The neobank market - France

1.2 THE GLOBAL NEOBANKING MARKET: CURRENT SITUATION

According to Grand View Research, the global neobank market is estimated to be worth $**.** billion in ****. This is a market that is growing exponentially, with an average CAGR estimated at no less than **.*% over the period ****-****. We can therefore make the following estimates for the coming years:

Neo-banking market World, ****-****, in billions of dollars Source: ****

Overall, the market is driven by consumers' desire for greater flexibility and convenience in payments and other financial services. It is also largely underpinned by growing use of telephones and the Internet, which affects many services, and supports demand for digitalized banking services that also offer greater agility.

Geographically, Europe dominates the market, with **% of global sales. This is partly due to a particularly dynamic innovation industry. The fastest-growing market over the next few years is Asia-Pacific, with the growth of Internet-related services and the use of telephones, but also due to the development of the offer with fully digital banks in Japan, India and China. By ****, according to MEDICI India Fintech, Indian neo-banking startups will have raised over $*** million. The US market will be worth $**.* billion in ****, with an estimated CAGR of **.*% between **** and ****.

Neo-banking market by geographic region World, ****, as % of total Source: ...

1.3 NEOBANKS ARE BOOMING IN FRANCE

NeoBanques.app estimates that there will be no fewer than ** neo-banks in France by early ****, with ** million users by ****. [***] This represents almost **% of the French population with a neo-bank account. Responding to expectations of immediacy and flexibility, and an appeal for innovative services, neo-banks seem to be widely deployed in the French banking market, often posting remarkable growth year on year.

The neo-bank market is impacted by the overall online banking market, which is itself experiencing strong growth. An ACPR study of a sample of ** online banks (***) shows the trend in customer numbers:

Evolution of online banking customers France, ****-****, in millions of customers Source: ****

While the main banks of the French often remain traditional banks such as Crédit Agricole, La Banque Postale or Caisse d'Epargne, neo-banks have a growing position among the secondary banks of those who are multi-banked, notably Orange Bank, Nickel or N**. [***]

Yet according to the ACPR, uncertainty hangs over their real long-term growth potential. It argues that

a French population already highly bancarized low demographic growth an uncertain increase in multi-banking.

The market also suffers from a lack of transparency regarding customers and revenues. While we can't confirm with certainty the figure of ** million users, ...

2.1 THE PROFILE OF NEO-BANK CUSTOMERS

A study by Ipsos in collaboration with KPMG reveals a panorama of neo-banking consumers in France in ****.

Breakdown by gender

Neo-banks seem to appeal mainly to men, who are more confident and sensitive to this type of innovative financial service.

Breakdown of neo-bank customers by gender France, ****, in Source: ****

Age distribution

While young people are important neo-bank customers, they are far from the only ones: the over-**s account for over **% of customers. However, they are not seduced by the same types of neo-bank. International and digital neo-banks are much more attractive to young people (***), while neo-banks based on a physical network attract **% of over-** year-old neo-bank customers.

Breakdown of neo-bank customers by age France, ****, in Source: ****

Geographic breakdown

The majority of neo-bank customers live in cities of over ***,*** inhabitants.

Distribution of neo-bank customers, by living environment France, ****, in Source: ****

Breakdown by professional category

Among consumers who are not students or teenagers, the majority of neo-bank customers are senior executives and self-employed, who will represent half of all consumers in ****.

Breakdown of neo-bank customers by professional category France, ****, in Source: ****

2.2 NEO-BANK CUSTOMER EXPECTATIONS

High demand, primarily due to economic advantages...

Among the reasons for the popularity of neo-banking among private individuals are :

an advantage in the price of neo-bank services: free payments in other currencies, cheaper (***) opening of a new account, etc. an advantage in the quality of the services offered: the ability to do everything quickly with just * click from the mobile application, an important factor particularly for young people, who expect to be able to carry out any operation from their phone an advantage in terms of administrative ease and speed when opening an account.

Survey: motivations of neo-banking customers France, ****, in Source: ****

...and users who are increasingly connected...

More and more French people are downloading their main bank's mobile app, even in the case of traditional banks. The appeal of online banking is thus real; the French are increasingly looking to be able to connect to their bank directly via their smartphone.

Customers who have downloaded their main bank's mobile application France, ****-****, in % Source: ****

In the same vein, more and more French people indicate that all their exchanges with their bank are now carried out remotely: **% in **** versus **% in ****.

Frequency of visits to the main bank branch France, ****-****, ...

2.3 B2B, A BUOYANT DEMAND SEGMENT FOR NEO-BANKS

The expectations of SMEs

While many private customers turn to neo-banks for their attractive pricing, they can also attract SMEs, which are sometimes overlooked by traditional banking services. For SMEs, the first criterion is efficiency gains. According to a **** McKinsey study, SMEs spend an average of **% of their time carrying out tasks that are not their core business, including administrative, accounting and banking tasks (***).

Time spent by SMEs on non-core activities World, ****, in Source: ****

In this sense, according to an article in Journal du net, neo-banks could better meet their expectations in terms of :

fees: as with individuals, SMEs may be attracted by lower, clearer and more predictable fees than those charged by traditional banks ; onboarding: the account opening process is often much faster in a neo-bank than in a traditional bank. However, according to a study by Penta, a German digital bank, **% of companies surveyed in Germany and the UK found the process of opening a bank account tedious. advice: instead of in-branch or telephone assistance from a traditional bank, a neo-bank can offer online assistance, which can save SMEs a significant amount of time and efficiency; other tools adapted to their business activity: neo-banks can include in their offer ...

3.1 MAIN NEOBANKS IN FRANCE

Of the almost half of French people who have bank accounts with several banks in France, around **% have one or more accounts with online banks, even if it's usually a secondary account. Among the most represented online banks are Boursorama, followed by players such as Hello Bank, according to Capgemini's **** study.

Secondary online banking among French multi-bankers France, ****, % of total Source: ****

An overview of neo-banks by Ipsos shows that in ****, neo-banks have risen in the rankings by number of accounts of digital banks on the French market:

Top ** challenger banks in ****, by number of accounts Top ** challenger banks in ****, by number of accounts * Boursorama Banque Boursorama Banque * ING Direct Nickel * Nickel N** * Hello Bank ING Direct * Fortuneo Revolut * Mona Bank Orange Bank * B for Bank Hello Bank * N** Fortuneo * Revolut Mona bank ** C-Zam B for Bank With the Nickel neo-bank announcing that it will have passed the * million user mark by ****, the Moneyvox website provides us with a summary of data from recent years on the number of users of the main neo-banks on the French market: Number of neo-bank users France, ****, in millions of customers Source: ****

3.2 MARKET CONCENTRATION

In France, online banking is said to account for **% of the market. In reality, * major players continue to dominate the national market: Nickel, N**, Revolut and Orange Bank. Other players in the French market include the UK's Monese, Starling Bank and Wise, as well as the Finnish neobank Holvi, which specializes in corporate banking services. According to an ACPR report, in ****, of the ** or so neobanks present on the French market (***), Nickel, N**, Revolut, Orange Bank and payment app Lydia will hold **% of accounts opened in France.

Market share of the top * neo-banks France, ****, in Source: ****

However, this phenomenon is not about to stop, as an article in Le Figaro in **** warns of the market's increasing concentration, due to the difficulty of its players in finding a truly stable and profitable model. In July ****, for example, Qonto acquired its German competitor Penta. Orange Bank is also said to be a neo-bank open to takeover by other players. At the same time, neo-banks such as Vybe, Xaalys, Aumax and Prismea are disappearing. [***]

3.3 A MARKET STILL SEEKING ITS ECONOMIC EQUILIBRIUM

Neo-banks that are rarely profitable...

According to an article in Forbes, only *% of the *** neo-banks in existence worldwide by **** will be profitable. Despite years of existence and numerous fund-raisings, neo-banks are still unable to find a profitable model. Indeed, revenues from the low-cost or even free offers that neo-banks are keen to propose still don't cover the investments in development and offerings that most neo-banks are making, and in view of this situation, fund-raising is becoming increasingly rare. Among the neo-banks on the French market, Nickel is reportedly one of the only neo-banks currently profitable. Orange Bank is said to have accumulated losses of over *** million euros in the * years since its creation. Thomas Rocafull, partner at Sia Partners, explains in Le Figaro that "the drying up of fundraising is the tree that hides the forest of problems facing neobanks. There are far too many of them, and their model is struggling to become profitable, as it generates little revenue".

Neo-bank losses World, ****, in millions of euros Source: ****

... and are modifying their offer accordingly

Insufficient to be profitable, the main neo-banking model, which relies on a free offer to reach a maximum number of customers, is now developing towards a ...

4.1 TYPOLOGY OF NEOBANKS IN FRANCE

Other banks such as Eko, Monabanq, Qonto and Treezor also offer different ranges and products for current accounts and consumer credit.

4.2 Neo-banks, growth drivers for the banking system?

The decline of traditional credit institutions

The French public's waning interest in traditional banking establishments is necessarily leading to a sharp drop in profitability for bank branches, and consequently to the closure or merger of many of them. Over the past ** years, more than *,*** branches have been closed[***].

We can look at NAF code ****Z: Other monetary intermediation. This sub-class includes the taking of deposits, the granting of loans or the lending of funds by banks, savings banks and credit unions.

Growth in the number of establishments registered under code ****Z France, **** - ****, in number of establishments Source: ****

In recent years, the number of establishments registered under code ****Z has been falling, with a -**%% drop between **** and ****. Against a backdrop of declining numbers of banking establishments, online platforms and neo-banks are experiencing significant growth.

The growth of neo-banks

The rise of neo-banks is based on the difficult times facing traditional banks. Indeed, the products on offer are designed to overcome the difficulties encountered by customers in "classic" banks: quick and easy account opening, accessibility to the greatest number, no resources required, ***% online... According to a KPMG study, some **% of French customers of this new type of bank would be prepared ...

5.1 REGULATORY FRAMEWORK FOR NEOBANKS IN FRANCE

Regulations governing the use of "neo-banks

The ACPR reminds us that the use of the term "bank" is regulated in France. Any payment company or fintech cannot be called a "bank" or "neo-bank". To qualify as a bank or neo-bank, a company must have received "credit institution" approval from the ACPR or an equivalent authority in another European country. [***]

Regulations applying to neo-banks

All neo-banks are subject to the same regulations as banks, as listed by the AC PR:

the European regulations and directives that make up the CRD IV package national laws and regulations governing the activities of credit institutions administrative rules enabling legislative and regulatory requirements to be met guidelines, in particular the disclosure requirements of European Directive ****/**/EU, and any other requirements that a competent authority may publish in this respect.

6.1 Segmentation

• Alma
• Lydia
• Nickel
• Hello Bank !
• Memo Bank
• Qonto
• Revolut
• N-26
• Bforbank
• N26
• Mangopay
• Oney
• Ibanfirst
• Pledg (Credit Agricole)
• Orange Bank