La French Tech marches on
All eight are members of the ‘Next40’, a selection of hotly tipped firms being championed, and having their needs prioritised, by France’s state apparatus – and all could be defined as fintechs.
After a slow start, certainly relative to the UK, a confluence of factors has meant that French fintech is on the march.
“Consumer behaviour has changed a lot, with younger people using apps and being open to using neo-banks, as well as the regulatory landscape becoming more favourable,” says Alain Clot, president of France Fintech, which has grown to more than 200 member companies after being set up five years ago.
Government and public authorities take a lot of credit in the developing story of French fintech’s rise, with the 2017 election of president of Emmanuel Macron – a popular figure in the sector – giving a palpable further boost.
Initiatives have included: in 2013 the creation of ‘La French Tech’ (or the French Tech Mission) – a major development to facilitate and promote technology firms’ growth; in 2016 the Autorité de contrôle prudentiel et de résolution (ACPR) and Autorité des marchés financiers (AMF)’s creation of a ‘FinTech Innovation Unit’; in 2017 the opening of the world’s biggest business incubator, Station F, on a former rail freight site in Paris; and, more recently, the launch of the Next40 and also the French Tech 120, which includes 80 further high-potential companies.
Investor interest is growing. Bpifrance (the Banque publique d’investissement – state-owned investment bank) has enjoyed a significant role (including during the coronavirus pandemic), while Macron announced last September that €5bn of institutional investment would be allocated to innovative tech companies over three years.
The target is to create more than 25 French unicorns – privately held start-ups with a value above $1bn – by 2025.
Clot, who has worked in the financial sector for more than three decades, mainly at French bank Société Générale, applauds the ambition. “It’s good that Macron is conveying positive messages. That said, valuations are one thing but profitability and number of clients are also important,” he says.
International investors are feeling the positive vibes. Earlier this year Chinese conglomerate Tencent co-led a funding round to invest in B2B neobank Qonto – reportedly the largest-ever funding round for a French fintech – as well as investing in Lydia, a mobile payments app particularly popular among young people.
2018 saw French fintechs raise €365m across 72 deals. 2019 saw €699m across 64 deals – 91% growth in volumes, with the average ‘ticket’ size more than doubling, according to France Fintech data.
“The creation of La French Tech and Macron’s support has been pivotal,” says Sofia El Mrabet, who specialises in fintech at the Paris office of law firm Bird & Bird. “As well as being practically helpful and relatively well funded, La French Tech is a great international marketing tool for France – previously when you thought of tech you didn’t really think of France, you thought of Silicon Valley, the UK and Asia.”
El Mrabet and Clot both point to the ACPR-AMF Fintech Innovation Unit’s creation as significant. “We wanted to have regulators who talk to each other – I didn’t think it would be possible! Also, it’s staffed by people who know the industry and not bureaucrats,” says Clot.
Clot identifies three factors that he believes initially hindered the growth of France’s fintech market: a (relative) lack of the venture funding required to fuel start-ups and, particularly, scale-ups; a traditionally cautious regulatory approach to innovative companies; and the relatively powerful and multi-product nature of established banks. “In the UK people have always tended to get their different financial services products from all sorts of different providers, not just one bank, as has traditionally been the case in France,” he says. But times are changing.