Bankers and insurers are experiencing a revolution, with new regulatory requirements, the advent of fintechs, and more fickle customers. Monique Cohen, Partner at Apax Partners and financial services specialist, offers her view on staying at the cutting edge.
Under pressure from fintechs
Bankers and insurers are facing a new breed of competitor: the fintech. In just a few years, these nimble actors have raked in hundreds of thousands of users, transforming customer behaviour and reinventing some bank and insurance businesses. “The basic banking function—payments—is under significant pressure from fintechs,” says Monique Cohen. Whether facilitating payments on mobile or web platforms, or peer-to-peer (P2P) payments, the new actors have truly changed the industry’s ground rules. “As a result, entire segments of the population no longer go to the bank. The customer/banker relationship has changed considerably.”
The second structural transformation of the sector: regulatory changes. Since the European Parliament adopted the new Directive on payment services, banks are no longer the exclusive owners of their customer data. “For example, if customers want to use a budget management application, they can allow Google and the fintechs to access their account information,” says Monique Cohen. She explains that this will impact bankers in two ways: first of all, they need to anticipate new cybercrime risks; secondly, their customer base will be more volatile, because people can change banks more easily. “This regulatory trend is also evident in the insurance business, with different laws (e.g. the “Hamon”, “Sapin” and “Macron” laws in France) that allow customers to renegotiate their loans or change insurers more easily.” Banks and insurance companies must accommodate these structural changes and thoroughly re-examine their model.
Integrating the start-ups
To quickly capitalise on new behaviour and attract a younger clientele, banks and insurers are counting on innovation and rushing to acquire fintechs. Crédit Mutuel Arkéa, for example, recently took 80% of the capital in the start-up Pumpkin, a P2P payment application. BNP Paribas chose Compte-Nickel and its 500,000 new accounts to boost its customer acquisition and distribution network. “Customer acquisition is now a real obsession for bankers,” emphasises Monique Cohen. Investing in start-ups also allows established market participants to better meet customer expectations, by searching for the most competitive product or service in each segment. What is the right price for a fintech? “It depends on the potential growth outlook for the enterprise, and its uniqueness.”
Partnerships between large companies and start-ups are focusing on the customer experience, but Monique Cohen expects that there will soon be a widespread impact on other core bank businesses, particularly administrative activities. “Start-ups like WorkFusion have prompted a review of the back-office function, thanks to machine learning, which allows robots to perform repetitive tasks.”
Apax Partners’ dual expertise: Banking/Insurance and Technology
Apax Partners is especially interested in companies aiming to revolutionise the customer experience. “We want to help companies develop their innovative products, services and distribution models and, above all, their ability to convince the customer.” To support them, Apax draws on its dual expertise: in-depth knowledge of the banking and insurance businesses, and expertise in technologies and telecommunications. “We have frequent discussions with Gilles Rigal and Thomas de Villeneuve about existing technologies in the bank and insurance sectors, and the technologies of the future.” Synergy is an integral part of the philosophy of Apax Partners, which capitalises on the cross-fertilisation among its four areas of expertise: TMT, Consumer, Healthcare, and Services. Combined with the digital expertise of Grégory Salinger, Chief Digital Officer, Apax Partners’ industry specialisations give its companies the chance to stay one step ahead of the competition.