About Exton Consulting Exton Consulting is a strategy and management consulting firm, founded in 2006 and specializing in financial services: insurance, retail banking, cards and payments, CIB & Asset Management. As a key player in this field, Exton Consulting provides executive boards with the advice and support needed to manage company growth, transformation and innovation. The firm is represented in France, Italy, Germany and Morocco and employs 150 consultants with a high level of expertise and competence. With more than 10 years of experience, Exton Consulting has become a privileged partner in addressing the challenges and opportunities of digital transformation in financial services. In direct contact with the FinTech and entrepreneurial ecosystem, to better support its clients in their innovation projects, Exton Consulting is a founding member of Le Swave, the first French acceleration platform for FinTechs, and a partner of Finance Innovation, an active member of its FinTechs banking and insurance projects labelling committee. For more information: www.extonconsulting.com [email protected] FOREWORD Some observers predicted that the FinTech phenomenon would slow down worldwide at competitive advantages and accelerate their digital transformation. the end of 2016. However, financial start-ups continue to attract investors and 2018 is already proving to be a record year. These are just some of the factors that lead to attractive development opportunities for FinTechs in France. Europe is the region with the strongest growth in 2017 (+121%) and in third place after North America and Asia in terms of invested amounts. The continent has a regulatory In this context, Exton Consulting and the Finance Innovation cluster wanted to framework that favours the emergence of FinTechs (with the European financial passport combine their expertise in order to: and the entry into force of PSD2, which paves the way for open banking). • provide a complete inventory of the French FinTech ecosystem by highlighting the creation dynamics, the different types of structures (by size, stage of maturity, income France is also a fertile ground for the emergence of technological and innovative level and profitability), the impact on employment, the profile of managers, the level of finance projects: the country is known worldwide for its excellent scientific field, and is internationalization of these start-ups, etc. at the forefront of artificial intelligence. The French, and Millennials in particular, are • better understand the actors comprising and coordinating this ecosystem, while showing growing interest in these new services which offer them an improved, intuitive measuring France's attractiveness for the development of the sector through key and simplified customer experience. levers: financing mechanisms; acceleration programmes; initiatives by regulators and This positive societal dynamic is reinforced by the various legislative developments public authorities to promote financial entrepreneurship, and the degree of designed to promote mobility and openness towards these alternative players. Bankers collaboration with bankers and insurers. and insurers are increasingly willing to work with these start-ups to create sustainable Frédéric PERRIN Jean-Louis DELPÉRIÉ Sophie ZELLMEYER Joëlle DURIEUX Cyril ARMANGE Maximilien NAYARADOU Partner, payment Partner, insurance Director, Fintechs General Manager Director of Partnerships Research Director and neo-bank and Insurtechs and Innovation Finance Innovation and Communication Finance Innovation Exton Consulting Exton Consulting Exton Consulting Finance Innovation © Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 3 CONTENTS CONTEXT AND METHODOLOGY OF THE STUDY 5 MAIN ISSUES ADDRESSED 6 KEY LESSONS 7 9 FRANCE IS COMPLETELY EMBEDDED IN A THE FINTECH DYNAMIC 10 17 FRENCH FINTECH INDUSTRY 18 33 B UNDER THE MICROSCOPE LEVERS FOR THE DEVELOPMENT OF THE C FINTECH ECOSYSTEM IN FRANCE 34 57 INTERVIEWS 58 78 EXTON CONSULTING AND FINTECHS 79 81 © Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. STUDY METHODOLOGY Questionnaire sent to +300 Fintechs (all segments combined) in April 2018 • This report is the result of a quantitative survey conducted in the spring of 2018 by QUANTITATIVE SURVEY +120 respondents, from different segments Exton Consulting with approximately 100 and maturity levels Fintechs executives covering all segments of financial services. Internet and telephone questionnaire • This report is also based on visits by Exton Consulting, with the Finance Innovation cluster, to many Fintechs accelerators to meet with incubation VISITS TO INCUBATORS About 10 Fintech incubator and accelerator sites visited in Paris and other regions managers and Fintechs executives, to understand their assessment of the strengths and weaknesses of the Exchanges with programme directors, incubation ecosystem in which they operate. managers and managers of French Fintechs • These testimonials were mirrored with those of key personalities interviewed by COLLECTION OF Interviews of approximately 15 Fintech and entrepreneurial personalities in France and in Europe Exton Consulting: Innovation directors TESTIMONIALS and/or General Managers in Banking and Insurance, financing actors (venture Between March and June 2018 capital and business angels), sector institutions and regulators. Support provided by specialized databases • These field surveys were supplemented DATA ANALYSES (Maddyness, CB Insights,…) by an analysis of specialized databases and public data. Analysis of reports and public data © Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 5 KEY ISSUES ADDRESSED IN THE STUDY What are the main development dynamics of Fintech companies on a global scale? Which countries are the most active and how does France compare with the rest of the world and its European neighbours? How is the Fintech sector doing in France? In which sectors and in which domains do Fintechs operate? What are the profiles of Fintech executives? How many jobs do they help to create in France? Who are the actors supporting the Fintech ecosystem in France? What initiatives are they implementing? What level of cooperation exists with traditional actors in the financial industry? What locks must be opened to raise French Fintechs even higher and to help with the emergence of tricolour unicorns? What are the prospects for the future? © Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 6 MAIN LESSONS FROM THE STUDY (1/3) FRANCE IS NOW COMPLETELY EMBEDDED IN THE FINTECH DYNAMIC In recent years the pace of creation has been particularly high in France - The founders, on the other hand, are more experienced (> 40 years on average). They are - The Fintech wave started a little later in France: from 2014 the phenomenon really not there by chance: three-quarters of them have previous experience in financial gained momentum services (mainly banking) and almost half are "serial entrepreneurs" - In total, almost 500 structures make up the French Fintech / Insurtech landscape with - The Fintech sector, like the entire financial industry, is struggling to feminize. Despite more than fifty start-ups registered per year some great success stories of talented female self-entrepreneurs, only a quarter of new - French Fintech’s solutions cover the entire spectrum of the financial industry, though hires in the sector are women, and in 9 out of 10 cases, the founders are men. some segments are more mature (in particular payments and alternative financing) - 35% already rely on artificial intelligence (Machine Learning), or even more than 50% if we also consider the ones working on Big Data - Almost a third was created in the last 24 months ≈ 500 Fintechs in 2018 - On a European scale, despite more modest fundraising campaigns, the French Fintechs are role models for sustainability: 36% of the structures are more than 5 years old. €290 million for 60 deals in 2017 +86% funds raised vs. 2016 €190 million in H1 2018 French Fintech is a job-creating sector for SMEs/VSEs - Although more than half are still very small structures with fewer than 10 employees, 3rd Fintech market in Europe Fintechs directly employ nearly 10,000 people, not counting freelancers, who are (in number of deals - 4th in terms of invested amounts) used by 2/3 of the structures and can represent up to 30% of the workforce - or even more than 50% for Fintechs with fewer than 5 employees: significant indirect €6.5 million for the ticket amount employment! In the first half of 2018 - The Paris basin, where almost 80% of Fintech companies are located, is still the main beneficiary of this recruitment, although other cities with specific Fintech support 11% of fundraising activities programmes are particularly dynamic (B612 accelerator in Lyon and Grenoble, start-ups in France Frenchassurtech in Niort, but also Nantes, Marseille, Bordeaux, Brest…) Rising stars - These start-ups attract younger generations that constitute the bulk of the resources: are standing out internationally the average age is 31 years. and posting strong growth © Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 7 MAIN LESSONS FROM THE STUDY (2/3) FRANCE IS STILL IN THE CATCH-UP PROCESS, WHICH EXPLAINS A CERTAIN WEAKNESS, BUT HAS ALREADY BROUGHT OUT PROMISING