Much of the talk around Brexit has centered around the UK’s changing relationships, but one country is hoping to capitalize on Britain’s departure from the EU: France is trying to take over a piece of the fintech space left from the UK’s departure.

Piece of Fintech Pie Up for Grabs

Markets and banks in Paris have lagged behind London for years, especially when it comes to financial technology start-ups. The few start-ups that tried to grow in Paris have been faced with a lack of financing and a constraining business environment.
However, with Britain out of the EU, firms may turn to other cities as a way to roll out products evenly across Europe. The UK will likely lose access to the European single market after Brexit, which means the city could shrink as a global banking center, causing start-up investments to slow down or stop. In the months since the Brexit vote, a number of large and small financial companies have announced their moves to other cities throughout Europe.

A new wave of French entrepreneurs appear to being positioning themselves to take advantage of what they see as an opening in the European fintech space, meaning Paris could soon become the new hub of European finance and technology.
The recently held Paris Fintech Forum tripled its attendance from last year, with more than 1,500 bankers, investors, and entrepreneurs from around the city gathering to discuss the region’s potential. Many bankers and entrepreneurs view the UK’s departure as an opportunity for France to up its game.

Mobile Technology Changing the Banking Game

The industry’s geographic upheaval comes at a time of great change. In an evolving technological world, the need for fintech start-ups is more important now than ever. Up until this point, high profitability has helped French banks avoid having to cut costs like other international banks.
However, a new law goes into effect in the country in February that makes it easier for customers to switch banks. That, combined with clients wanting new technology options to make banking easier and cheaper, has driven many French banks to increase their focus on digital spending.
An increasing number of people are moving their banking to their smartphones; a survey found that only 20% of clients in France visited their bank more than once a month, a sharp decrease from 62% in 2007, as mobile banking technology continues to grow and develop.

As Bank of France governor Francois Villeroy de Galhau said, “For banks and insurers, the digital revolution is upsetting the traditional model for client relations,” noting that there are many difficult choices ahead.
“You need to create a sense of urgency,” said Axa Chief Executive Officer Thomas Buberl. “Everybody at Axa has understood that digital is there, that digital changes our business and also that digital can create an opportunity.”
One of the big players in the switch to digital is Groupe BPCE, which controls the second-largest market share of French loans. It bought German online bank Fidor last year as a platform for financial advice and has plans to move 1,000 current employees to its digital teams, as well as open operations in France and Berlin. Other groups are also joining the movement: Societe Generale is increasing its investments in online banking and technology by sharing an account-aggregating tool with its consumer-banking networks.

Continued Progress Needed

Fintech start-ups raised 155 million euros in France in 2016, up from 135 million euros in 2015. However, financing in France is still just a small portion of what it is throughout the rest of Europe.
Although France is making progress, it still has a long way to go before it comes close to the UK’s levels. Of the 125 fintechs at the conference, only a third were French, and just 3% of all organizations represented have raised more than 100 million euros in venture funding.
And while there is hope that Paris will be able to capitalize on the UK’s departure, experts warn that fintech competition is very international and steep. Paris isn’t alone in its attempt to take over at least part of London’s fintech dominance. Frankfurt has made a big push for London-based banks to move there, and it has the advantages of a more solidified banking system already in place. Dublin and its large tech community are also making a push for more start-ups in the area, as is Berlin.
The effects of Brexit will be felt in the fintech space long after Britain has left the EU. With changing technology and a new hub, it could be the start of a new era for financial start-ups and large banks.