoubi

Mounir Mahjoubi

Preparing for the move to ‘open banking’, as embodied in the second Payment Services Directive, is a key challenge for the French banking industry in 2018, according to the country’s digital minister, Mounir Mahjoubi. Nevertheless, he believes that it will also help to progress the digital transformation of incumbent institutions and encourage a thriving fintech industry.

The European directive, which comes into force in September 2019, aims to increase competition by giving new payment players easier access to customer financial data through, for example, application programming interfaces (APIs), as well as enhance security and consumer protection.

No fear

Mr Mahjoubi encourages banks not to be fearful of the new entrants. “The worst behaviour [incumbents] could exhibit is to resist and make it difficult for new actors to connect or work with them, because then everyone will lose. But if the banks play their part in the new ecosystem, then everyone can win,” he says.

He believes that the large French banks have made significant progress in embracing the fintech start-up wave and applauds the effort put into digital transformation thus far. However, the journey is not yet over. “They have reached the right speed of innovation and the right level of partnership, but now they must go through a deep cultural change to embrace an open API philosophy, where competition can happen at multiple levels in a banking relationship,” he says, pointing to France’s ecosystem of innovators that are “already operating in this open banking world and offering advanced experiences and technology”.

Mr Mahjoubi reports a sea change in incumbent institutions’ attitudes towards fintechs. Today, a “great majority” of banks and insurers recognise that they have “more to win by investing and contracting with these new actors than [they have] by beating them with regulation”, he says. This is an important shift from a few years ago, when incumbents were calling for greater regulatory controls to be placed on new entrants, arguing that they were unsafe and a risk to the stability of the financial system.

The change has mainly come about because of recent experiences that have demonstrated the value created through fintech partnerships, according to Mr Mahjoubi. “Some banking groups have bought innovative fintech companies and included them in their basic offerings, which transformed [the incumbents] and their whole organisation,” he says.

“That is the best model – when a large organisation views small actors as partners and uses them as a catalyst for transformation. A poor model is when an incumbent works with a start-up – without paying them – on a proof of concept that will never launch. The ‘fintech tourism’ model was common a few years back, but now it is more about creating deep business partnerships.”

Vibrant ecosystem

Fostering an attractive environment in France for fintechs is an ongoing focus for Mr Mahjoubi’s ministry, especially in light of Brexit. “Europe needs a place where fintechs find a welcoming regulatory framework, but also a culturally welcoming situation,” he says. For example, in June 2017 the government launched the French Tech Visa scheme, a simplified and accelerated procedure for obtaining a residence permit for start-ups, employees or investors, and, more recently, announced a regulatory sandbox initiative.

Notably, the French banking supervisor, the Autorité des marchés financiers (AMF), has also embarked on its own digital transformation – as part of its strategic plan, #Supervision2022 – to make it a regulator “adapted to the fintech arrival and transformation of the industry”, he reports.

The level of commitment from successive governments has encouraged the emergence of many fintech incubators, accelerators and ecosystems. And while Paris acts as a central hub, the activity in other cities also attracts attention and, importantly, investment. According to Fintech Global research, investment in French fintech companies increased by 47.8% between 2014 and 2017. The total amount invested in 2017 reached a record high of $297.8m across 41 deals. However, this does not come close to the level of investment the UK ecosystem commands, with fintech companies raising £3.07bn ($4.05bn) in 2017, despite Brexit uncertainties.

A start-up nation

The digital ministry is fully supportive of president Emmanuel Macron’s vision of turning France into a ‘start-up nation’ and fostering the emergence of international technology champions. On May 25, Mr Mahjoubi unveiled ‘French Tech, Horizon 2022’, which includes €70m-a-year support for ‘deep tech’ players, or start-ups focused on breakthroughs in science and engineering that profoundly change industries; help in recruiting talent through doubling resources to the French Tech Diversity programme and easing recruitment conditions under the French Tech Visa scheme; and specific support for French start-ups with high growth potential, called the ‘next 40’.

“We invest directly to help diffuse the ecosystem of investors to finance new and emerging start-ups,” he says. “It is important to help start-ups become large champions operating around the world.” [Since this interview, on June 21, France established the French Tech Seed Fund with an initial €400m for tech start-ups in post-maturation phase.]

While these initiatives are not solely for fintech start-ups, Mr Mahjoubi’s visit to Money 20/20 Europe in June illustrates his commitment to the fintech community. He joined the 13 French start-ups exhibiting in Amsterdam “to give small start-ups [financial] support from the state to help them reach their future international clients”.

Mr Mahjoubi, an entrepreneurial leader, has spent many years promoting the start-up ecosystem in France. For example, from June 2016 until he took up his ministerial post in May 2017 he was CEO of French Bureau, which helps start-ups to launch; and in 2011 he co-founded Le Bridge, a digital support network to connect start-ups and investors in London and Paris.

He believes that France has an opportunity to play a leading role in other technology sectors, such as artificial intelligence and cyber security. “The world is looking at our companies and what they can provide,” he says, emphasising the trust factor that the country elicits on the global stage. “France is known for trust and we are developing a name for technology. If we play both cards at the same time – trust and innovation – then we will do well in fintech, cyber security and so on, where trust is as important as the technology.”

Banking on blockchain

Building on its trusted reputation, France is positioning itself as a global hub for initial coin offerings (ICOs) and recently announced that it was open to companies using this alternative crowdfunding method based on cryptocurrencies or tokens. In late May, the Treasury and AMF put forward a bill, called the Pact Act, or Action Plan for Business Growth and Transformation, which is predicted to come into force in early 2019 following a parliamentary debate. Mr Mahjoubi believes this act will “…create the coherence of trust and technology” in ICOs.

Additionally, in December 2017, the French government announced new rules for trading unlisted securities using blockchain, meaning that banks and fintech companies can set up blockchain platforms where unlisted securities can trade instantly, cutting out middlemen such as custodians and brokers.

The French government is also experimenting with blockchain. When asked if he was confident in blockchain’s potential, Mr Mahjoubi says: “I trust the technology if I can create the framework to make it credible.” However, he would not be drawn on whether France would go down the cryptocurrency route. This is an area that Estonia, for example, has been exploring but has recently scaled back its plans to launch the so-called ‘estcoin’.

E-government initiative

Mr Mahjoubi’s ministry is responsible for France’s e-government initiative, which he considers to be an overriding priority. And with the goal of dematerialising 100% of administrative procedures by 2022, France has turned to Estonia, which is a global leader in digitalisation. The Baltic country has already moved 99% of its government administration activities online.

Building on previous technology-sharing arrangements, on March 18 Mr Mahjoubi signed a co-operation agreement with the country’s minister of entrepreneurship and IT, Urve Palo, to exchange best practices and solutions in the fields of e-governance, digital economy and cyber security.

As digital identity is the first step to a fully digital economy, the ministry launched France’s digital identity project at the beginning of 2018, with a delivery deadline by the end of 2019. Interestingly, Estonia is a leader in this space as well and is moving towards becoming a borderless nation state through its e-Residency programme, where any individual can become a digital resident without setting foot in the country.

When asked whether France will follow Estonia’s lead in providing a digital identity to non-French citizens, Mr Mahjoubi did not discount this possibility but says it would only be considered after the successful completion of the national e-identity project. “First, we are developing our infrastructure of public e-services with an advanced digital public identity [for French citizens],” he says.


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