French Fintech Ecosystem

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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

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

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

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?

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

FRANCE IS STILL IN THE CATCH-UP PROCESS, WHICH EXPLAINS A CERTAIN WEAKNESS, BUT HAS ALREADY BROUGHT OUT PROMISING FINTECHS WHOSE NOTORIETY EXTENDS BEYOND THE COUNTRY'S BORDERS

The invested amounts remain below certain financial markets but are constantly While some FinTechs are growing well, these structures remain fragile as a whole increasing - Overall, it is estimated that French FinTechs generated almost €800 million of earnings in - In 2017, €290 million were invested in French FinTechs, an increase of 86% compared to 2017. 2016. - More than half of them have annual earnings of under €300,000, given the very nature of - H1 2018 confirmed the trend with amounts raised well above the whole of 2016. these still very young companies:a quarter of them are still in the start-up phase. - The average ticket amount (5 million in 2017), although constantly increasing, was half as - Extending beyond France is often a necessity in order to reach a critical mass and ensure high as the European average (overweighted by London), which puts France in fourth place the ramp-up of their commercial activities : the 8% of the FinTechs that are generating in Europe in terms of amounts invested in FinTechs. more than €10 million of annual earnings, all operate internationally. - This relative weakness of the amounts collected by French FinTechs must be put into - 50% favour the more profitable B2B2C model, while increasingly positioning themselves perspective in light of : primarily as technology providers in the service of major actors in the financial services • The maturity of the French FinTech ecosystem, which started somewhat later and is still sector, but also for other sectors (30% of FinTechs operate in B2B2C). in the process of catching up : more than 53% of French FinTechs have only raised funds - Less than 20% say they are profitable. once • The specific nature of the French financing system in which start-ups are benefiting However, there is a real desire on the part of French FinTechs to take it to the next level from the creation of many public subsidies, thereby delaying the recourse to initial - The main fundraising reasons are to accelerate development by increasing staff (for 77% fundraising of FinTechs) and to internationalize by opening branches outside of the country (49%). - In addition, in H1 2018, the average increased appreciably to €6.5 million, with a - More than 42% of French FinTechs say that they already have commercial contracts significant opening to foreign venture capital funds, a sign of the attractiveness of French outside France : mainly in Europe (with 39% of FinTechs operating internationally), but FinTechs. also on other continents (11% in North America, 8% in Asia). - Amongst French FinTechs operating internationally, 22% have opened one or more commercial structures abroad. - Although it does not yet have unicorns in valuation terms, France has managed to produce about twenty nuggets in the scaling phase, which have gained international fame.

THE FRENCH FINTECH ECOSYSTEM HAS BECOME CONSIDERABLY MORE STRUCTURED AND DENSE IN RECENT YEARS. STRONG PILLARS ARE SUPPORTING THE SECTOR'S DEVELOPMENT AND PROMOTION

French public authorities have taken many initiatives in favour of technology and French regulators are also organising themselves to support Fintechs: they are open to entrepreneurship, and to develop financial start-ups these new business models and technologies - In regard to Brexit, Paris intends to strengthen its position in the European financial system - The AMF and ACPR have created orientation and advisory centres to better support and (EBA, Elixium with collateral) guide Fintechs, and Task Forces on the impact of new technologies in finance. The - This led to the launch of Le Swave, a dedicated Fintech accelerator in Paris Banque de France has also launched a Lab, and is the first Central Bank to have created a position of Chief Digital Officer The emergence of structures and programmes to support Fintechs and Insurtechs has - For 38% of Fintechs, the difficulties involved in obtaining accreditation are an obstacle to accelerated considerably in the last three years France's competitiveness - In the last 6 months, about 10 Fintech/Insurtech structures have been launched in several - The approach chosen by the regulator is still cautious compared to certain more flexible cities in France: the support network for financial start-ups now links the entire territory markets that have set up "regulatory sandboxes" that are solicited by 55% of Fintechs, through the FinTech network, which is responsible for the promotion of local start-ups who would like to see these derogations implemented within French territory - More than 60% of Fintechs have gone through such an incubation/acceleration programme The sector's historical players are increasingly opening up to Fintechs French Fintechs can count on many sources of public and private funding to support their - Bankers and insurers now plan to rely on Fintechs to accelerate their digitization: all, to activities, particularly in the early years of their establishment varying degrees, have opted for open-innovation by setting up a range of mechanisms in - Unlike other countries, French Fintechs, like other start-ups, can benefit from a large order to work better with these new players amount of state and public aids from the outset (via the Public Investment Bank - BPI, - 75% of Fintechs welcome this willingness to open up to them grants, loans, tax credits, etc.) - However, 79% still regret the slowness and lack of responsiveness in promoting exchanges, - 60% of Fintech entrepreneurs, however, regret a lack of visibility amongst the many and 62% regret the burdens of the contractualization processes schemes and do not understand the support available to them - While > 2/3 have at least one agreement with a French player in the sector, 73% of the - As a relay from these public mechanisms, Fintechs can raise funds from private investors, cases are Proof of Concept (POC): interactions are still struggling to morph into real who are more and more interested in the sector's potential industrial partnerships. - Alongside generalist Venture Capitalists, two independent funds with a specific focus on Fintech investments have also been launched in France (BlackFin, New Alpha AM…) - Historical players in the financial industry have also created their own Fintech/Insurtech investment structures in order to better understand these new models and to build up a pool of potential strategic partners.

THE FINTECH PHENOMENON IS STILL ON THE RISE 12 > 14 1 AND IS SPREADING ACROSS ALL CONTINENTS

EUROPE IS A MATURE REGION, PARTICULARLY 2 CONDUCIVE TO THE DEVELOPMENT OF FINTECHS 15 > 16

FRANCE IS A FERTILE GROUND FOR THE EMERGENCE 3 OF INNOVATIVE FINANCIAL PROJECTS > 17

THE FINTECH PHENOMENON IS CONTINUING WORLDWIDE

• The investment slowdown seen in 2016 was short-lived l History of the number of worldwide Fintech deals and investments – In 2017, 1134 Fintech and Insurtech deals were identified worldwide for an amount of 31 billion 2010-2017 and H1 2018 dollars, representing a +24% increase in terms of deals compared to 2016 Figure A.1.1 – In total, more than 160 billion dollars have been invested in Fintechs since 2010 (cf. Figure A.1.1) – There are now several thousand start-ups worldwide and already 32 unicorns (cf. Figure A.1.3) Amount of funds raised (€ billion) Number of operations

50 1400 +5% • Far from running out of steam, the worldwide momentum of the Fintech phenomenon has been 1200 38 $30 billion confirmed and 2018 is already a record year in terms of amounts invested in Fintechs: 1000 - Worldwide investments in H1 amounted to 31 billion dollars, which is already as much as all +24% +730 deals investments within the sector over the whole of 2017 25 800 - A record number of transactions (732) were recorded in the first half of 2018. 600 - More than 20 Fintechs raised more than $100 million, mainly in the United States and China, which continue to attract the most investment. 13 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 0

l TOP 5 Fintech fundraising efforts worldwide in millions of dollars Sources: 2017 data provided by the Market Intelligence PitchBook Fintech through M&A / VC data feedback Figure A.1.2 2017 H1 2018

China and the USA attract the largest investments with amounts showing a net increase in 2018.

Sources: Exton illustrations from CB Insight data

OPERATIONS MAINLY IN NORTH AMERICA AND ASIA

• North America accounted for nearly half of the amounts raised and half of the deals made in 2017. l Weight of the world's regions according to the number of deals • The continent is mainly driven by the United States, which also accounted for the largest Fintech and amounts invested in Fintechs in 2017 fundraising actions (cf. Figure A.1.2). Figure A.1.3 - The tickets are particularly high (more than 16 million dollars per operation, on average 3 times As a % of the amounts invested more than in France in 2015), and this phenomenon is mainly due to the fact that Fintechs in the United States are more mature, and that they need to raise more funds in order to recruit. North America - Stripe, the leading American unicorn in terms of market capitalization based its success on a 16% Europe software solution that allows all e-merchants to manage their entire transaction flow as simply as 47% possible. Asia - With the largest US fundraising action in the first half of 2018, Dataminr ($392 million) provides Other continents financial actors with the information flow needed to anticipate market developments as effectively as possible. 34% • Asia ranks second with one-third of the amounts raised in 2017, slightly lower than in 2016 (cf. Figures A.1.3 and A.1.4). 3% - China is the region's main driver. Chinese Fintechs have been able to capitalize on a population that The weight between is accustomed to digital solutions: with nearly 600 million users of its Alipay solution in China, Ant invested amounts and As a % of the number of Fintech deals Financial (Alibaba) is the originator of an open ecosystem of financial services for individuals and the number of deals is professionals. Supported by giants such as Alibaba and Tencent, ZhongAn capitalises on Big Data for unevenly distributed automated management of its insurance offer. 40% amongst the world's - Southeast Asia is also very dynamic, most notably Singapore that, with its reputation as an main regions. important financial hub, is striving to create an ecosystem adapted to Fintechs through the 25% involvement of government institutions, notably including the Singapore Fintech Festival organized Thus, in terms of the by the Singapore Monetary Authority. The region is even attracting foreign entrepreneurs, notably number of operations, from France, such as the founders of TransferTo, the leader in cross-border payments in emerging Asia is even with countries, or Moneythor, which created a simple integration solution that allows banks to offer a 25% Europe, where the fluid and personalized digital experience, also founded by a Frenchman. invested tickets are 10% generally lower.

Source: Exton analysis based on CB insight Global Fintech Report data

NEW FINTECH HUBS ARE EMERGING AROUND THE WORLD

• Latin America now has more than 800 Fintechs, most of them alternative payment or l Growth of amounts invested in Fintech in 2017 by region and Fintech unicorns financing solutions. Figure A.1.4 - The first national association focusing on Fintechs in Latin America was created in Mexico. Wishing to provide the sector’s players with the means to come together, this association has encouraged the creation of other associations sharing the same objectives in other Latin American countries. - Argentinian Fintechs, like Lineru, are overflowing with ingenuity to offer credit solutions to a population that is largely excluded from the financial system. - The Brazilian unicorn Nubank, valued at $2 billion, has based its success on a fully digital banking offer that allows Brazilians to acquire credit cards at a lower cost and to manage their operations themselves. • Fintech is also booming in the Middle East and Africa. - In this region, Fintech investments jumped by 100% in 2017. - In particular in the United Arab Emirates, which concentrated most of the amounts invested in 2017 with actors such as Paytabs ($20 million), Souqalmal ($10 million) and Beehive ($5 million)

• Singapore is already a very mature hub for Fintechs, but other Southeast Asian countries are also very active: - Thailand is an example of the rise of Southeast Asian countries as Fintech creators, including Piggipo, which enables Thailand's highly connected population to manage their accounts and cards on a single platform. - India already has 2 unicorns. One97 has many brands in the mobile Internet field, including Paytm, the largest digital commerce platform and the most popular payment Source: Exton formalization based on CB insight Global Fintech Report 2018 data solution for e-commerce sites. 32 Unicorns European unicorns Fintechs around the world 8 The continent recorded the strongest growth in 2017 (proportional increase of 15 American unicorns the amounts invested)

Sources: Field survey conducted by Exton in China and Latin America, in partnership with the W Project (ESCP), Data from Innovate Finance D 2017 VC Fintech Investment Landscape and CB insight analyses

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 14 A 2 EUROPE IS A MATURE REGION, PARTICULARLY DYNAMIC AND CONDUCIVE TO THE DEVELOPMENT OF FINTECHS

THE EUROPEAN UNION HAS A REGULATORY CONTEXT THAT IS PARTICULARLY FAVOURABLE FOR THE EMERGENCE OF FINTECHS

• The regulations implemented by the European Union give a real competitive advantage PSD2, A EUROPEAN DIRECTIVE to its Fintechs by simplifying their expansion within the European market. IN FAVOUR OF OPEN INNOVATION - Since 1993, the European Financial Passport has enabled financial institutions authorized in their country of origin to simply obtain the right to distribute their products and IN THE BANKING SECTOR services throughout the European Union. By facilitating and accelerating administrative procedures, the passport makes the European market accessible to Fintechs from the earliest stages of their development and thus represents a real opportunity for start-ups to reach critical size more easily and to improve their profitability. By forcing banks to open their information systems to third party Payment Service - In 2018, the European Commission wishes to propose a regulatory framework for Providers (PSPs), the PSD2 represents a major step forward in terms of data security, participatory finance (crowdfunding) and peer-to-peer credit (P2P lending), which could which is essential to the development of Open Banking. include a format similar to that of the financial passport, in order to standardize national regulations and to stimulate the growth of these sectors by opening up the European It puts an end to the use of web scraping* for aggregation services for banking market to Fintechs. information and payment initiation and supervises their activities by allowing them to • The Payment Services Directive 2 (PSD2), which came into force in 2018, aims to obtain approval with the creation of new statuses: promote emulation and cooperation between banks and Fintechs through: ▪ AISP (Account Information Service Provider) – The supervision of companies operating in the payments field, that must now obtain the ▪ PISP (Payment Initiation Service Provider) status of payment institution. – The obligation for banks to open, via APIs, their information systems to payment Via APIs, these actors will now be able to legally and securely access the accounts of institutions for use in connection with their services. their clients, and to initiate operations therein. Fintechs are therefore taking full • By strengthening the obligations of companies regarding the collection and processing of advantage of the entry into force of PSD2, which is a true opportunity for them to personal data, the General Data Protection Regulation (GDPR), introduced in 2018, improve the quality of their services, expand their offers and increase client represents an opportunity for the differentiation and development of Fintechs. confidence. – Thanks to their agile structure, Fintechs can adapt their organization and information systems more easily and quickly than traditional financial players. – The GDPR represents an opportunity for Fintechs to develop their customer promise, * Connection, via robots and identifiers provided by customers, to bank sites and applications in order to extract bank account information particularly in terms of data security, or even to differentiate themselves from competitors by developing new services (ultra-secure solutions, data monetization etc.).

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 15 A 2 EUROPE IS A MATURE REGION, PARTICULARLY DYNAMIC AND CONDUCIVE TO THE DEVELOPMENT OF FINTECHS

LONDON REMAINS THE MOST ACTIVE EUROPEAN FINTECH MARKET

l European ranking (in number of transactions and amounts invested) • Despite Brexit, London is confirming its position as Europe's leading Fintech hub: of Fintechs in 2017 – With many internationally renowned accelerators (UK L39, London Rise, Start-up Bootcamp, etc.), the British Figure A.2.1 capital has no fewer than 1,000 start-ups and has attracted 45% of the amounts invested in Fintech in Europe (€1.54 billion in financing in 2017, an increase of +153%). As a % of the € amounts invested on the European continent As a % of the number of transactions in Europe – This hub has successfully produced 5 unicorns, including BGL Group, the largest capitalization amongst European unicorns, that specializes in price comparison and insurance distribution, but also Revolut, which in 45% 41% 2018 became the first European neo-bank unicorn. – The much more digital nature of the distribution of financial products in the United Kingdom explains the 12% 12% significant size acquired by these players, when compared to other European countries. 8% 9% – As Brexit approaches, many Fintechs operating in Europe and approved by the FCA (British regulatory 5% 5% authority), will have to acquire a new license from another country in order to continue to "passport" their activities in Europe.

Source : Exton analysis based on the 2017 landscape VC Fintech Investment by Innovate Finance • Berlin and Frankfurt also intend to take advantage of Brexit and attract European Fintechs. – Germany has no fewer than 650 Fintechs. l Breakdown of the number of deals and amounts invested in technology – A jewel amongst the latter, Kreditech has put the excellence of its algorithms in the service of its retail credit start-ups in 2017 in billions of euros offer. Figure A.2.2 – Germany is also particularly active in the InsurTech segment, particularly in Munich.

• Sweden is at the forefront of the payments sector and has a vision of a cashless economy. – The country attracted 12% of Fintech investments in Europe in 2017. – It was the first in Europe to bring out a Unicorn: Klarna, specialized in online payments.

• Paris is very dynamic and is benefiting from its technical and entrepreneurial ecosystem. – In 2017, the largest number of financing operations for technology start-ups occurred in France, well ahead of 2nd place London. – In the Fintech sector, the country started later than its European neighbors but is catching up: France recorded 10% of Fintech deals in Europe, despite lower average tickets, but with strong growth as its Fintechs mature (cf. part B.).

Source : Exton analysis based on the Tech.eu Report "Next Station: Europe"

FRANCE HAS MANY ASSETS TO HELP FINTECHS GROW

• The country is world-renowned for the excellence of its scientific field and has a pool of technological talent l What do you think France's assets are when it comes to attracting Fintechs? – France is at the forefront of Artificial Intelligence, as shown by the GAFAMs, which recently opened research Figure A.3.1 laboratories in Paris (Google AI Centre, Facebook AI Research, Microsoft AI Lab at Station F) – The high level of French higher education is well established. The country trains many engineers, data scientists, developers and doctors, and has already won 13 Fields medals, following closely behind the leader, the United States (14 medals) – The recent creation of digital schools (WebSchool Factory, Ecole 42, EPITA, Epitech) is reinforcing this system. • The French, and in particular Millennials, are showing growing interest in new technologies in financial services. – They are more and more inclined to be attracted by the innovative offers offered by newcomers – France is the 2nd largest European market in terms of neo-banks and it is attracting European Fintechs: Revolut and N26 have been operating in France since 2017 and Starling Bank has already announced its set-up in France by the end of 2018. The rising star of payments, the American Stripe, has chosen to set up in Paris in order to target Southern Europe – However, the distribution market for financial products is still quite traditional and not very digitalized (particularly insurance): under the impetus of this positive societal momentum, the opportunities for new actors are therefore great. • The legislative and regulatory context is gradually facilitating the market's openness to these new financial 2 out of 5 French people 3 million services ready to join a Neo-bank Neo-bank customers – French legislation is evolving to adapt to new financial business models and promote banking and insurance in France mobility, which is essential for the development of Fintechs (Hamon law in 2014 on the termination of property and casualty insurance contracts, Macron law on banking mobility in 2015, etc.) – France was also the first country to create a legal framework for crowd-funding in 2014 – France naturally transposes European directives into national law, such as PSD2, which promotes the development €336 million of new financial services: as soon as the directive came into force in January 2018, the ACPR issued new collected in 2017 through accreditations to aggregators (Bankin, Budget Insight, Linxo, etc.) crowd-funding – The French supervisory authorities have organized themselves to better guide Fintechs in understanding regulatory matters. Sources: Exton study on 120+ interviewed Fintechs. Exton Consulting Digital Channels Survey, Exton Estimates and • Specific support measures for Fintechs have been considerably enhanced in recent years (cf. Part C.) ACPR data based on the study of the digital revolution in the French banking sector, March 2018

FRENCH FINTECHS ARE NOW COVERING THE ENTIRE 20 > 21 1 FINANCIAL INDUSTRY SPECTRUM

A SECTOR WITH VERY SMALL STRUCTURES, CONDUCIVE TO > 22 2 THE EMPLOYMENT OF YOUNG GENERATIONS

HUMAN CAPITAL THAT BRINGS TOGETHER SOLID AND > 23 3 EXPERIENCED PROFILES THAT ARE NOT THERE JUST BY CHANCE

STILL FRAGILE STRUCTURES, STRUGGLING TO GROW AND 24 > 25 4 REACH THE PROFITABILITY THRESHOLD

B2B2C AS THE PREFERRED FINTECH MODEL IN THE SERVICE > 26 5 OF THE SECTOR'S HISTORICAL PLAYERS

INCREASE IN THE AMOUNTS RAISED BUT TICKET SIZE STILL 27 > 30 6 LOW COMPARED TO OTHER PLACES

7 A WILLINGNESS TO SCALE UP AND INTERNATIONALIZE 31 > 33

A SUSTAINED CREATION RHYTHM OVER THE LAST 3 YEARS

• In terms of deals and business start-ups, the Fintech phenomenon really gained momentum l Creation date of Fintechs starting in 2014 Figure B.1.1 2014 • Since then, the entrepreneurial momentum has been sustained. Rise of the Fintech wave – On average each year since 2014, 55 new start-ups have been registered. in France – Nearly 29% of these structures were created under 2 years ago. – About twenty new structures have already been identified since the beginning of 2018: with a slight slowdown of creations, a sign of relative consolidation within the sector. – ¼ are still in the creation stage (prototyping and product development then seed testing ~500 Fintechs in France their offer as a POC). Even +675+ innovative – 5% are in the "scaling" phase, replicating their model by opening foreign branches. projects in Finance or Techfin

• Overall, the French Fintech / InsurTech landscape consists of 500 structures, or even +675 if one considers all innovative projects and structures: Analysis of Exton database of +500 Fintechs – Labelled by the Finance Innovation Cluster. 10 % – And/or Techfins (based on AI, machine learning, biometrics, DLT/Blockchain, electronic l Distribution of Fintechs by development stage of entrepreneurial tech signature, cybersecurity and cryptography) in order to address usage cases in financial Figure B.1.2 in terms of financing services.

success 15% • Fintechs account for nearly 10% of the French entrepreneurial Tech investments Development 5% Scaling 55 • On a European scale, French Fintechs are models of sustainability despite more modest Fintechs created on average every year since 2014 fundraising: 54% – 36% of the structures are more than 5 years old Marketing – However, many of them are having trouble with sustainable growth 20% Priming 29% 6% Of structures created Prototypes since 2016 Start-up

Exton survey of 120+ French Fintechs

l Mapping of French Fintechs (distributed by field and seniority) Figure B.1.3

50% are impacting banking businesses

As in other countries, Financing and Payments are the most mature segments

The Insurtech wave is more recent with 20% of start-ups created under 2 years ago

20 companies are already relying on blockchain to address finance use cases

< 3 years 3-5 years > 5 years

Source : February 2018 mapping of nearly 300 structures, prepared on the basis of Exton, NewAlpha AM and INVYO shared data

l How many employees does your Fintech have? l What is the proportion of freelancers amongst The Fintech sector generates nearly 10,000 direct jobs (i.e. 1% of the financial sector). • Figure B.2.1 the employees? • The sector is still mainly made up of very small structures Figure B.2.2 – 57% of very small structures with fewer than 10 employees* and 84% with fewer than 25 employees – Only 6% of Fintechs report having more than 50 employees* – Nearly 2,500 Fintech jobs posted in 2017.

• These jobs are mainly benefiting the Paris region – 72% of offers published in the last 12 months are located in the Paris region. – More than 80% of structures have their main office in the Ile-de-France number of – Structures with more than 50 employees are mainly in Paris. employees

• The high use of freelancers generates a significant number of indirect jobs l Where is the headquarters of your Fintech? If it is l If so, do you feel the need to open offices in – 2/3 of Fintechs use freelancers based in Paris/IDF, do you have branches elsewhere Paris? – On average, they represent 31% of the Fintech workforce in France? Figure B.2.4 – These service providers represent more than 3,000 direct jobs Figure B.2.3 – The use of freelancers is particularly significant in structures with fewer than 10

employees. 22% YES 37% YES Fintechs are attracting Generation Y and Millennials who make up the bulk of the • 36% recruits 78% NO – With engineering profiles for positions as data scientists, programmers or business NO developers – Most of them – more than 74% – are men – However, Fintechs are having trouble recruiting CTOs, a scarce resource. Exton survey, Exton Fintechs databases

10 000 31 years 26% 72% 57% of VSEs direct jobs Average age of positions in only women between 1 and 10 employees 3k+ freelancers of a Fintech employee the Paris region

Source : Jobilft* (permanent and fixed-term contracts – excluding freelancers)

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 22 B 3 HUMAN CAPITAL THAT BRINGS TOGETHER SOLID AND EXPERIENCED PROFILES THAT ARE NOT THERE JUST BY CHANCE

• The founders have a solid academic background and strong expertise in financial services l The typical profile of a French Fintech founder – More than fifteen years of professional experience in this sector Figure B.3.1 – 73% already have experience in financial services, amongst them: • Nearly half of them started their career with a bank • Only 11% come from the insurance industry • 82% have a higher education diploma, which confirms France's 3rd place in terms of the Man qualification level of its start-up founders. Fewer than 9% woman

• Almost half of them are serial entrepreneurs – 12% have already founded a start-up in the financial sector 40 Average age of founders • There are many reasons for being an entrepreneur, and amongst the ones frequently cited: – Modernize the sector thanks to new technologies – In response to a personal vocation – Efforts in favour of sustainable and solidarity-based finance 73% – Optimise the user experience, in response to a "pain point" that they have themselves Have experience in financial services experienced as bank and insurance clients – Generate business. 46% • Today, French Fintech is mainly driven by male entrepreneurs and is having trouble Are serial entrepreneurs feminizing itself – France stands out and is above the European average (5% of women Fintech CEOs). – The sector only hires 26% women – Clear gender inequality, despite: 13% • The success of some start-ups founded by women who have since become spokespersons Have already created a FinTech for the sector (Céline Lazorthes, founder of Leetchi, Caroline Larnaud, co-founder of Anaxgo, Stéphanie Savet of Wiseed) • The feminization of certain general management teams of banks and insurance companies • Organizational initiatives such as StartHer, Financi'elles, Hellowilla and France Fintech. 86% Engineering, Business, Master or PhD diplomas

Sources : Enquête Exton auprès de 120 FinTechs françaises

Revenue levels vary considerably depending on business models, customer type, age and degree of internationalisation

• Overall, French Fintechs generated earnings of nearly €80 million in 2017* l Breakdown of Fintechs by turnover level – Still low overall earnings compared to the number of structures and the amounts raised by the sector Figure B.4.1 – The average earnings are around €1 million per structure, but are overweighted by the meteoric performance of some Fintechs in 2017 (e.g. Ledger, driven by the enthusiasm for crypto-currencies, or Shift Technology, involved in anti-fraud measures).

• In reality, a large majority of Fintechs generate very little turnover. – Only 1/4 exceeds €1 million of earnings – Rather, the median is around €300,000

• To generate more substantial earnings, Fintechs often have to look beyond France or complete their model by turning to B2B2C (cf. illustration B.4.2 below)

• At least 80% of these structures have not yet reached their profitability level

• Nevertheless, despite low revenue and profitability levels, a significant number of Fintechs already have successful products that are used and appreciated by clients, sometimes already numerous. This explains the sometimes significant valuations of certain B2C structures, particularly ones that have managed to gain a certain notoriety. ~€800 million < 20%

estimate of the overall say they turnover generated by are profitable French Fintechs in 2017*

* Exton estimate based on cross-referencing the results of Sources: results of the Exton survey amongst 120+ French Fintechs, adjusted by an analysis of the turnover declared by the field survey with fintechs and company analyses the players

l Focus on the 2017 turnover based on... Figure B.4.2

A) …age of the structure B) … operational model C) … degree of internationalisation

Operates internationally Does not operate internationally

Longevity naturally affects the generated turnover. Few B2C Fintechs charge individuals for their services, 3/4 of Fintechs operating only in France are and generate lower earnings struggling to exceed the earnings threshold of €300,000. • above all, they are striving to attract as many clients However, we note that many Fintechs are "getting as possible and build their renown, by", while struggling to reach significant earnings: nearly 60% of Fintechs created more than 5 years • and must make considerable investments in marketing. Those that have managed to exceed earnings of €10 ago have not yet reached earnings of €1 million. million all operate outside of French borders. B2B2C with key accounts is generally more worthwhile and profitable than the B2C model. As such, the earnings generated by French Fintechs • 33% of Fintechs operating in B2B2C state that they are do not always benefit the French GDP. already profitable. • However, approaching key accounts directly can be very time-consuming (less significant in amount but more impact on the WCR in days of turnover).

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 25 B 5 B2B2C AS THE PREFERRED MODEL, WITH POSITIONING AS TECHNOLOGY SUPPLIERS IN THE SERVICE OF TRADITIONAL PLAYERS

• Fintechs use a range of technologies: l On which technology(-ies) is your solution based? – Almost half of them rely on Big Data and AI. (% of Fintechs using technology) – More than 1/4 of them already report experimenting with blockchain to address use cases in financial services. Figure B.5.1 >1/3 • Due to high client acquisition costs, many Fintechs initially operating in B2C have upgraded their model: Deep & Machine Learning working on – by diversifying into B2B to supplement their earnings (for example, Lydia and Pumpkin have launched an offer for Natural language processing artificial intelligence professionals). Big Data – by choosing to focus exclusively on B2B/B2B2C clients (the case of a large majority of Robo-advisors that target wealth management advisors, insurers and bankers) Biometry

Cryptography • More than 50% operate in B2B2C/B2B* for key accounts in the financial services sector, a more profitable model based on the sale of licence agreements to professionals and/or large companies. Blockchain – By definition, some Fintechs – such as Regtechs – use a B2B model. Intensive calculation and simulation – Amongst Fintechs operating in B2B or B2B2C: Connected objects • 70% say that they sell their services exclusively to financial sector actors, mainly bankers and traditional insurers • 30% also serve other peripheral sectors (Transaction Connect and Europass on Retail, Jenji on Accounting, or RPA Telecom, for which Younited Credit is planning to provide its white label services). Other

• While business models vary greatly from one Fintech to another, an increasingly significant part is moving l Hybridization of business models and target clients towards the SaaS model** to optimize the recurrence of their earnings and their sustainability | Hybridation des business modèles et cibles clients Figure B.5.2

• Another trend is that more and more Fintechs are forging joint partnerships to combine their commercial 32% 23% Hybrid efforts, complete their offers or provide an open architecture service hub. B2Individuals 61% Hybrid 36% – Neobank Qonto and the neo-insurer Alan target freelancers, and have teamed up with the Malt start-up to launch B2Corporates Sesame, a package of services dedicated to self-employed workers (Key Accounts) 77% Hybrid – As such, Younited Credit offers its services to the German neo-bank N26 in order to develop its credit offer in 39% France B2Ind focus – Budget Insight provides its account aggregation technologies to about 100 partners, including many Fintechs (Paylead or Lydia use this aggregation technology to integrate contextualized cashback offers within mobile 32% Hybrid banking applications). 68% Overall, nearly 60% have a hybrid model and B2Pro focus address several types of clients (professionals – B2B, key accounts – B2Corp, and/or individuals B2Part) 32% B2Professionnels *Exclusively or in addition to other models ** Software as a service *** In the strictest sense excluding Big Data Exton survey of 120+ interviewed Fintechs

A SIGNIFICANT INCREASE OF INVESTED AMOUNTS

• Due to the amounts raised and its valuations, the FinTech sector has a significant presence within French tech: €290 million for 60 deals in 2017 – 11% of French entrepreneurial tech, within the average weight of Fintech worldwide (12%) +86% funds raised vs. 2016 – It's one of the most dynamic sectors behind MedTech and Biotech, but ahead of FoodTech, €190 million for H1 2018 Mobility, Retail, etc. 3rd Fintech market in Europe • The overall fundraising amount in Fintech has jumped by more than 80% in recent years in France. (in number of deals - 4th in terms of invested amounts) – The growth of the amounts invested in the Fintech sector in France did not slow down in 2016, unlike the slowdown seen on the global level. – Nearly €290 million were raised by finance start-ups in H1 2018, through approximately 60 €6.5 million average ticket amount in H1 2018 operations – +86% in 2017 and 57% on average over the last 2 years… – and 2018 already promises to be a record year with more than 190 million euros invested: a much l Evolution of investment in French Fintech better performance in one half-year than in the whole of 2016. Figure B.6.1

350 • The number of deals has also increased considerably in recent years, but not as much as the 290m€ 140 amounts. In reality, the size of the tickets is growing by leaps and bounds: 300 – The average number of tickets has increased steadily since 2016 120 190m€ • 4.7 million in 2017, an increase of 34% compared to 2016… 250 100 • With an average of €6.5 million collected in H1 2018, this trend seems to be confirmed. Growth 200 – This average is naturally inflated by certain fundraising operations, but the median amount of +86% 80 cumulative tickets is also growing in size... a sign that France is in the catch-up phase. 150 60 • 2.25 million euros in 2017 (1 million euros more than the French tech tickets as a whole). 60 30 • Multiplied by 1.5 since 2016 and by 4 since 2010. 100 40 • The first half of 2018 even seems to be confirming the trend with a median of €2.6 million. 50 20

0 0 S1 2018 Sources: Exton analyses based 2010 2011 2012 2013 2014 2015 2016 2017 on Maddyness, CB Insights Amount of funds raised (€ millions) Number of rounds data, and public data

INVESTMENTS STILL TOO LOW TO BRING OUT UNICORNS

• The Fintech sector in France started later than in other countries, and is gradually catching up l Distribution of Fintechs according to the cumulative number – Half of French Fintechs have raised tickets worth less than €2 million, including ¾ tickets worth of fundraising rounds since their creation, to the end of 2017 less than €1 million. Figure B.6.2 – The total amount of funds raised by French Fintechs remains low. Half of them have not raised more than 2.3 million and only 18% managed to cumulatively raise more than 10 million euros – 84% of French Fintechs have not completed more than 2 rounds and few are already in their C series, indicating an offset of the French ecosystem compared to other more mature hubs (notably London)

• The average amount of tickets remains low compared to other Fintech markets in Europe and worldwide – Half as much as the European average (overweighted by the United Kingdom, one of the ten biggest fundraising events in 2017 benefited London start-ups) – 3.5 times less than the average in the United States. – However, this weakness of the French amounts should be put into perspective: the Anglo- American mega-rounds distort statistical comparisons and must be restated in view of the development costs, which are by a factor of one to three when compared with London – This under-capitalisation is also explained by the particularities of the French financing system l Breakdown of Fintechs by total funds (cf. Part C) raised from their creation to the end of 2017 Figure B.6.3 • The Paris financial centre has not yet been able to produce unicorns: – No French Fintech is amongst the 32 Fintech Unicorns, while there are already 8 European 0-1 31% Unicorns including 6 in the United Kingdom Median of cumulative 1-2 18% …...... funds raised: €2.3 million – The French Tech industry as a whole is having difficulty growing its start-ups. Only 3 of the 260 unicorns in the world are French: Blablacar, Vente-privée and Critéo. 2-3 11%

€ 3-5 10%

5-10 13% Average total of

10-20 18% …...... funds raised: €8 million In millions of of millions In

Sources: Analysis from Exton database of more than 500 Fintechs and public data

| Fundraising rounds carried out and communicated since early 2018 Figure B.6.4

In millions of €

60 30 20 10

0 January February March April May June July August September

Source: Exton update of a France Fintech illustration in August 2018

l Most dynamic French Fintechs by segment according to the total funds raised since inception (late August 2018) Figure B.6.5

INCREASINGLY SIGNIFICANT FUNDRAISING EVENTS THAT WILL ENABLE FRENCH FINTECHS TO CHANGE SCALE

• Overall, 18% of French Fintechs have raised more than €10 million since their creation | Top 5 fundraising events (January 2017 to July 2018) Figure B.7.1 • 9 Fintechs have already raised more than a total of €30 million – The European champion in alternative financing, Younited Credit, holds the Fintech record in France for the amounts raised (€103 million) – On the Payment side, the HiPay acceptance solution holds the top spot (€70 million) 61 – The Neo-Bank "Le Compte Nickel" had raised nearly €40 million before being bought by BNPP in 2017 – In Insurtech, Alan stands out (with €35 million of fundraising) and is the only neo-insurer to hold a 40 license 32 23,7 – Taking advantage of the growth of the Blockchain and crypto-currencies, Ledger is now up to €73 20 million (en millions €)

• Some French Fintechs carried out major financing rounds in 2017 and in H1 2018, demonstrating their desire to move to a larger scale and notably to conquer other markets: – Shift Technology opened offices in Singapore, Hong Kong, Madrid, London and Zurich, following its | Ranking of the 5 Fintechs having raised the most funds in total $28 million (€23.7 million) fundraising from US investors in 2017, just like Ledger. Figure B.7.2 – Stratumm plans to attack the European and American markets after raising €7 million – Famoco raised €11 million and is preparing to open offices in Europe, the Middle East and Africa,

• This financing internationalization shows the attractiveness of France and the openness of Fintechs 103 to international markets 73 70 51 38,8 (en millions €)

Sources : Exton analyses on Maddyness databases updated in August 2018

| Where do these French Fintechs operate? • Internationalisation can be an important component of the business model of Figure B.7.3 some Fintechs: 42% of Fintechs – Fintechs are building natively "scalable" platforms in several countries so as to have commercial activities As a % of responses amongst Fintechs that declared reduce production costs. having commercial activities outside of France outside of France – They need to quickly reach critical size and thus to expand in several countries

EUROPE • More than 40% of Fintechs claim to have commercial activities with customers and partners outside France – These activities remain largely confined to the European continent, mainly GERMANY within countries bordering France BENELUX – Some have set out to conquer other continents, particularly the United States, which remain at the forefront in terms of supporting financial start-ups (the SWITZERLAND UK AND IRELAND French Fintech Moneythis, which specializes in money transfers, chose to move abroad to pursue its development, just like the robo-adviser Marie Quantier), or Asia, more precisely Singapore, a very dynamic Fintech centre that is attracting ITALY young French companies (including Moneythor, which has already signed many partnerships with banks in the region (DBS, Standard Chartered Bank)

• However, this high degree of internationalisation is a contrasting and even paradoxical reality: NORTH AMERICA IBERIAN PENINSULA ASIA – Amongst French Fintechs operating internationally, only 22% have opened one or more commercial structures abroad (e.g.: Lemonway, Lendix, Slimpay) – Sometimes, certain Fintechs, though registered in France, develop in other locations because they have not really been able to break into and find a critical size market in France – It also means that France exports more technology transfers than it buys, despite the trend towards open innovation by French key accounts (cf. Part C) MEA

LATIN AMERICA OCEANIA

Sources: Exton survey of 120+ French Fintechs

EVEN WITHOUT A FINTECH UNICORN, FRANCE HAS BEEN ABLE TO PROMOTE PROMISING FINTECHS

• Some of them have been dazzlingly successful and have quickly become international : | Top 10 European Fintech growth rate – Ledger, the specialist and world leader in securing bitcoin portfolios, recorded record turnover Between 2013 and 2016, in terms of increasing revenues growth: Figure B.7.4 • €45 million in 2017, compared to €600,000 in 2016. The Fintech states that it is already profitable. • It already has 82 employees in San Francisco, Paris and Vierzon, and is expected to double its workforce in 2018 – Slimpay experienced phenomenal growth of +4,000% between 2010 and 2014! It is now present in 6 European countries and will be expanding to the United States. – Lemonway and Younited Credit are amongst the fastest growing European Fintechs (cf. Illustration B.7.4) • Six French Fintechs are included in the 2017 "Fintech 100" ranking of the world's leading Fintechs – Lendix is in 45th place in the "Leading 50". – Alan, IBanFirst, Lydia, Payfit, Qonto are listed amongst the "Emerging 50”

FIVE FACTORS CONTRIBUTING TO THE DEVELOPMENT AND 36 > 37 1 PROMOTION OF THE FINTECH SECTOR

DYNAMISM OF PUBLIC AUTHORITIES COMMITTED TO 2 PROMOTING THE FINTECH AND ENTREPRENEURIAL 38 > 41 ECOSYSTEM

MULTIPLICATION OF SUPPORT AND PROMOTIONAL 3 STRUCTURES FOR THE FRENCH FINTECH SECTOR 42 > 45

NUMEROUS FINANCIAL SUPPORT MECHANISMS TO 4 PROMOTE SEEDING AND DEVELOPMENT 46 > 50

MORE RECEPTIVE REGULATORS THAT ARE ORGANIZING 51 > 53 5 THEMSELVES TO SUPPORT FINTECHS

THE DEGREE OF FINTEGRATION: HISTORICAL ACTORS THAT 6 ARE MULTIPLYING THEIR INITIATIVES IN THE DIRECTION OF 54 > 57 FINTECHS

THE FINTECH ECOSYSTEM HAS BECOME HIGHLY STRUCTURED AND MORE DENSE IN RECENT YEARS IN FRANCE

| Five factors are contributing to the development and promotion of the Fintech sector Figure C.1.1

Against the Brexit backdrop, public authorities have taken numerous initiatives in favour of technology and entrepreneurship and the 1 | Dynamism of development of financial start-ups. Recent work on the "Pacte" law is public authorities indicative of this.

Historical actors in financial services (banks, 5 | Collaboration The emergence of structures and programmes dedicated insurance companies, etc.) are opening up and relying 2 | Densification of to supporting Fintechs and Insurtechs has accelerated on finance start-ups to accelerate their with traditional support structures considerably over the last three years (incubators, digitization actors accelerators, but also Fintech associations, etc.).

French regulators (ACPR, Banque de France, etc.) have 3 | Many financial French Fintechs can also count on many sources of public financing to also organised themselves to support fintechs and are showing support their activities in the early years of their creation, as well as on themselves to be receptive to these new business models 4 | More receptive support Venture Capital funds, which are becoming more and more interested in and technologies regulators mechanisms the sector's potential.

AN INCREASINGLY EXTENSIVE RANGE OF SUPPORT SERVICES

| Mapping of the Fintech and entrepreneurial ecosystem in France Laboratories and Tech institutes & Research Chairs accelerators of Figure C.1.2 institutes Fintech accelerators and meeting places

Institutionals and regulators

Financing activities and investment funds #Fintech of Corporates ecosystem

Start-up studio Fintechs and Business generalists Angel Fintechs entrepreneurs can rely on an networks and Family Offices increasingly extensive range of support services. In 2016, there were already more than 250 incubators and 50 generalist accelerators in France. Since then, nearly fifteen structures have been set up, Promotional dedicated to start-ups in the financial agencies and competitiveness Venture Capital industry. clusters Generalist Private Funds Accelerators CrowdEquity Start-up & Fintech Caption: Associations Structures dedicated to Fintechs / Insurtechs

Exton Consulting Analysis and Formalization

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 37 C 2 DYNAMISM OF PUBLIC AUTHORITIES COMMITTED TO PROMOTING THE FINTECH AND ENTREPRENEURIAL ECOSYSTEM

PUBLIC AUTHORITIES ARE MULTIPLYING THE MEASURES AND INITIATIVES TO SUPPORT AND PROMOTE THE DEVELOPMENT OF START-UPS AND FRENCH TECH

•The government is demonstrating, over time, its ambition to make France a "start-up nation" • the Blockchain Order (2017) makes France the first European country to adopt a legal framework – In 2005, the State set up competitiveness clusters (71 active clusters in 2018) to support for this new technology innovation and research, including Cap Digital dedicated to the innovative economy in the Île-de- • the PACTE law (2018) aims to promote innovation, to facilitate business creation and to better France region, and Finance Innovation in the service of the financial industry (cf. Figure C.1.2.) oversee, via the AMF, the issue of virtual tokens (ICO), a new financing method for young – In 2013, the Ministry for the Economy launched French Tech, an innovative public initiative companies aimed at bringing together, accelerating and promoting the French start-up ecosystem. A • the government is also committed to tax simplification with the introduction of the Flat Tax thematic version of the network, the French Tech #Fintech, was launched in 2016. – Launched in 2017, the French Tech Visa initiative seeks to attract international Tech talents to • Politicians can dialogue with young innovative companies during the main events dedicated to France by supporting entrepreneurs, employees and investors in their efforts to obtain a fast- start-ups and Fintechs: Since its creation in 2016, Viva Techonology, a trade fair dedicated to track "Talent Passport" technological innovations and start-ups, has provided an opportunity for the government to assert its – Through the State Secretariat for Digital Technology, the government is committed to start-ups commitment alongside start-ups and its willingness to support the development of the French with strong initiatives such as: ecosystem • the "France Expérimentation" scheme, enabling companies to work within the regulatory framework • A true "Start-up region", the Île-de-France region is working with start-ups to ensure their • The appointment of start-up correspondents within ministries, who are responsible for development and to encourage innovation coordinating the ecosystem within their sector – In 2016, the Ile-de-France set up a financing scheme for young innovative companies in the region: • the financing by BPI France of long-term "venture loans" to boost the fundraising efforts of start- INNOV' Up ups – In Las Vegas, in January 2018, the region announced the launch of the Paris Region Starter Pack, a • Now discontinued, tax incentives (ISF funds) for investors that, for a long time, were the main financial aid programme for foreign start-ups and SMEs wishing to establish themselves in the Île- driver behind venture investment in France. de-France – The French legislative environment is changing to adapt to the business models of start-ups, and – In March 2018, Paris and the Île-de-France region hosted the first Start-Up Europe Campfire, led to promote their growth by the European Commission's Start-Up Europe initiative

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 38 C 2 DYNAMISM OF PUBLIC AUTHORITIES COMMITTED TO PROMOTING THE FINTECH AND ENTREPRENEURIAL ECOSYSTEM

| Chronology of the main initiatives and interventions of public authorities in favour of Tech and start-ups within the financial industry Strong government statements in support Figure C.2.1 of start-ups and Fintechs

January 2018 Creation of the 2006 Paris Region Starter Pack "Today, France is becoming the nation of start-ups, Creation of the cluster 2016 March 2018 and it must meet this challenge. That is why I 2013 Launch of Organization of the want […] our State to behave differently with the Launch of the financing Start-Up Europe Campfire economic world; so as not to be a State that regulates everything, but one that facilitates and supports. » Emmanuel Macron, President of the Republic

"France needs start-ups [but] start-ups also need France. They need the State to simplify their lives, to be proud of them 2005 2017 and to support them internationally." Launch of the Creation of March 2018 Mounir Mahjoubi, Secretary of State for competitiveness clusters Inauguration of May 2018 2007 100 government Digital Technology (ex-start-upper - La proposals for start-ups Ruche qui dit oui) Creation of the cluster 2016 January 2018 Launch of the Presentations at the "With the launch of Le Swave, [...] Paris is May 2018 highlighting the dynamism and excellence of its Presentations at the trade fair financial ecosystem. […] And one more step towards our goal: making France the Fintech hub Initiatives of the Ile-de-France region in favour of start-ups within the European market. » Bruno Le Maire, Minister for the Economy and Government initiatives in favour of Tech and/or fintechs Finance, at Le Swave inauguration in March 2018

Government pronouncements adopted in favour of Tech and/or fintechs

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 39 C 2 DYNAMISM OF PUBLIC AUTHORITIES COMMITTED TO PROMOTING THE FINTECH AND ENTREPRENEURIAL ECOSYSTEM

| Close-up on two schemes dedicated to promoting and supporting finance start-ups, supported by the State Figure C.2.2

The French competitiveness cluster The first FinTech open-innovation platform in Paris dedicated to the financial industry

▪ One of the seven worldwide competitiveness poles, FINANCE INNOVATION LABEL ▪ A marketplace initiative supported by the State and run by specialising in finance innovation Finance Innovation provides labels for innovative Paris & Co projects, in order to support them with its – Leading network of incubators in France (more than 800 ▪ The missions of Financing Innovation include: members in order to structure commercial innovative companies supported in the last 19 years) – Encouraging the emergence of Fintechs within the partnerships. – 10 thematic innovation platforms territories, accelerating their growth and increasing More than 550 labelled innovative projects have their influence received more than €300 million of public and private financing. ▪ Location: 1st multi-corporate accelerator dedicated to – Supporting innovative projects for competitiveness Fintechs in Paris within the French financial industry , as well as job creation. – 2500 m² on the 19th and 20th floors of the Arche de la FINANCIAL INNOVATION THINK TANK Défense More than 800 experts are working within ▪ A network of more than 500 members, including: – Approximately 20 start-ups already accommodated Key account partners working groups and on white papers in order to – Public authorities identify innovation domains for the finance of the The Paris & Co teams oversee the – Regional communities future. platform – Corporations coordinate the ecosystem – SMEs ECOSYSTEM COORDINATION ▪ Challenges: Strengthening the Paris financial marketplace – Start-ups, Fintechs Finance Innovation organises many events and within the Brexit context – Academics workshops on the latest trends and innovations in sectors including Insurance, Banking, Social and – Bringing together the existing ecosystem and strengthening Paris’ position relative to the European competition ▪ 6 key sectors: banking, insurance, asset management, Solidarity-based Economy, etc. Academics & accounting and consulting, Real estate, Social and – Participating in the modernization of the financial sector by institutionals Solidarity-based economy identifying cross-functional solutions that are sustainable and The State & the territories contribute solidarity-based their expertise ▪ Member of the FrenchTech #FinTech thematic network – Developing employment within the dynamic territory of La provide support for Défense development – Identifying new nuggets (notably French) – Attracting international nuggets and talents to Paris – Links established with other international Fintech Hubs

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 40 C 2 DYNAMISM OF PUBLIC AUTHORITIES COMMITTED TO PROMOTING THE FINTECH AND ENTREPRENEURIAL ECOSYSTEM

THE PUBLIC AUTHORITIES INTEND TO USE BREXIT TO MAKE FRANCE MORE ATTRACTIVE AND MAKE PARIS A REAL EUROPEAN FINANCIAL SERVICES HUB

• Brexit will re-establish borders between the European Union and the United Kingdom, and though the provisions for this are not yet fully decided, the loss of the financial "passport" means that a Fintech will no longer be able to address GREEN FINANCE, AN OPPORTUNITY FOR PARIS the continental market as easily from the other side of the Channel. TO ESTABLISH ITSELF AS A REFERENCE IN EUROPEAN FINANCE • While London is currently the Finance capital in Europe, the cards will have to be reshuffled. The French authorities intend to seize this opportunity and make Paris the gateway to Europe for financial services. A series of measures have The strong commitment of the Paris financial centre to sustainable been taken to make France more attractive to financial companies and their development is enabling Paris to establish itself as tomorrow's employees, notably in tax matters. And we can see that Paris is doing well: capital of green finance. In 2017, two years after COP21, Paris – In late 2017, the French capital secured the new headquarters of the EBA, the European Union's main banking regulator, which had to leave London after Brexit organised the "One Planet Summit" that brought together – With the support of the Banque de France, Paris is emerging as the new European international public and private finance stakeholders on the topic of collateral capital, notably with the June 2018 launch of Elixium, the first finance for the environment and climate. In parallel, public electronic collateral exchange (initially planned to be located in London) authorities are multiplying their initiatives, such as the Finance for – the announcement of the installation of numerous foreign banks or funds, Tomorrow project led by Paris EUROPLACE, to promote sustainable American or Japanese finance and establish the French capital as the reference marketplace – In 2018, the State is supporting the creation of Le Swave (cf. Figure C.1.2.), an on these issues. open-innovation platform dedicated to Fintechs, intended to make the Paris financial centre the spearhead of post-Brexit financial innovation

• There will probably no longer be a single European Finance centre, but rather a multi-local ecosystem, between London, Paris and Frankfurt and even others for certain activities (such as Dublin for management)

THE EMERGENCE OF SUPPORT STRUCTURES AND PROGRAMMES FOR FINANCIAL SECTOR START-UPS HAS ACCELERATED IN THE LAST THREE YEARS

• In the first 6 months of 2018, 8 structures were created to | Chronology of Fintechs programme launches, forums and support structures in France support Fintech entrepreneurs, including : Figure C.3.1 – Half of them outside of Paris, a sign that the support network is Fintech accelerator taking shape throughout the country January February Start-up studio – 3 dedicated to Insurtechs (Hub FFA, Niortech, Maif Start-up Club) Forum and Insurtech accelerator

+ 8 new Insurtech accelerator • Nearly 60% of Fintechs use a network of accelerators structures March – The main identified benefits are "Network", "Visibility", "Working identified since the Appril Fintech meeting place environment and premises", "Interaction with other start of 2018 June Fintech accelerator entrepreneurs" July Fintech excellence branch – Some carry out double "incubation" to increase the power of the September Insurtech accelerator meeting place (coming) ecosystem – The average incubation time is about 18 months January Event (1st edition) • Other initiatives are strengthening this support network so as to May Event (1st edition) promote the sector's interests July Thematic network – Since 2015, Fintechs have been federated as an association under September Accelerator January Incubator

the aegis of France Fintech in Paris. Local associations have also November Digital platform February Fintech school

emerged, such as in Bordeaux or in the Rhône-Alpes region May Accelerator (Fintech Bordeaux and Fintech in the Alps) Cf. figure C.2.2. July Accelerator

– A Fintech school called "Wake Up" was even created in 2017. Cf. September Open-Innovation Challenge C.2.3. March Accelerator Event (1st edition) – Many Fintech events punctuate the year on an almost monthly June Fintech organisation November Event (1st edition) basis, demonstrating that the sector now holds a place in its own September Start-up studio right within the financial industry in France October Event (1st edition)

Source : Exton Consulting analysis and formalization. Census to the end of September 2018

| Start-up programmes in the financial sector are multiplying throughout the country Figure C.3.2

Initiative launched by 5 insurance actors

Community members of French Tech #Fintech

Fintech Tour communities

Network

The "FinTech Tour", an initiative conceived by the French Tech #Fintech Thematic Network, was officially launched in March 2018. Its objective is to strengthen local Fintech ecosystems, to promote the emergence of start-ups throughout the territory, and to highlight this community in France and internationally

Sources: Exton analyses based on public data and programme visits

| Close-up on 3 initiatives in favour of Fintechs in France Figure C.3.3

THE FINTECHS ASSOCIATION THE FINTECH SCHOOL THE NEW MEETING PLACE FOR FINTECHS 2015 2017 2018

• Federation of all innovating companies in the financial services • Certifying Fintech training • A place for exchanges and gathering of all innovation actors: industry. • Aimed at people with eight to ten years of finacial experience - Fintech start-ups • 36 founding companies (Ledger, Lydia, Credit.fr…) and who wish to reorientate themselves - Established actors in finance & insurance - Institutional actors • The association's mission is to promote the excellence of the • Mentors from the biggest French Fintechs: Céline Lazorthes, Fintech sector within France and abroad and to represent CEO of Leetchi and Mangopay; Olivier Goy, CEO of Lendix; • Located at the Palais Brongniart, a symbolic finance venue Fintechs before public authorities, the regulator and the Hugues Le Bret, CEO of Compte Nickel… • Ambition of 150 events per year (thematic conferences, ecosystem. • 3 main axes: afterworks, start-up pitch sessions…) • Organisation of the annual "Fintech Revolution" event in April - Fintech expertise (ecosystem overview, robo-advisers, DSP2 • Corporate partners (Crédit Agricole, Generali France...) and regulations, Insurtech market…) institutional partners (BPI France, Paris Europlace, Finance - Start-up culture (CEO testimonial, introduction to computer Innovation...) programming) - Personal development

Sources: Exton analyses based on public data and programme visits

| The main trade fairs and events are spread throughout the year so as to promote Fintech's visibility within France and to attract foreign Fintechs Figure C.3.4 11 Fintech forums and exhibitions that have become annual events

7th Edition 2d Edition In January 2018, the Paris Fintech Forum, the international Digital Finance & Fintech event, brought together 2,000 participants. 1st Edition September In March 2018, Fintech Révolution, the 5th Edition June France Fintech event, brought together 3d Edition 1,000 people in the capital.

September October May May

5th Edition 11th Edition April + April 3d Edition October The major Tech and Digital forums March November 2d Edition The many and varied Fintech 3d Edition conferences and events that follow one another throughout the year 7th Edition January December

Fintech / Insurtech event Tech event

FRENCH FINTECHS CAN RELY ON THE MANY PUBLIC SUPPORT MECHANISMS AT THE TIME OF THEIR CREATION

• During their lifecycle, Fintechs use venture capital funds late, relying on the many public | What are your project's main financing sources? subsidies at the time of their creation Figure C.4.1 – At the R&D stage, they're financed largely through Love Money (funds raised from Friends & Family), or even through Business Angels (used by 42% of Fintechs) – The use of participatory crowdfunding or crowdequity platforms can enable entrepreneurs to

finance part of their equity needs quickly and flexibly, but paradoxically few Fintechs use them, as Public the financing volume is quite low. origin – Early-stage Fintechs can also rely on an increasingly extensive network of accelerators, which can sometimes invest up to a few hundred thousand euros during the seed phase. – They primarily benefit from many State mechanisms that support the start-up of their activity: 86% of Fintechs say that they have used public aid (cf. Figure C.3.1)

Subsidies linked Regional to belonging to Bank loans subsidies and Private BPI an R&D Tax credit Other various BPI programme • A French financing system that is in many respects "healthier" than the highly speculative Anglo- American model – In England or the United States in particular, venture capital funds flock too early into the capital of potentially promising Fintechs, for fear of missing their chance, often contributing to their over-capitalisation (and over-valuation) in relation to the maturity and actual business potential of the developed solutions… – On the other hand, only 38% of French Fintechs use venture capital, and quite late in their lifecycle – This particularity of the French system may partly explain why France is further down in the ranking of countries in terms of investments in Fintechs, which often only consider venture capital

Exton 3 survey out of +120 interviewed Fintechs

OPTIMIZING THE PROCESS OF GRANTING AID TO REDUCE THE BURDEN OF PREPARING APPLICATIONS THANKS TO FINTECHS

• Most Fintech founders have trouble navigating through the myriad number of public seed grants: | Range of public support for business creation (not exhaustive) – There are more than 2000 aid schemes, distributed by a few hundred organisations Figure C.4.2 – 60% of entrepreneurs state that they do not understand the aids to which they are entitled (cf. Figure C.4.3) – They also regret the burden of the time needed to prepare an application, the complexity of the procedures and the time required to obtain subsidies | Loans for directors | Subsidies

• This administrative burden for obtaining public financing transforms this strength of the French financing system • Accompaniment and interest-free loan • Assistance for the feasibility of innovation into a risk of counterproductive time loss, with the main challenge for "early stage" start-ups being the race • IPM - Creator - buyer interest-free loan • Assistance with the preparation of innovative against time to push back the critical cash shortage stage • ACCRE Assistance for Unemployed projects Business Creators or Buyers • French Tech Exchange • It would be necessary to set up a shared infrastructure in an open architecture in order to facilitate the • “Entreprendre Network”: interest-fee loan • INNOV'Up Feasibility transmission of financial information between the various public aid organisations • Creation interest-free loan • INNOV'Up Experimentation • Remarkable Initiative interest-free loan • Paris Innovation Seeding – It is precisely to this difficulty that a Fintech, Finamatic, is trying to respond by helping start-ups to identify the public mechanisms that they can claim, and by simplifying the administrative tasks for them with regard to applying for the identified aid, bearing in mind that "more than 80% of the information to be provided is | Repayable advance | Loans the same for all organisations"* • A3P - First Steps Prospecting Insurance • Innovation Development Aid – The BPI's desire to move towards open-banking seems to be a step in this direction: the French Tech start-ups • Technological partnerships aid • FGIF - Women's Initiatives Guarantee Fund • Innovation Contest call for projects • Crédit.fr crowd-funding bank aims to become a "market Fintech" and offer all of its services directly online by capitalising on • Cash advance and pre-financing of the • Digital Growth loan crowdfunding platforms such as Younited Credit and aggregation platforms, with Bankin, in order to retrieve Research tax credit • Seed-stage loan data from its entrepreneur clients. | Approvals | Tax benefits | Are you able to navigate all of the public financing options and to understand what you can expect? • Company creation support for women • CII – Innovation Tax Credit • "Innovative Company" qualification • CIR – Research Tax Credit Figure C.3.3 • Advance tax ruling • CICE – Competitiveness and employment • TPE funds: Zero interest loan to replenish tax credit the cash • Support for software design 0 1 2 3 4 5 9% 27% 23% 17% 16% 8% | Exemption • Young innovative companies status 60% have trouble navigating all of the public financing Exton survey amongst 120+ Fintechs interviewed Sources: Finamatic * Interview with Clément Boulais, partner at Finamatic

AS A RELAY FOR PUBLIC MECHANISMS, ▪ French venture capital funds are very active and are increasing their investments in Fintechs (Kima Ventures, Partech ventures, etc.) FINTECHS CAN RAISE FUNDS FROM cf. Figure C.4.4 PRIVATE INVESTORS… ▪ As a sign of this enthusiasm for Fintechs, funds exclusively dedicated to Fintechs / Insurtechs have been launched in France: – New Alpha AM, was the first of its kind in late 2015 and more recently Blackfin, which specialises in working with entrepreneurs developing B2B solutions to support the sector's historical actors as part of their digitization – Some M&A boutiques, such as AEC Fintech or Cambon Partners, have specialized in this niche ▪ But these private equity actors are still few with regard to positioning themselves on investments of less than €1 million... and some Fintechs, after the creation and R&D phases, often lack liquidity in order to develop

… AND IN PARTICULAR WITH BANKERS ▪ This equity gap phenomenon, faced by every start-up, is especially pronounced in the Fintech sector where valuations are very high in view of AND INSURERS THAT HAVE CREATED the low monetization and the virtual absence of profitability in the early stage phase DEDICATED INVESTMENT STRUCTURES ▪ Bankers and Insurers can play a key role in closing this gap (cf. Figure C.4.5 below) – Without any real yield constraints for their Corporate Venture Capital (CVC) structures, they have multiplied their participation in Fintechs in recent years in order to better understand these new models and build up a pool of potential strategic partners. – But this is sometimes done at the risk of penalising their participation by early dilution of the founders and loss of strategic freedom

▪ After the first fundraising rounds (series A, even B), in the pivotal period of 3 to 5 years of existence, Fintechs experience significant difficulties A NEED TO TURN TO FOREIGN CAPITAL with regard to finding financing sources in France IN ORDER TO CHANGE SCALE ▪ Despite the significant increase of average tickets (doubled since 2016), many have to turn to foreign funds to accelerate their growth and to change scale – For example, the Ledger cryptocurrency safe with €61 million raised in January 2018 – Or the anti-fraud Insurtech Shift Technology, that raised €28 million at the end of 2017 from American investors

However favourable it may be for business creation, the financing system is not yet sufficiently robust to support development during the seed-stage phase and especially to accelerate start-ups, in particular to push them beyond French borders.

| Top 10 of French private funds most invested in Fintechs Figure C.4.4

LIOR DEHRY More than 25 public deals 16 public deals 14 public deals 12 public deals 10 public deals Managing Director, New Alpha AM, VC Recent deals: Recent deals: Recent deals: Recent deals: Recent deals: Fintechs

In November 2015, NewAlpha AM Noteworthy deals: Noteworthy deals: Noteworthy deals: Noteworthy deals: Noteworthy deals: launched the first French VC fund dedicated to Fintechs. It focuses on all entrepreneurial initiatives that impact the banking, insurance or asset management businesses, either by offering innovative products or processes, or by offering solutions that enable existing financial industry 10 public deals 9 public deals 8 public deals 8 public deals 6public deals actors to optimise their business processes. We invest in tickets ranging Recent deals: Recent deals: Recent deals: Recent deals: Recent deals: from €2 million to €3 million during financing rounds of up to €12 million.

Noteworthy deals: Noteworthy deals: Noteworthy deals: Noteworthy deals: Noteworthy deals:

Source: Exton Consulting analysis updated according to Techfoliance data

| The market's major €100 million insurers have gradually €1 million €125 million The OPEN CNP programme with a budget of €100M in €150 million created their own structures Seed fund that also provides Maïf Avenir has already order to support start-ups. advice and market knowledge to invested in Morning, Cbien, Common fund for CNP has already invested Investment fund Support area dedicated to for investing in start-ups selected start-ups Inspeer, GuesttoGuest, financing digital in Lendix, H4D (remote dedicated to Fintech start-ups in Paris Max. investment €100,000 in Locat'me, Monptivoisinage, transformation and medicine), and Alan start-ups, e-health, (residential location, event Figure C.4.5 start-ups in the launch phase Mutum, Travelcar, Zenpark… innovation (collective health) human resources… area, catalogue of services)

December 2014 July 2015 September 2015 September 2016 December 2017 March 2018 COVEA NEXT MAIF Future Sferen Innovation OPEN CNP MM Innov’ MAIF START-UP CLUB

June 2013 February 2015 September 2015 June 2016 December 2016 February 2018 AXA SEED FACTORY AXA Strategic Ventures Kamet InnovAllianz Allianz X FRENCH ASSURTECH

Seed funds to invest in banking Investment fund in Insurance or An Insurtech "start-up A fund dedicated to A fund managed by the An Insurtech accelerator in Niort and insurance start-ups. Asset Management start-ups with studio" with €100 million innovative start-ups in Munich head office. Invests created on the initiative of 5 Discontinued in February 2015 a budget of €230 million! and 40 employees! insurance 2/3 in internal start-ups, 1/3 mutual companies. and replaced by the AXA Strategic in external Insurtechs Offers to provide start-ups with Ventures + AXA Factory incubator up to 9 months of support France

€100 million World €230 million €10 million €430 million

Sources: Exton Consulting analysis based on public data

Through their Corporate Venture Capital structures, the sector's historical actors are playing a key role in closing the financing gap and supporting the development of Fintechs, during a phase of their lifecycle when public aids are no longer sufficient to ensure their growth, at the risk of sometimes penalising their participation by early dilution of the founders and a loss of the Fintech's strategic freedom

FRENCH REGULATORS HAVE IMPLEMENTED A "FINTECH FRIENDLY" APPROACH AND SYSTEM

• Fondation in 2016 of the Fintech Innovation cluster within the ACPR, a single entry point for Fintechs • Development of a Fintech network within the ACPR - Performance of studies related to financial innovation - Mobilisation of experts - Reflections on the digitization of the financial industry • Launch of a Task Force to analyse the challenges of Artificial Intelligence within the financial sector

Fondation of the Fintech Forum in 2016, under the • Implementation of the first "Chief Digital Officer" within a central bank, in charge of the digital transformation of the Banque de France aegis of the ACPR and the AMF, with the aim of initiating a constructive dialogue between the • In 2017, creation of an Open-Innovation laboratory, the Banque de France Lab, bringing together innovative actors on a wide range of topics: new working methods, data valuation, innovative technologies, etc. various stakeholders • Launch and supervision of experimental programmes (such as the MADRE blockchain project) – A forum for monitoring, dialogue and proposals on regulatory and supervisory issues related to innovation in the financial sector – Includes Fintechs, financial industry actors and public authorities

• In 2016, foundation of the Fintech, Innovation and Competitiveness division within the AMF with the aim of: - Analysing current innovations in the financial sector in order to identify challenges in terms of competitiveness and regulation - Understanding new forms of risk in order to update AMF regulations • Launching research programmes on technological innovations, such as the UNICORN programme on virtual token issues (ICO)

… AND THAT HAVE TAKEN A MORE PROPORTIONATE APPROACH THAN THE BRITISH SANDBOX

| Comparison between the French and Anglo-American approaches Figure C.5.1

THE BRITISH "SANDBOX" THE FRENCH "SOUNDBOX"

In 2014, the British regulator (FCA) set up the first regulatory sandbox via the Innovate project, a regulatory sandbox that In France, the ACPR and the AMF did not wish to adopt the 55% of Fintechs allows Fintechs to experiment with their services within a more British sandbox model in order to avoid a fragmentation of flexible regulatory framework in order to promote innovation. the regulatory landscape and instead advocated the set-up of a would like to see these regulatory soundbox (sound in the sense of solid), while derogations implemented maintaining regulations common to all actors but respecting within France The Fintechs selected by the regulator to be part of the the proportionality of requirements (administrative and sandbox benefit from a special regulatory regime and support equity). from the FCA in order to develop their activities for a fixed period of time, after which they once again join the standard regulatory framework. For their parts, non-selected Fintechs "We want […] to ensure that there is no structural distortion of must fully apply the existing regulations. competition through regulation between existing actors and newcomers: yes to the proportionality of the rules, but no to 38% of Fintechs mention their unfairness." » François Villeroy de Galhau difficulties with accreditation as More than 60 projects supported by the FCA in connection with ACPR Chairman and Governor of the Banque de France an obstacle to France's the regulatory sandbox since 2015 competitiveness This approach aims to foster innovation and the emergence of Many countries have since followed the British example and set new technologies, while continuing to ensure security of up their own regulatory sandboxes (Canada, Netherlands, transactions and consumer protection. Singapore, Hong Kong, Malaysia, United Arab Emirates, etc.)

| Regulators differ in their level of maturity and regulatory flexibility with regard to Fintechs Figure C.5.2

JAPAN Japan, whose regulatory framework has so far shown little flexibility towards Fintechs, wishes to set up a regulatory sandbox in FRANCE UNITED KINGDOM GERMANY 2018 based on the model of the United Thee ACPR and AMF have chosen to set up a The British regulator introduced the first Fintechs do not benefit from a specific legal Kingdom and Singapore, in order to encourage regulatory soundbox, by introducing regulatory sandbox for Fintechs in 2014. framework and are subject to the same innovation and experimentation. proportionality of the requirements based regulations as traditional financial actors. on the risks represented by Fintech.

Least mature Most mature models models

USA SWITZERLAND SINGAPORE Fintechs are subject to the same regulations as Since 2017, a regulatory sandbox has allowed Fintechs In 2016, the Singaporean government set up a traditional financial actors, with the exception of actors to avoid the obligation of having a bank authorisation (as regulatory sandbox allowing Fintechs selected by working in the deposit, cheque and loan sectors, that long as the total collected amount is below CHF 1 the regulator to test their business model, for a can benefit from regulatory relief. In 2018, Arizona million). Unlike the English model, the Swiss sandbox fixed period of time and within a predefined became the first American state to propose the set-up of operates according to a one size fits all approach, geography, while benefiting from a lighter a regulatory sandbox. thereby enabling all Fintechs to benefit from this regulatory framework. regulatory flexibility.

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 53 C 6 THE DEGREE OF FINTEGRATION: HISTORICAL ACTORS THAT ARE MULTIPLYING THEIR INITIATIVES IN THE DIRECTION OF FINTECHS

A CLEAR OPENING OF TRADITIONAL ACTORS IN THE FINANCIAL SERVICES SECTOR

• Historical bankers and insurers now plan to rely on Fintechs to accelerate their digitization. | Do you consider that there is a positive development in the way large companies approach Fintechs? • All, to varying degrees, have opted for open-innovation by setting up a range of mechanisms in order to work better with these new actors, that are contributing to the modernization of financial services (cf. figure C.5.1 below) Figure C.6.1 • This openness is perceived and welcomed by 75% of the surveyed Fintechs. • Monitoring of Fintechs is organised in all major groups and information is easily disseminated and accessible within all business lines, over and above the innovation departments; the development of the Fintech sector is becoming the R&D of the historical actors in the financial services sector. • Major groups have made considerable efforts to facilitate new contacts with start-ups, such as BNPP, for example, which created a Start-up engagement kit to reduce as far as possible the barriers for collaboration with Fintechs or Start-ups for business departments. Disagree Agree

of Fintechs have already established one or more partnerships with a corporate actor (POC, > 2/3 75% of Fintechs surveyed multi-year commercial contract...) report a positive development Sources : Exton Consulting on 120+ Fintechs interviewed in spring 2018

| Have you had interactions with a large financial industry | If you have already entered into one or more group? If so, what kind? partnerships, are they POC or multi-year contracts?

Commercial relationship / Partner → With whom have you signed your → With whom have you signed your POC? multi-year commercial contract? Incubator / Accelerator / Lab With other 37% With other Event / Prize corporates multi-year corporates Equity interest contracts Foundation / Sponsorship With insurers 63% With insurers HR incentive / Mentoring POC

Other With banks With banks

Average 3 contracts per Fintech

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 54 C 6 THE DEGREE OF FINTEGRATION: HISTORICAL ACTORS THAT ARE MULTIPLYING THEIR INITIATIVES IN THE DIRECTION OF FINTECHS

| Analysis of the different stages and involvement levels of traditional actors within the Fintech ecosystem Figure C.6.3

PARTNERSHIPS & SPIN-OFF AND START-UP ONE-OFF EVENTS INCUBATORS SEED AND ACCELERATIONS INVESTMENT FUNDS ACQUISITIONS STUDIO

Communicating about an Hosting start-ups in order to Integrating complementary Supporting Fintechs and Investing in actors with good Co-creating with innovative start- innovative approach and learn from contact with them Fintechs to build sustainable providing them with expertise potential for development and up entrepreneurs with possible immersing itself in the Fintech and and build a pool of potential industrial partnerships and

Principes to create business synergies additional earnings majority equity interest entrepreneurial ecosystem partners enhance the service offer

Start-up studio aimed Sponsoring Acceleration of Hosting start- at generating Fintech location ups to promote foreign Fintechs MM Innov' InnovAllianz independent or incubators CNP open Fintegration is the process open innovation insurtechs Support for start- Creation of start-ups Hackathons ups in any initiated by a large group that in the service of the Call for projects segment Incubation and group's Matchmaking aims to integrate, to a greater creation of a transformation pool of start-ups Offshore Internal for its corporate accelerators Creation of an or lesser extent, a Fintech and collaborative client Insurtech based on an within the regions Capital innovation (Nice, Lyon,..) Partners intrapreneurial its activity Exempleexhautives) (non d’initiatives platform initiative

EXPLORING LEARNING IMPROVING HEDGING INTEGRATING DISRUPTING Understanding disruption Understanding disruption Supervising and getting up Safeguarding against disruption Turning disruption Generating disruption to speed with disruption into a competitive advantage By investing in events or various calls for By hosting start-ups, a corporate actor By supporting Fintechs, a corporate By investing in the leaders of tomorrow, By integrating the services and offers of By creating start-ups to attack its own

Logique projects, a corporate actor seeks to increases its competence, identifies new actor seeks to orientate them towards the corporate actor ensures earnings if Fintechs (their own or white label), the model, the corporate actor ensures that it make itself known to start-ups and to trends and potential partners models that serve its own needs its initial model encounters difficulties corporate actor seeks to create a remains one step ahead make initial contacts competitive advantage over its competitors

Requires greater organisational Few links with the group's According to the interest of No direct link with the and cultural integration Employees who are often Commitment limited in time core businesses employees and innovation teams business lines (organisation, process, IT, seconded to be innovative

culture, etc.) implication

The objective is to enhance the The goal is to create one or two nuggets

ROI ROI The objective is to create possible Financial results are the main objective current business, the financial results whose success will be phenomenal : the attendu No direct ROI (innovation image and indirect profit on corporate clients) synergies of the start-ups are secondary failure of some start-ups can be tolerated

Sources: Exton Consulting Analysis

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 55 C 6 THE DEGREE OF FINTEGRATION: HISTORICAL ACTORS THAT ARE MULTIPLYING THEIR INITIATIVES IN THE DIRECTION OF FINTECHS

OFFSET BETWEEN THE STATED DESIRE TO COLLABORATE AND REALITY ON THE GROUND

• The sales cycles for signing a partnership contract between a Fintech and a corporate actor are | Words mentioned by Fintechs to describe their interactions with the sector's actually very long (several months) compared to the need for speed of start-ups with their historical actors precarious cash flow. Figure C.6.4 • When Fintechs sign contracts with Corporate actors, this involves a Proof of Concept in 63% of cases, often without invoicing, according to the interviewed Fintechs.

• Once it becomes time for the POC to take concrete shape in an industrial partnership or a long- term partnership, the contractualization processes become more complex – Many highly varied issues related to IT security, compliance, data protection and data processing, scalability of the solution, the business model and the value sharing model... all become part of the discussion. – The ability to accelerate this phase is key to the survival of Fintechs, whose models are based on these B2B or B2B2C agreements

• Once the partnership is signed, the integration and deployment of the solution within the historical actor's organisation requires at least 6 months in order to account for: – Development or technical integration delays – The time needed to carry out client tests or to prepare for marketing – Change management within commercial networks

• Thus, the success of a Fintech's collaboration with a large banking or insurance group requires patience and great professional maturity.

| Difficulties encountered by Fintechs in their ManqueLack of deresponsiveness réactivité et compléxité and interaction des interactions complexity 79% search for partnerships ExcessivelyProcessus burdensomede contractualisation contractualization trop contraingant process 62% Figure C.6.5 DifficultyDifficulté finding à trouver the rightle bon contact interlocuteur person / sponsor 59% BesoinsNeeds mal poorly appréhendés grasped 48%

InadéquationCultural inadequacy culturelle 42% ExcessivelySystème rigid IT trop IT system rigide 29% ConstraintContrainte related tolié establishingà la mise en complianceconformité 26% Sources : Exton Consulting on +120 Fintechs interviewed in spring 2018

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 56 C 6 THE DEGREE OF FINTEGRATION: HISTORICAL ACTORS THAT ARE MULTIPLYING THEIR INITIATIVES IN THE DIRECTION OF FINTECHS

| Acquisitions and investments in Fintechs | Acquisitions and investments in Fintechs by the main French banks* by the main insurance companies in France*

*Only buyouts and investments in start-ups considered as Fintechs are taken into account here. Recognition at the end of 2018

21 Investments Carried out by the main French 25 Investments Carried out by the main insurance 13 Acquisitions banks since 2015 3 Acquisitions companies in France since 2015

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. More than fifteen testimonials from Innovation Directors and/or General Managers of banks and insurance JEAN-MICHEL LEDRU companies, financing actors and institutions within the sector Director of the EDHEC Incubator

PIERRE BIENVENU OLIVIER GOMBERT-GILLMANN ANTOINE LEPRETRE Fintech Innovation Cluster, ACPR, Director of the HEC Incubator Prudential control and resolution agency CIO, MAIF

LAURENT DARMON JULIEN MARTINEZ CEO, Fabrique by CA Start-up Studio created by DAMIEN GUERMONPREZ Director of Strategy and Innovative Projects, Crédit Agricole in 2018 President LemonWay and Business Angel in Fintech Allianz France

ARNAUD DE BRESSON CEDRIC NIEUTIN STEPHANE GUINET Director, B612, Start-up incubator and accelerator Paris Europlace Executive Officer CEO, Kamet, Start-up Studio Insurtechs run by the Caisse d'Epargne Rhône-Alpes

LIOR DEHRY LAURENT HERBILLON EDOUARD PLUS Managing Director, New Alpha AM, VC Fintechs Director of Open Innovation and Start-ups Director, Le Swave (Paris&Co) Fintech innovation platform Cooperation, BNPP IRB

JOËLLE DURIEUX STEPHANIE HOSPITAL FARIDA POULAIN General Manager, Finance Innovation CEO, One Ragtime, innovative investment platform Incubation Manager, Le Swave (Paris&Co)

ANNE-SOPHIE GODON RONAN LE MOAL ALEXANDRE VELUT Innovation Director, Malakoff Médéric, Chief Executive Officer, Crédit Mutuel Arkéa CEO, INVYO, Market intelligence start-up specializing French joint social protection group in the Fintech sector in Europe, the Americas and Africa

WHAT IS YOUR VISION OF THE MAIN TYPES OF FINTECHS? As part of my duties, I carefully observe what's being done in other countries. I think that France is really in the "breakout" phase in the Since the cluster's creation in 2016, we've come across just over 400 Fintechs. This demonstrates the dynamism of the French ecosystem. field of Fintech regulation. It has demonstrated this through its approach to crowd-funding, account aggregation and the blockchain. The Some want to offer financial services or products, while others present themselves as technology providers for established financial initiatives taken by the ACPR and the AMF amplify these legislative and regulatory developments by making them genuinely available to actors. The latter are involved in the fields of data science, artificial intelligence, blockchain as well as computer security. Amongst the innovative actors. This responsiveness is essential. actors directly offering services or products, a large proportion operates in the field of payment and account aggregation. The others are in crowd-funding, the distribution of financial products or investment consulting. We also meet a smaller number of actors targeting more advanced banking, insurance and investment services activities. They must then obtain the appropriate authorisations for credit OTHER MARKETPLACES, SUCH AS IN THE UNITED KINGDOM, HAVE ANNOUNCED A ROBOT REGULATOR PROJECT FOR institutions, insurance companies or investment firms. SIMPLER APPLICATION OF REGULATORY TEXTS. WHAT DO YOU THINK? DO YOU WORK ON THIS KIND OF SUBJECTS? That's an interesting thought. Regulation is very fragmented in the texts, both on the national and European levels, and anything that helps to make this regulatory matter clearer, more explicit and more accessible is a step in the right direction. However, when I look at WHAT IS THE ROLE OF THE FINTECH AND INNOVATION POLE? the regulations that fall within the scope of the ACPR's jurisdiction, they're not so prescriptive that they can be read and understood by a Our mission is to meet with Fintechs without formalism and to answer their questions while trying to educate. We try to provide them robot. They're based more on principles and a risk-based approach that require the responsibility of the actors. with the supervisor's perspective so that they can make an informed choice of their regulatory model. Every day, we receive 1 or 2 Since July 2018, the Fintech-Innovation Cluster has been working with the LAB at the Banque de France (the ACPR is backed by the requests from Fintechs. Our relatively small team works like a start-up, in order to preserve our responsiveness and flexibility. We want Banque de France) to accelerate innovation and digital transformation at the ACPR. The projects that will emerge from it could to break with this "fear of the police", this formalism that often dissuades innovative actors from contacting supervisory authorities. eventually make it easier to access regulations. We're also the ACPR's outpost on innovation topics such as blockchain, artificial intelligence, remote identification, etc. As such, we're participating in the development of the ACPR's positioning on these new subjects through public interventions as well as through participation in European and international working groups. In March 2018, we published a comprehensive study on the challenges of the FRANCE STARTED VERY EARLY TO SUPERVISE THE CROWDFUNDING SECTOR. EUROPE HAS INDICATED THAT digital revolution within the banking and insurance sectors, and another in October 2018 on the business models of online banks and neobanks. We're also preparing to complete our work on artificial intelligence, for which we've led a task force with a large number of REGULATION IS IN PROGRESS. HOW WILL THIS CHANGE THINGS? banks, insurance companies and service providers. Indeed, along with Great Britain, France was a pioneer on the subject of crowdfunding. The 2014 Order governing the sector is based on In all of its activities, we cooperate closely with the AMF. This is particularly the case of the Fintech Forum, a consultation body for the a simplified regulatory model. However, it's a sector that continues to evolve. First of all, actors need volume and that's why European Fintech ecosystem that aims to strengthen dialogue between all the actors in the market (Fintechs, established actors, investors, markets are essential for their growth. In addition, the "crowd financing" model can prove to be more complicated in practice, as it consulting firms, etc.). requires both finding projects to finance and investors willing to finance them. Platforms sometimes evolve towards more classical models by turning to institutional investors. The European Commission's project is an effort to respond to these developments. For now, Europe is proposing to have a new European status for crowdfunding. A start-up would then be able to choose between a French statute or directly a European statute in order to be HOW WOULD YOU SEE THE FRENCH REGULATOR IN RELATION TO OTHERS WHO CLAIM TO BE VERY AVANT-GARDE ON able to operate its crowdfunding activities throughout the single market. THE FINTECH SUBJECT, NOTABLY WITH THE SET-UP OF SANDBOXES? The first entry barrier for Fintechs is an information barrier. Innovative actors and entrepreneurs often don't know whom to contact when it comes to regulation. It's the raison d'être of the Fintech-Innovation cluster to foster a direct dialogue with Fintechs, to avoid HOW DO YOU VIEW THE DSP2? misunderstandings about regulations that may at first appear to be complex and inaccessible. Secondly, it's clear that financial The DSP2 is an essential regulation. It allows new Fintech actors to offer payment account information services with customer consent. regulation, largely of European origin, is not a monolith: it consists of a variety of paths that allow a great diversity of actors to coexist This is a step towards Open Banking, because beyond account information services, these regulated actors can become intermediaries on the basis of common principles. We therefore use an open approach, since we're convinced that innovative actors can find regulations and they want to challenge the customer relationships of established actors. This regulation is therefore a powerful competition lever. to be a path in line with their activity and favourable to their growth. At the same time, when necessary to amplify the proportionality We can see that established actors are responding, with data aggregation projects and by redesigning their mobile applications. The DSP2 principle and encourage innovation, we can also propose regulatory changes. must guarantee the security of these services, but it's also positive for innovation and consumer satisfaction. In this respect, the ACPR has been particularly responsive, since shortly after the Directive came into force in January 2018, several aggregator authorisations were issued.

CAN YOU GIVE US AN EXPLANATION OF THE ROLE OF THE FABRIQUE BY CA, WHERE THIS PROJECT COMES FROM, DO THE BUSINESSES CREATED BY THIS "START-UP FACTORY" HAVE EXCLUSIVE CONDITIONS WITH CRÉDIT AGRICOLE? AND HOW IT WORKS? Exclusivity with the group is not required from the start-ups that develop within the Fabrique. They can create the partnerships that Transformation is not easy for major banking groups. Two main reasons for this : firstly, the burden of their "legacy system", that they want. Like any business, Crédit Agricole may request exclusive rights, that will be remunerated accordingly. Similarly, though we crystallizes the operation of banking groups and makes innovation complicated and costly ; secondly, the risk culture and the difficulty of primarily focus on the French market, if one of our start-ups wants to open up internationally, then we'll support its decision in this a banking group when it comes to investing in innovation. Even if the employees would like to act, the silo organisation makes it difficult direction. We won't be an obstacle to its development. to take the initiative. However, if a project touches the group's core business and is of strategic interest for the CA, we'll want to have a majority. The Fabrique by CA was born from this observation and the need to "leverage" the power of Crédit Agricole. These days, in fact, innovation is either treated alongside a large group, with no impact on its internal culture ; or, otherwise, groups absorb the start-up and destroy its very essence by imposing their own operating method. WHAT'S THE NATURE OF YOUR RELATIONSHIP WITH THE CA VILLAGE? We were initially hosted within the Village and some of the created start-ups will naturally be hosted there. In general, we rely on the With the Fabrique by CA, we've therefore created a hub run by a dozen people who are perfectly familiar with the entrepreneurial entire CA ecosystem with, for example, a shared digital service, via the API system of the "CA store", or the innovation fund. The culture and who understand the difficulties of integrating within a large group. We support start-ups and entrepreneurs in their creation ecosystem built by the Group allows us to benefit from additional and complementary levers. The idea is to use all of the assets at our process, and we provide them with financial support through an investment fund (seed, series A). The idea behind this structure is to co- disposal to optimize our support. construct a value proposal with entrepreneurs without altering the essence of their company. We start with the needs of Crédit Agricole or its clients, and try to meet them by exploring different value proposals, while creating two to three prototypes for each need. The idea is to test several solutions within the market, in order to decide which one to accelerate. YOU NATURALLY PAY A LOT OF ATTENTION TO THE FINTECH ENVIRONMENT. WHAT'S YOUR VISION OF THE PARIS MARKET RELATIVE TO OTHER FINTECH ECOSYSTEMS? In France, we have the impression that it's difficult to have our start-ups become European champions. If we take the example of the HOW DOES THE SOURCING OF START-UPS WORK? Sandbox in England, it provides for greater testing capabilities. Germany is also a good example, with dematerialized and remote KYC We rely on our partners such as the Place Fintech au Palais, for our calls for projects, and we organize hackathons. Entrepreneurs whose being authorised much earlier, thereby allowing neo-banks like N26 to get a head start in terms of experience with autonomous clients. projects are still in the initialization phase can join us. It's not the role of the Fabrique to acquire interests in already mature start-ups. As for the United States, financing capacities are much more greater for a start-up that's starting to get traction. In case of time-to-market issues, we can work with an actor that is already established, but this won't be the target model. The challenge is really to build up together.

CAN YOU DESCRIBE THE MISSIONS OF EUROPLACE AND HOW YOU'RE WORKING FOR THE DEVELOPMENT OF THE IN THE CONTEXT OF BREXIT, WHAT PLACE DOES FRANCE HAVE COMPARED TO OTHER FINTECH CENTERS IN EUROPE? FINTECH ECOSYSTEM IN FRANCE? With between 500 and 700 Fintechs, France is in the lead in the European competition, even compared to London. The Paris market has Paris EUROPLACE brings together all of the actors in the Paris financial market: industrial companies, including SMEs and start-ups, developed innovative start-ups in several sectors of excellence that attract European investors : notably payment instruments, big data, investors, banks and financial intermediaries, law firms and consulting firms, market authorities and local authorities, to contribute risk management, new banking and financial products, insurtech, sustainable and collaborative finance. together to developing and promoting the Paris financial market. The development of financial innovation - both on the level of large industrial finance companies (banking, insurance, management) and Fintechs - is one of the priorities of our action intended to make Paris "The financial market of the future, leader of the European Union", WHAT KEY MEASURES SHOULD OUR COUNTRY TAKE TO ENCOURAGE THE EMERGENCE OF START-UPS IN FINANCE AND in accordance with our Strategic Plan. TO SUPPORT THEM OVER TIME? In concrete terms, Paris EUROPLACE is developing recommendations to work towards the best regulatory and fiscal environment to The objective is to simultaneously develop orientation structures, nurseries and incubators, following the model of the first initiatives support these companies, in collaboration with the Regulatory authorities, to develop our research and innovation capacities, in developed with the City of Paris and the Ile-de-France Region. But also to develop investment capacities, both public and private, to collaboration with the Institut Louis Bachelier, created in 2010, and to support the creation and development of Fintechs, thanks to the support these companies over the long term. Encouraging the creation of larger funds is a priority, as is reviewing the regulatory and tax action of the Finance Innovation Pole, a department of Paris EUROPLACE, created in 2008. And since COP 21, to help accelerate environment, both in France and Europe, in order to develop long-term savings and to orientate these savings towards the financing of sustainable and environmental finance, including the development of start-ups in these new sectors : this is the action undertaken by companies. Finance for Tomorrow, an initiative launched by Paris EUROPLACE in 2016.

CAN YOU TELL US MORE ABOUT "EMERGENCE", THE SEED FUND THAT YOU PROMOTED? Another of our initiatives was the 2010 launch of Emergence, a seed money fund that provides funds to be managed by young innovative management companies in the Paris financial market. Emergence recently set up its third sub-fund dedicated to equity management companies, for a total amount of €800,000 of funds provided to management start-ups.

THE FRENCH ECOSYSTEM NOW SEEMS TO BE ADEQUATELY STRUCTURED TO HELP FINTECHS TO START UP, AND TO GROW THEM ON A LOCAL OR EVEN CONTINENTAL SCALE. HOWEVER, WE HAVEN'T YET MANAGED TO BRING TO LIGHT ANY SCALE-UPS/UNICORNS. HOW DO YOU SEE THIS OBSERVATION? It's a difficulty, certainly. Paris EUROPLACE has taken the initiative to bring these high-growth companies together with investors, to better identify their needs and set up the necessary financing capacities. We need to develop larger venture capital funds and to strengthen the accommodation capacities of the stock exchange, particularly the Enternext compartment. It's also necessary to work on the regulatory environment and to facilitate the investment of institutional investors - insurance, investment funds - in companies.

CAN YOU TELL US MORE ABOUT THE NEWALPHA AM FUND DEDICATED TO FINTECHS? (AMBITIONS, OBJECTIVES, HOW DO YOU SEE FRANCE'S PLACE WITHIN THE FINTECH SECTOR? ENDOWMENTS, ETC.) The French Fintech ecosystem has extensively developed and structured itself over the last five years: entrepreneurial initiatives in all For more than 10 years, NewAlpha AM has been selecting, financing and supporting innovative entrepreneurial projects. Its focus is financial industry businesses, organisation of the sector's representativeness and attractiveness, growth of private and public financing, mainly on initiatives with a strong technological component that impact the banking, insurance and asset management businesses. It thus the emergence of dedicated acceleration mechanisms, and the significant emergence of several Fintechs. At the same time, the offers institutional investors access to the most innovative and dynamic companies in the sectors that concern them. constructive evolution of relations between established actors and start-ups in the financial industry is democratizing Fintech innovations This investment activity is coupled with a structured support system that relies on internal resources dedicated to activating synergies and offering attractive development opportunities for everyone. between all members of the partner ecosystem. NewAlpha AM has distinguished itself both nationally and internationally for its positioning and expertise. In November 2015, it notably launched the first French VC fund dedicated to Fintech. WHY HAVE WE NOT YET SEEN ANY FINTECH UNICORNS? HOW CAN WE PROPEL MORE FRENCH START-UPS WITHIN THE FINANCIAL INDUSTRY AND MAKE THEM CHAMPIONS ON A EUROPEAN OR EVEN INTERNATIONAL LEVEL? IS THERE A WEAKNESS IN THE FINTECH FINANCING MODEL IN FRANCE? (I.E. TO ENSURE THE RAMP-UP OF ACTIVITIES VS. ANGLO- WHICH TYPES OF DEALS DO YOU PREFER? AMERICAN MODELS WITH LARGER TICKETS)? Our Fintech fund focuses on all entrepreneurial initiatives that impact the banking, insurance or asset management businesses, either by The Fintech sector in France got off to a start somewhat later than in the United States or the United Kingdom, and these countries are offering innovative products or processes, or by offering solutions that enable existing financial industry actors to optimize their business still ahead of France for now. Some Anglo-American start-ups have become unicorns and, at this stage, the financing that's provided to processes. their start-ups remains greater than the financing invested in French Fintechs. Moreover, the world's largest Fintech unicorns are in We invest in tickets ranging from €2 million to €3 million during financing rounds of up to €12 million. China, where start-ups have taken advantage of a lower penetration of certain technologies that are widespread in the West, particularly in payments, and have thus become world leaders in more innovative technologies. However, it can be seen that the financing volumes of start-ups in France are accelerating sharply, particularly in 2018, and this should DO YOU ONLY INVEST IN FRENCH FINTECHS? make it possible to bring out unicorns amongst French Fintechs in the coming years. Our mission is to offer a French financing and support solution, one primarily intended for French Fintechs. However, we can be active beyond our borders as well. The fund's portfolio currently includes 9 companies, 2 of which aren't French. NEVERTHELESS, SOME OBSERVERS POINT TO A FINTECH BUBBLE, AND EVEN SUGGEST A FUTURE EXHAUSTION OF THE FINTECH PHENOMENON. HOW DO YOU SEE THESE FORECASTS? AND WHAT ARE THE MAIN MOTIVATIONS OF THE INSTITUTIONAL INVESTORS THAT ARE WORKING WITH YOU? It's understandable that the valuations can sometimes be surprising, but they must be viewed in relation to the growth potential of start- We contribute to the innovation and support efforts of institutional investors who put their trust in us. In close contact with their general ups and the valuations during disposals that we've seen in France and abroad. In addition, to bring unicorns to light in France, it's management teams as well as their digital or innovation teams, we help them to structure their strategic reflections, to identify necessary to be able to carry out larger financing rounds while maintaining the significant capital participation of the managers. The solutions relating to the profound changes that concern them, and to establish fruitful collaborations, particularly with the companies mapping of French Fintechs that we prepared last March with Exton and Invyo indicates that more than 300 Fintechs start-ups are that we support. currently operating in France. This illustrates the predominance of Fintechs in our financial industry. Also, given the richness of the French ecosystem, regulatory changes that encourage the emergence of opportunities and the fact that nearly a third of identified Fintechs have been created in the last two years, we're convinced that this momentum will continue with significant developments over SINCE THE CREATION OF THE FINTECH FUND IN 2015, YOU'VE ANALYZED A LARGE NUMBER OF FILES. FOR YOU, the years in terms of the addressed topics. WHAT ARE THE MOST PROMISING MODELS? Indeed, the specificity of the team, which combines a large VC and Tech network with a proven positioning in financial professions, enables us to be visible and attractive across Europe. We've met with several hundred start-ups. Fintechs focus on specific products or customer niches that are insufficiently addressed by traditional actors, with a focus on innovation to revolutionize the customer experience and pricing models. This phenomenon is affecting every segment of the financial services sector, but in an uneven way. As in many countries, the banking business, particularly financing and payments, was the first to be revisited, and it's the most mature segment. The wave affecting insurers is more recent. Regtech subjects are also major drivers in the rapid expansion of Fintechs, in view of open markets and the recurrence of appropriate structural changes.

CAN YOU TELL US MORE ABOUT THE MAIN MISSIONS OF FINANCE INNOVATION? Each project's quality is assessed by a committee of experts on the basis of three main criteria: The Finance Innovation Cluster was created on the initiative of public authorities in order to support and accompany innovative projects - Innovation: the projects must offer a genuine innovation within their market, whether in terms of usage, technology, etc. for the finance industry. Indeed, the financial sector in France is an industry in its own right and deserves to be given its own cluster. - Strategy: the topic highlighted by the project must be strategic for the targeted sector, or even for society in general. - Credibility: the project must have a structured and credible development plan and business model, as well as a team with the Finance Innovation is accompanying and supporting today's Fintechs in order to create tomorrow's finance: positive, transparent, human necessary skills. and innovative finance. In other words, a finance that isn't inward-looking but that adapts to its era while being open to the needs of the actors of its time. YOU RECENTLY ANNOUNCED PARTNERSHIPS WITH INTERNATIONAL FINTECH CLUSTERS. WHAT ARE THE OBJECTIVES WHAT ARE YOUR LINKS WITH THE PUBLIC AUTHORITIES? OF THESE BRIDGES BETWEEN PARIS AND THE WORLD'S OTHER FINTECH HUBS? We have a very strong relationship with the public authorities: in 2007, we were awarded the "World Competitiveness Cluster" label by The Finance Innovation global competitiveness cluster has always been committed to supporting and promoting the Fintech ecosystem in Mrs Christine Lagarde. Working with the State, 9 founding members are behind the Finance Innovation Cluster: Paris Europlace, the Île- France but also abroad. With this ambition in mind, the Cluster has reached out to several international hubs (Montreal, Toronto, New de-France Region, the City of Paris, three professional associations - the French Insurance Federation (FFA), the French Banking York, Dubai, Casablanca, Madrid, Luxembourg, Tel Aviv, Shanghai, Singapore, etc.) in order to export French expertise to regions where Federation (FBF), the French Management Association (AFG) - the Paris Chamber of Commerce and Industry (CCIP), BPI France and Fintech is booming. Euronext Paris.

THE FRENCH ECOSYSTEM NOW SEEMS TO BE ADEQUATELY STRUCTURED TO HELP OUR FINTECHS TO START UP, AND HOW ARE YOU WORKING TO BE A DRIVING FORCE IN THE FINTECH ECOSYSTEM? TO GROW THEM ON A LOCAL OR EVEN CONTINENTAL LEVEL. HOWEVER, WE HAVEN'T YET MANAGED TO BRING TO Banks, insurance companies, start-ups, competitiveness clusters and public authorities: we all have a role to play in bringing new and LIGHT A SCALE-UP/UNICORN. CAN BREXIT CHANGE THE SITUATION AND STRENGTHEN FRANCE'S ATTRACTIVENESS / innovative ideas to light within a changing financial ecosystem. It's for this very reason that Finance Innovation organizes events such as COMPETITIVENESS IN THE FINTECH SECTOR COMPARED TO OUR EUROPEAN NEIGHBOURS? Fin&Tech Community, Insurtech Business Week and Fintech Business Day, that bring together all of the sector's actors. Competition is fierce between the major European financial cities, Paris, Frankfurt, Dublin and Luxembourg, and each one is struggling Moreover, Finance Innovation helps its members to identify tomorrow's strategic and promising sectors, by writing thematic white to position itself as the European Union's new financial centre. In this battle, Paris now appears as the most popular financial centre for papers. These papers are distributed throughout the ecosystem, including to the public authorities, to raise awareness and help them to the relocation of banks and financial institutions. But beyond this economic situation, we have major assets: - A buoyant market: many foreign Fintechs are setting up in France allocate public and private funding to disruptive, priority projects that create value for the competitiveness of the financial industry. - A very favourable regulatory framework for the emergence of innovative projects Finally, through a series of events in the regions, we coordinate the FrenchTech #FinTech thematic network, the objective of which is - Strong regional dynamism with the French Tech Fintech thematic network to: - Committed public authorities and regulators: creation of the Fintech Forum by the AMF and ACPR, European passport, etc. - federate and promote synergies in the local FinTech ecosystem of metropolitan areas - Dedicated and efficient support structures: an incubator (Le Swave), a venue for exchanges (La Place), a professional association - raise awareness of Fintech innovation amongst the participants (France Fintech) - develop the potential of Fintech ecosystems in metropolitan areas to promote French Fintechs. - Major dedicated events: Fin&Tech Community, Paris Fintech Forum, Fintech Revolution, etc. - Excellent training in data sciences provided by academic centres of excellence (Ecole Polytechnique, Université Paris-Dauphine, HEC, YOU'RE THE ONLY FRENCH ACTOR TO ISSUE LABELS TO FINANCIAL INDUSTRY START-UPS, WHAT EXACTLY DOES THIS ENSAE, etc.) LABEL COVER? WHAT ARE THE AWARD CRITERIA? HOW MANY HAVE YOU AWARDED SINCE THE CLUSTER WAS FOUNDED? WHAT KEY MEASURES SHOULD OUR COUNTRY TAKE TO ENCOURAGE THE EMERGENCE OF START-UPS IN FINANCE AND As a competitiveness cluster created by the State in 2007, Finance Innovation has natural legitimacy when it comes to bringing about the TO SUPPORT THEM OVER TIME? development of the financial ecosystem in a rigorous and independent way. We therefore created the State "Finance Innovation" label in Beyond regulatory changes, it's more than urgent to reflect on the need to create national champions. Several avenues can be explored, order to enable the sector's most innovative and promising companies to distinguish themselves and gain visibility with their partners. in particular that of facilitating collaboration between major principals and fintechs. This conviction could take the shape of a platform Since 2007, we've approved more than 500 innovative projects. As such, the promoters of labelled projects have access to a very built as a meeting point between the needs of traditional financial institutions and the offers proposed by Fintechs, with a view to co- complete range of services: before obtaining the Finance Innovation Label, they're supported by a pool of experts who challenge their creating a sovereign and unified ecosystem. projects in many aspects (strategy, market, targets, business model, management, skills…). Once labelled, they also have access to the The logic of collaboration must also exist between Fintechs, augmented by a logic of aggregation. After all, it's by combining the "Fintech & Croissance" programme run by consulting firms in order to elaborate their strategy, business development, international strengths and complementary aspects of Fintechs that we'll succeed in creating a true champion, capable of being recognized as a key growth, access to research tax credits or tax optimisation. We help them to find their first business in France, to raise public and private actor on the international Fintech scene. funds, and to develop internationally. They can also have access to a tool for accelerating penetration within major groups, by means of in situ experimentation projects.

CAN YOU DESCRIBE THE OPEN INNOVATION SYSTEM SET UP AT MALAKOFF MEDERIC? WHAT ARE THE POSSIBLE AREAS FOR IMPROVEMENT IN COLLABORATION WITH FINTECHS? Well, we're trying to launch an open-innovation initiative with a very empowering approach that involves appointing Innovation Points of Companies are still struggling to identify segments of their value chain where Fintechs could help them. It still isn't natural for large Contact in each department and supporting them. The task of these people is not limited to monitoring, they also have the objective of groups to give up their internal development in order to make room for collaboration. seeing through a transformation project with a concrete solution within a given timeframe. As such, the ten innovative solutions Especially since this collaboration with Fintechs generally isn't easy: start-ups communicate with a different language and work with delivered by the end of the year will begin to instil innovation and transformation within the business lines. much shorter time horizons than large groups... The relationship to ownership also isn't the same; it's often not easy for a corporation to As far as the relationship with start-ups is concerned, the group had to adapt. First, we set up an industrial process to manage the renounce the principle of exclusivity within the context of a partnership. incoming flow, which was becoming increasingly significant. We work with Yoomap, which is helping us to categorise incoming requests and redirect start-ups directly to the right people. The evaluation of start-ups is another area for improvement. It's still extremely difficult to identify a start-up that will match up with the We've also taken time to reflect on areas within the value chain where collaboration with a start-up could benefit us the most in order to company in the long term. Labelling has the advantage of giving a vision at a given moment, but doesn't make it possible to assess the guide our sourcing. start-up's health over time. However, it's precisely this longitudinal follow-up that is valuable for a large group, and reassures them. In terms of financing, Malakoff Mederic has a €150 million start-up investment fund mainly managed by Idinvest. The objective is to Finally, the set-up of a grey area for experimentation: the creation of a meeting platform between specific business needs and start-ups, invest in projects that are strategic for the group (health, insurtech, new technologies, etc.) and will allow the involvement of our and tools for contractualization means are a few initiatives that would encourage and facilitate the relationship between start-ups and business teams. This policy enables us to reconcile financial profitability and operational interest. It remains to be seen whether these large groups. two objectives can be reconciled and balanced.

YOU'VE JUST PUBLISHED A REPORT ON THE IMPACT OF ARTIFICIAL INTELLIGENCE WITHIN COMPANIES. CAN YOU TELL US ABOUT THE INITIATIVES IN PROGRESS ON THIS SUBJECT WITHIN MALAKOFF-MÉDÉRIC? We're currently undertaking AI projects in two main areas: data (production of anti-fraud algorithms, generation of commercial leads) and client relationship (voicebot, automatic data reading, automatic integration of cover tables, etc…). AI is mainly being used to prepare/optimise and support our employees who will assist our customers on their omni-channel journey; all in an effort to make their experience as smooth as possible. Finally, we're participating in fundamental ethical debates related to AI.

CAN YOU TELL US MORE ABOUT THE RELATIONSHIP BETWEEN MAIF AND FINTECHS? AND WHY ARE YOU INTERESTED With the intrapreneurship scheme, the Mutual is giving everyone an opportunity to implement an idea for an offer or service that MAIF IN IT? and its subsidiaries have not yet imagined, and thus to participate in MAIF's cultural transformation. This cultural revolution is reinforced Despite the enthusiasm for Fintechs/Insurtechs, MAIF approached innovation from a different angle: more societal, more profound, and by MAIF's DNA, which is a mutual society and is intended to be a mirror of society: as its members change, it must also evolve in order to with the aim of identifying new applications. The objective was to observe the changes in society and its new needs, in which there is remain in sync with them. naturally a link with insurance. It should not be forgotten that Maif has a social responsibility: our brand embodies the values of a militant and ethical commitment. A very concrete example of change culture was the IT revolution that MAIF experienced in 2016. Our IT system was no longer able to We position ourselves as the trustworthy third party that can support the members in their daily lives, and we always strive to better modernize and provide new versions to keep up with the market. IT therefore decided to set up an open source and API-suitable service serve them with new experiences. In this context and with this in mind, we felt that Insurtechs provided good levers in terms of agility platform, and was able to do it under a year. As such, MAIF can now benefit from a network of thousands of developers and, in return, it and technological innovation to implement new unique experiences that we wanted to create and to offer to our members. offers free access to the source code of the IT tools that it has designed. It was quite an in-depth reappraisal of the IT processes that was The example of the foundation of Nestor, our personal and family finance management assistant, in partnership with the Fintech Linxo, led by our IT director, who understood that transformation was necessary to enable the group to be agile from end to end. is emblematic in this regard and is in line with the logic of following and supporting our members (in case of cash flow problems, etc.) : the challenge was to respond to a "pain point" in life by offering them an overview of their accounts and of the products adapted to their project in the more or less long term (risk coverage, prevention, financing, etc.) IN FEBRUARY 2018, MAIF LAUNCHED NIORTECH ALONGSIDE GROUPAMA, IMA, MAAF AND MACIF. CAN YOU TELL US This is really the angle of attack that Maif initially adopted in relation to this world of start-ups. ABOUT THIS INITIATIVE AND ITS SPECIFICS? In fact, Niortech is a territorial initiative of the four major mutual insurers, Groupama, Maaf, Macif and MAIF, with the Inter Mutuelles Assistance (IMA) group, which joined forces with the Niort conurbation and the Medef des Deux-Sèvres to promote and capitalize on the MORE SPECIFICALLY, WHAT MECHANISMS HAS THE GROUP SET UP TO WORK WITH FINTECHS/INSURTECHS? region's technological, insurance and consulting assets. The objective is to attract new economic actors to the Niort area. To do this, Since these start-ups serve as scouts for the MAIF, the group's first step was to get referenced and get closer to these new actors by Niortech has set up a true ecosystem, including: working on concrete field experiences, as well as testing and validating our intuitions through hybridization. an insurtech accelerator: French Assurtech, an entity in charge of culture and diploma training in partnership with business schools (Sup In this sense, MAIF Avenir was the referencing and hunting tool to gain a foothold within this entrepreneurial ecosystem: by investing in de co La Rochelle, La Cnam) in order to train future entrepreneurs and develop local skills, as well as a place to live, co-work and various start-ups, without being a majority shareholder, MAIF sought to facilitate relations with these players and to create proximity exchange for start-ups. with the founders to allow cross-fertilization. There was also a diversification objective in the background, but the first goal was really The paradox is that we find ourselves working with our competitors in the same space. Thanks to Niortech, barriers have been lowered to learn how to work with these Fintechs and better understand these new business models. and the spirit of competition is giving way to a natural community, a collaborative spirit and dialogue specific to mutualism. We may be Phase 2 will be totally different from the first, our approach will instead be to consolidate our relationship with Fintechs by creating small compared to other insurance actors, but together we represent 12 million insured households. Our members represent 50% of the clubs such as the MAIF Start-up Club, a new venue in Paris, inaugurated in March 2018 and dedicated to young innovative structures. We population and we can create new market standards. MAIF even ends up recommending certain start-ups to other mutuals and vice versa, wanted to create an original model by providing resident start-ups with an à la carte service offer (that includes HR, legal, financial and with a view to co-developing practices and new standards. This is the role of Niortech: to be an adoption accelerator. communication dimensions, all of which are essential for the development of start-ups...) coupled with a commitment by our MAIF employees to support them on these dimensions. This concept is beneficial in two ways: it enables the start-ups to develop independently, but also allows MAIF employees to be as close as possible to innovation. This allows us to build stronger partnerships and HOW DOES MAIF POSITION ITSELF IN RELATION TO OTHER GLOBAL FINTECH HUBS? go beyond mere investment. The digital department has created a "HUB" that manages landing zones. These are spaces around the world with a more or less permanent presence of MAIF or partners and which allow us to keep an eye on what's happening elsewhere. The initiative is quite recent, we currently have a landing zone in Paris and New York and we want to expand into Asia, Israel... This connection with other ecosystems HAS YOUR COMMITMENT TO START-UPS IN RECENT YEARS ENABLED YOU TO INTRODUCE THESE NEW APPROACHES enables us to meet new actors by organising learning expeditions, to be confronted with new issues and to enrich our knowledge, while AND WORKING METHODS INTO THE GROUP? being on the lookout in other sectors. (e.g. MedTech). Given the richness of the entrepreneurial ecosystem, the challenge is to know Undeniably! During these initiatives, MAIF was able to generate an indirect, non-financial, but real ROI: change management. Today, how to read and translate it, and to be able to execute it. That's the keyword and the ultimate goal. Detecting great ideas only we're seeing a real culture of change driven by a breeding ground of more than 7,000 people. This is very positive for MAIF, which, represents 5% of the work, with 95% having to do with implementation speed through a real industrial project. despite a model that’s still working well, is learning to reappraise itself and is encouraging many initiatives from its employees in order to bring about change (Lab, POC...).

IS FINTECH A JOB-CREATING SECTOR? FOR WHICH PROFILES? All businesses are concerned. In the ten or so Fintechs with which I'm working, there are needs for all profiles provided that the Although LemonWay has been ranked #1 in growth by Les Echos in the French banking and insurance sector for the past two years and #8 candidates can adapt to a digital culture: from marketing to law, from IT to finance. I'm impressed by the experience of some employees within the EMEA according to the FT, we must accelerate. We've just raised €10 million for expansion in the UK and Germany. who don't hesitate to leave high-paying positions in renowned establishments to join a Fintech company that's fragile by its very nature. However, two elements should reassure us. First of all, the market for French Fintechs is European, even global, which gives us On the other hand, I notice that there's little room for 50-year-olds, who are relatively expensive and often resistant to change. After 25 interesting prospects. Furthermore, each Fintech is finding its new business and has the potential to become a Leader. As such, Lemon years in a profession, it's more difficult to believe in disruption. Way is targeting leadership amongst payment institutions in the service of digital marketplaces, Evollis, leadership in B2C leasing, Tiller, There aren't enough women and I find that they’re underrepresented in management positions at Fintechs compared to other digital leadership in Ipad-based cash registers, Wedoogift, leadership in digital prepaid cards... Becoming a leader in a niche is bound to have a companies. certain value. I've also noticed that the profiles that need the reassurance of a stable environment don't always correspond to Fintechs, even though To date, very few Fintechs are profitable in France, as indicated by their accounts on Infogreffe. I only know of one profitable Fintech in Fintechs, particularly ones that are regulated, must attract these analytical profiles such as auditors, compliance managers and bank payments, Lemon Way, because we made it a habit of selling our platform as a white label to French banks when we needed to do so, in lawyers. It's up to Fintechs to adapt to attract and retain these more "serious" profiles. order to finance our growth for ten years. This is where I believe the difference between other start-ups and regulated Fintechs lies : the latter must double their efforts to meet regulatory constraints. It's anything but fun, but it's still exciting A decade is how long it takes to reach an average turnover of around €10 million. That's my horizon as a business angel. Exits like Pumpkin’s are welcome, but they remain exceptional.

WHAT SUPPORTS THE FINANCING OF FINTECHS? HOW TO COOPERATE WITH TRADITIONAL ACTORS? As far as financing is concerned, one must remain realistic. Fintechs remain too fragile to hope for bank financing in any significant way, THE INTERNATIONAL CHALLENGE AT THE HEART OF BUSINESS MODELS? apart from BPI France that has European support for a large part of its commitments. Regulated Fintechs are the only start-ups that can't Whether the market for Fintechs is European or even global, they're exposed to strong competition from foreign actors. Normal enough, afford to lose a single euro without immediately returning it to equity, while other start-ups can call on debt if they have access to it. so far… However, with regard to regulated Fintechs, there's clearly a competition distortion in favour of non-European Fintechs that use When it comes to cooperation, banks and Fintechs are very open and respectful of their commitments. lax countries such as Malta, Cyprus and Gibraltar to access the European market without having to put up with the same constraints as I'm not aware of a single bank that has tried to replicate internally what it discovered with a FinTech, except to appropriate the Fintech's European Fintechs established in strict countries. white label solution or to buy the Start-up. This is a major change from the innovations of previous years, when banks developed their own online services in the securities These countries praise their laxity on their websites in order to attract Fintechs that want more flexibility without the strict country's brokerage business, although at the time, some brokers like Fortuneo were forerunners of the Fintech era. regulator being able to act, since it only supervises regulated actors that are established within its own country. Almost all of Lemon In payment businesses, the collaboration seems exemplary. Fintechs use secure highways, i.e. interbank payment networks, while paying Way's competitors, even French-speaking ones, have chosen to be established outside of France. That’s regrettable. a toll to the banks that built them. We nevertheless believe that, for us and for a Fintech in general, being regulated in France is synonymous with seriousness. This has worked in our favour when signing with clients such as the Fédération Française de Football (FFF), the FF de Natation, the Scouts de France, Auchan and many others who favour France. MATURITY AND PROFITABILITY : ARE FINTECHS FULFILLING THEIR PROMISES? Growth targets are being met, but profitability is falling behind, because volumes remain insufficient in mature markets. That's the paradox: LemonWay's growth from a turnover of €1 million to €11 million between 2014 and 2017 is a great performance, but it's still insufficient in a payment world where work unit is a billion euros of transactions.

CAN YOU INTRODUCE US TO THE KAMET MODEL AND ITS ROLE IN THE FINTECH WORLD? Health data aren't sufficiently aggregated, it's necessary to obtain patient consent in order to store information, even with anonymized KAMET is a start-up studio with offices in London, Paris & Tel Aviv. Our purpose is to launch innovative start-ups with entrepreneurs, data. Cutting off datasets doesn't promote the design of high-performance algorithms and ultimately doesn't help the progress of science. whether in core insurance domains or in peripheral activities such as healthcare. We have an approach where we seek to resolve a "pain point" within the market, but one that's big enough to lead to commercial opportunities. We set aside 90% of the ideas: we have a In terms of financing or incubation structures, it seems to us that the French market is rather well equipped, even if the average process in which, at each step, the original idea has to be enriched or developed further, or otherwise the project is abandoned. We fundraising tickets are more modest than in the United Kingdom or the United States. Start-ups must be able to find their market and don't hesitate to pivot the business models in order to give our start-ups a chance to succeed. We can provide AXA's expertise and prove that they can grow through sustainable growth: they'll then find appropriate financing. Valuations are high in the Fintech sector, resources in terms of actuarial services, market analysis, financial analysis, etc., to support our ideas. We invest seed capital and then but after the euphoria of the first rounds of fundraising, the reality of finance comes down to generated turnover and revenue growth, support start-ups for the subsequent fundraising events, open to both the AXA Group and the market. with a viable profitability model. The models must prove themselves: over time, valuations are therefore mechanically adjusted.

HOW DO YOU CHOOSE MARKETS FOR LAUNCHING START-UPS? WHAT WOULD BE YOUR RECOMMENDATIONS FOR MAKING FRANCE MORE ATTRACTIVE IN TERMS OF OPEN We have an approach in which we don't focus on the French market. The English or Israeli markets are good playgrounds where we can INNOVATION? sometimes more easily experiment with our ideas. For each project, we decide which will be the best market for launching the start-up I would say that a start-up should not hesitate to find the right market that corresponds to its business model, and if necessary to change and making it flourish. For example, we considered that for the Insurtech Anorak Life Insurance, there was more potential with a launch territory to develop its activity. directly in the United Kingdom. The State has a role to play by asking the heads of administrative authorities to welcome start-ups with some benevolence, instead of forcing them to take legal action to demonstrate the validity of their concept. Each administration (DGT, ARS, etc.) should facilitate the work of start-ups by giving them the right to pre-market experimentation within a limited territory or for a limited time. The WHAT DO YOU THINK OF THE FINTECH INNOVATION ECOSYSTEM IN FRANCE? administrative burden in France is a barrier to innovation and the emergence of start-ups. There's momentum in Fintech even though most of them are focused on banking/insurance services and will have trouble finding their Finally, while France is known for the quality of its engineers, it still doesn't train them sufficiently in financial and rhetorical matters. market in B2C. The entry barriers to becoming an insurer are enormous (regulations, necessary equity capital...), and they protect the These teachings need to be reinforced in schools, so that our entrepreneurs develop more oral fluency when confronted with investors sector's leading actors, though Fintechs can improve part of the value chain. and other partners. There are many forms of public aid (subsidised loans, research tax credit, etc…). There's a kind of benevolence from the State and the regulator in France that's developing with regard to start-ups, but the administrative burden is still considerable. Unlike the United Kingdom or Israel, where we can access data sets to experiment with our ideas, it's still difficult in France. In Israel, for example, we were able to launch a start-up that analyses cancer cells using high-definition imaging and machine learning, which has significantly improved cancer detection. This system will be extended to Israeli hospitals. Today, access to health data in France remains very complicated, even on an experimental basis.

THE DEVELOPMENT OF THE FRENCH FINTECH ECOSYSTEM IS ACCELERATING. ARE YOU ABLE TO ASSESS THIS This is all leading to true empowerment of BNPP’s employees, and it enables the teams to experience "learning-by-doing" while being EXCITEMENT? AND HOW DO YOU UNDERSTAND IT AT BNPP? faced with new and more agile working methods. All of this is possible notably thanks to strong sponsorship from the management, which Indeed, we're seeing the same excitement within the Fintech sector. A multitude of actors are entering the market in various segments very quickly understood the virtues of open innovation for the transformation of businesses. of the value chain. For banking groups like BNP Paribas, this is a great opportunity to accelerate our digital transformation. However, a phenomenal offer also means a fairly significant drop-off rate for start-ups. On the corporate side, this plethora of offers can also be a source of problems: the whole question is how to make the right choices. Through our Plug and Play acceleration programme at ON THE OTHER HAND, WHAT DO YOU THINK ARE THE OBSTACLES TO FINTEGRATION? Station F, we're being approached by a growing number of French and international candidates with very diverse profiles. This forces us Fintech-Corporate collaboration still has to be made sustainable. We need to broaden the cooperation scope and consolidate our to be increasingly equipped and experienced in order to make a rational choice within the diversity of projects. relations through real medium-term industrial projects. For this to happen, it's necessary to set up mechanisms and KPIs to monitor and measure performance. For example, through our Dialogue and mutual understanding between start-ups and large groups remain a complex subject. Between these two worlds, the time collaboration with Yoomap, we've deployed a Start-up Relationship Management (SURM) platform that enables us to harness the majority scale isn't the same: the decision-making processes are sometimes too long for a start-up, which needs to quickly sign a contract. There of our relationships with start-ups (contacts, appointments, PoC, MVP…). This means that we can share a maximum amount of are also the difficulties surrounding the industrialization of POCs. We also have to deal with the lack of "bandwidth" of the professions information internally, increase our efficiency and improve our relationship with start-ups for which time is a valuable resource. with which we work. It then becomes a question of finding the right balance between day-to-day business, experimentation and innovation. That’s why BNPP has wanted to facilitate bridge-building with start-ups by lowering as many collaboration barriers as possible. We've IN THIS REGARD, CAN YOU TELL US ABOUT OTHER MAJOR INITIATIVES IMPLEMENTED AT BNP PARIBAS? notably created a Start-up engagement kit, which has also been recognised with an award from French Tech. In practical terms, it's a The BNP Paribas Plug and Play programme is an acceleration programme located at Station F, in partnership with the Californian toolbox for BNP Paribas Group project managers and the start-ups who are co-developing projects with them. Specifically, it contains a innovation platform Plug and Play. Its purpose is to support BNP's digital transformation. We're starting our fourth season this autumn. standard confidentiality agreement, simplified contract templates to be adapted to the country specifics, a "sandbox" for testing the Since the beginning, 29 start-ups have been accelerated and we've completed 30 POCs, several of which have already gone into proposed solutions, recommendations for better managing the project's launch, and simplified procurement with a 3-page POC contract. production. This programme has enabled us to make great progress in terms of open innovation. We aim to provide real added value by This approach, that provides for easier cooperation between Fintechs and BNPP businesses on simple and clear bases, has been meeting highly identified and documented business needs. welcomed by both sides. We've also recently launched an open innovation investment fund with BNP Paribas Capital Partners. The purpose of this fund is to either acquire direct and minority stakes in innovative start-ups that are reinventing financial services and insurance; or to make indirect investments via Venture Capital funds whose technological (Artificial Intelligence, data, blockchain, cybersecurity, etc.), geographical and/or thematic verticals meet BNPP's transformation needs. Several investments have already been made over the past year, such as Serena Data Venture, Viola Fintech or Ventech China. Since 2016, BNP PARIBAS has been working with Plug and Play to develop an accelerator dedicated to Fintechs. Located at Station F, the accelerator is intended to support the selected start-ups and to enable them to benefit from HAVE YOU BEEN ABLE TO MEASURE TANGIBLE RESULTS WITHIN THE GROUP AFTER IMPLEMENTING ALL OF THESE the synergies within the Paris campus. Plug and Play is an innovation platform OPEN INNOVATION INITIATIVES? It's satisfying to see the positive internal impact of our open innovation strategy, and how it's helping to accelerate BNPP's digital present in many countries, and a first gateway to Silicon Valley for these start- transformation at both business and cultural levels. ups. From now on, the subject of open innovation is not restricted to the "happy few": many employees have adopted the reflex of experimenting with the innovative solutions offered by Fintechs. All of the Group's business lines, including top management functions, are involved in open-innovation programmes: development of use-cases, selection of start-ups, mentoring, etc...

DO YOU AGREE THAT THERE IS A WEAKNESS IN THE FINANCING MODEL FOR START-UPS IN FRANCE (TO ENSURE THE IN WHICH COUNTRIES IS THE CROWDEQUITY ACTIVITY MOST DEVELOPED? AND HOW WOULD YOU RATE FRANCE IN SCALE-UP OF ACTIVITIES VS. ANGLO-AMERICAN MODELS THAT INCLUDE LARGER TICKETS)? THIS RESPECT? Not at all, the French ecosystem is growing at a high and stable rate: In France, the number of investments in Tech start-ups has tripled We obviously look to the United States and the United Kingdom for this kind of activity, but France was one of the first countries to adopt since 2014, with 722 deals recorded in 2017 - more than any other European country. This is indicative of strong confidence in French crowdfunding, with the first platforms launched in 2007/2008. Tech and French Start-ups, with an effective financing model. It's certain that larger tickets/contracts are to be expected. (Source: In 2016, we achieved a record growth of 36% in France for CROWDEQUITY / crowd-funding per action and the enthusiasm amongst Tech.eu's latest report, "Next Station: Europe") investors and entrepreneurs for this form of financing is certainly growing.

This is the case for OneRagtime. We use crowdfunding and venture capital to create our hybrid equity financing model, thereby enabling HAVE YOU ALREADY BEEN ABLE TO MEASURE A "BREXIT EFFECT"? IN THIS CONTEXT, WHAT DO YOU THINK ARE our investors to choose where they want to invest while ensuring access to highly qualified business flows and ensuring growth through FRANCE'S MAIN ASSETS IN TERMS OF BECOMING THIS "START-UP NATION", AND MORE SPECIFICALLY IN THE TECH our studio, our consultation and the strength of our community, but also through the great exchanges and relationships that we have DOMAIN? with large groups. The latest immigration statistics in the United Kingdom show that fewer and fewer European citizens are going to Great Britain for work. The total number of people going to the UK for work was 248,000 in September 2017, a decrease of 45,000 compared to the previous year. As far as start-ups are concerned, there's obviously a Brexit effect, uncertainty isn't something that motivates investors! We can HOW DO YOU SEE THE NEW FINANCING METHOD BY ICO? certainly capitalize on this in France. Paris is only 2 hours away from London, and we're proud to have the largest start-up campus in the While this is something that we're monitoring closely in the VC world, the current lack of regulation is exposing investors to great risks in world at Station F. Also, the French Tech label is attracting talented entrepreneurs whose goal is to build their empire in France. We a world without legal protection and without ownership rights over regulated shares. It's perhaps this lack of regulation that explains why have a thriving financing ecosystem thanks to BPI and significant institutional and private financing, and many success stories lie ahead. ICOs aren't that numerous... (for now). The ingredients are there, it's time to choose France! Coindesk's ICO Tracker has a current record ICO investment amount in the order of $5.6 billion, which, though increasing rapidly, remains a paltry sum compared to VC investment that adds up to $84 billion just in the United States. ON THE OTHER HAND, WHAT ARE THE MAIN OBSTACLES THAT ARE CURRENTLY STILL LIMITING FRANCE'S Consequently, a rapid start and an intriguing model that's still very speculative. It will have to be closely monitored, but it needs to mature in order to provide investor protection and to become a real lever for risky financing (venture). The COMPETITIVENESS WHEN IT COMES TO ENCOURAGING THE FOUNDATION OF START-UPS AND ATTRACTING FOREIGN "disruption" is excellent when the underlying base is both stable and real. I guess that it'll take some time to reach this level and to START-UPS? reverse the current trend of 0.01% good projects for 99.99% scams. The mentality of large groups that need to grasp the importance of their digital transformation and to understand that "ventures", as well as mergers and acquisitions, are now the new R&D. However, this does not only apply to France, but to all of Europe.

HOW CAN WE ENCOURAGE MORE FRENCH START-UPS AND MAKE THEM LEADERS ON AN EUROPEAN OR EVEN AN INTERNATIONAL LEVEL? By cultivating them, giving them resources, contacts and financing, which is exactly why I created OneRagtime with Jean-Marie Messier. Initiatives such as French Tech have created a global vanguard for the international launch of French tech start-ups. That is exactly what we must keep doing, with continued support from our current governments, which for once are initiating key changes in the country's transformation, such as the BPI and the CDC financing programme.

WHAT IS THE SPECIFIC FEATURE OF THE ARKEA OPEN INNOVATION SYSTEM AND MECHANISM THAT YOU WISH TO HOW DOES ARKEA GET INVOLVED IN SUPPORTING / ACCELERATING START-UPS? IMPLEMENT? Six years ago, I participated with two entrepreneurs (Charles Cabillic and Sébastien Le Corfec) in the creation of "West-web Valley", a This question harkens back to the genesis of Arkéa's investment in Fintech. The subject came up ten years ago, after the realisation of generalist accelerator that provides web start-ups with access to an entire ecosystem (coach, marketing consulting, premises...) as well the transformation that our industry would undergo. At the time, I identified three very strong shocks that were hitting the bank: as a €35 million investment fund that supports them up to the A series. - The regulatory, fiscal and legislative shock that put pressure on the margins of banks, - The shock resulting from customer empowerment in the wake of the financial crisis and from an increased distrust of banks, which In July, we also launched a brand new excellence network in Brest, whose mission will be to support fintechs from A to Z. Called Bressst threatened to upend the relationship model between advisers and clients, (for Smart, Sciences & Start-ups), and supported by the metropolis, this project has a twofold objective: we want to grow this Fintech - The shock caused by the arrival of new actors on the market. ecosystem by providing the market with our banking factories and infrastructures in order to co-construct tomorrow's solutions but also Meanwhile, we identified our company’s three main strengths: its local roots, the use of technology as a development lever and the to create jobs in this region that has the benefit of offering many strengths in terms of training, technological infrastructure, dynamism agility resulting from its intermediate size. It's thanks to all of these characteristics that we see things differently, and that we've and cost of living. undoubtedly been pioneers in terms of innovation when compared to other major groups. Once you're aware of your strengths and of the potential upheavals in the sector, you eventually realize the attractiveness of these newcomers. They'll never be able to do our business on their own, but they will be able to complete our activities or even be a growth HOW DO YOU POSITION FRANCE IN TERMS OF OPEN-INNOVATION IN FINANCIAL SERVICES? driver for our influence outside of the usual territories. We then launched white label partnerships and made equity investments in I believe that we're a country in which there are many emerging ideas, but we're also one of the most conservative countries. In certain start-ups. The idea behind all this is to help our businesses to evolve in the right direction. Our businesses have three value particular, regulatory conservatism has long been a brake on the development of Fintechs. layers: transactional, operational and relational. Beyond the use of Fintechs for what they can provide in and of themselves, it turns out that they're the ones who will improve our business value layers. They're a source of inspiration on relational issues, they're enabling us But I'm convinced that France's good years in Fintech are still ahead. There's a favourable melting pot, regulation is beginning to ease off to operationally move up within the range via the white label... As such, we're now convinced that proprietary and exclusive systems are and traditional banking actors are taking an interest in the sector. We're really starting to get to the heart of the matter. a thing of the past. One mustn't be afraid to look for services elsewhere.

ON THE PLATFORM BANK AND OPEN-BANKING, YOU WERE ONCE AGAIN A PRECURSOR AND DIDN'T WAIT UNTIL DSP2 WHAT IS ARKEA'S RECIPE FOR SUCCESSFULLY LINKING THE FINTECH ECOSYSTEM WITH THE BUSINESSES IN CHARGE TO "APISE" YOUR CORE BANKING. WHERE ARE YOU IN THIS PROCESS? OF TRANSFORMING THE BANKING MODEL (KEY MOMENTS…)? We're convinced that the person who'll have development in his hands is the one who'll have the customer relationship, and the high First of all, our mindset is not innovation for the sake of innovation. Above all, we want to follow the group's strategy. value layer. The medium-term risk for bankers is that they'll become simple service providers and account keepers (lower layer). To The second thing is that we've done a lot of internal education so that retail banking understands that it must transform itself and not avoid this, it's necessary to make the most of APIs so as to remain suppliers of services and to maintain a high-level relationship with the necessarily view this as a threat. It must be aware of the coming transformation, and we have to be reassuring about the model that will customer. This is where value will be found, and no longer in the lower layers. What we want is to become a financial services hub that be developed. As such, it's important to emphasize that a model focusing on products, rather than on the customer experience, will go provides its clients with experiences built on the basis of our know-how but also on that of our partners. nowhere and is no longer producing any value.

CAN YOU TELL US ABOUT THE EDHEC INCUBATOR IN GENERAL? WHAT'S YOUR VIEW OF FRANCE'S PLACE WITHIN THE FINTECH / START-UP ECOSYSTEM? The EDHEC incubator includes 180 new businesses, 1200 jobs created, 37 million of funds raised and 40% women. Five projects are I think that France is very well placed in Europe and that Paris is one of the largest European places alongside London and Berlin. currently in the start-up phase, particularly in the cryptocurrency sector. On the other hand, if we look internationally, our investments are minimal compared to the USA. Also, their companies have a great EDHEC also has a studio and a project accelerator. It operates in several intervention phases. The first involves turning an idea into a advantage because of the size of the domestic market: they reach critical size faster, and can quickly expand abroad. project. This phase includes about 500 projects / year. The second phase involves turning this project into a company. At this stage, we drop to 80 companies created per year. The company then goes before a commission that chooses to direct it either into a consolidation phase (for about thirty of them) or into an acceleration phase (for about ten). WHAT WOULD YOU SEE AS THE LEVERS FOR IMPROVEMENT TO PROMOTE FRANCE'S COMPETITIVENESS IN TERMS OF Our programme focuses on interviews with the incubator team, made up of entrepreneurs, personal assessments, collective co- START-UPS? construction interviews and the involvement of alumni (who act as mentors during the acceleration phase). We also have a number of First of all, it's worth mentioning that France is extremely effective when it comes to initiating. We have many assets such as the BPI, corporate partners who provide us with service offers. FrenchTech and the pôle emploi. France is a fertile ground for seceding, but has major shortcomings when it comes to supporting growing start-ups. The ability to finance Series A / Series B should be improved. The second obstacle for the development of start-ups is the cost of labour and the resulting difficulty of supporting growth in terms of WHAT ABOUT THE INTERNATIONAL EXPANSION OF YOUR START-UPS? jobs. We support our start-ups that want to expand internationally with remote support that generally lasts for 12 months. However, this isn't enough and we're now starting a profound reflection on the creation of an incubator satellite on the other side of the Atlantic. Our ambition is to offer our companies the opportunity to establish themselves on the American market.

WHAT IS THE PROFILE OF THE ENTREPRENEURS? 40% of our entrepreneurs are women! We've also seen that self-entrepreneur families often generate entrepreneurs themselves. On average, our entrepreneurs are 26 years old.

WHAT ARE THE MAIN DIFFICULTIES ENCOUNTERED BY START-UPPERS? IN WHICH AREAS DO THEY NEED THE MOST SUPPORT? For B2B companies, the main difficulty has to do with commercial prospecting. As for B2C, companies lack the expertise to implement effective market access action plans. Start-ups also need a lot of support when preparing for fundraising: how to prepare your fundraising? How to pitch to investors?

CAN YOU GIVE US A GENERAL PRESENTATION OF YOUR INCUBATOR? HOW DO YOU THINK FRANCE IS SITUATED WITHIN THE START-UP ECOSYSTEM? WHAT ARE THE PERSISTENT The incubator includes 20 business sectors and 73 companies. We welcome 4 "classes" per year, and we're pleased to have raised 70 OBSTACLES TO THIS DEVELOPMENT? million euros, including 10 million euros in the first months of 2018. Our entrepreneurs include 30% female co-founders. The objective is There's now very good momentum, notably because of Brexit and some government initiatives. to mobilize the entire HEC ecosystem in order to help start-ups grow faster. The programme is built on 3 pillars. First, we develop a But two things still have to be improved. First of all, it's necessary to continue strengthening France's international presence, and bespoke programme, then an "à la carte" offer, based on the needs of the entrepreneurs, which is set up with our community of secondly improving foreign capital investment in France. This will make it easier for our start-ups to enter the scaling phase. entrepreneurs. The incubator tries to provide our start-ups with 4 types of resources: expert advice, premises at Station F, visibility and access to financing. CAN YOU TELL US ABOUT YOUR PARTNERSHIP WITH STATION F? We target great diversity amongst our entrepreneurs, because the more diversified the talents are, the better the results will be. Our partnership with Station F has helped us a lot. The premises have enabled us to triple in size, to improve our visibility and to access We're aware that the main difficulty for entrepreneurs is time. Therefore, we're committed to enabling them to do in 3 months what all types of public services. In addition, many synergies are created by bringing the entire ecosystem under one roof. I think that this they could not have done alone in one year. campus model is the best suited for supporting our start-ups.

WHAT DO YOU THINK OF FRANCE'S ABILITY TO RETAIN / ATTRACT TALENT? France has a real market size problem. Israel, for example, has such a small market that Fintechs are forced to be global right from the start; the United States, on the other hand, has a big enough market that Fintechs can focus on the domestic market. France is between them. Unfortunately, this situation isn't great for talent retention: many start-ups leave for the United States after taking their first steps in France, so that they can start all of their business in the United States. One way to keep our talents in France is to develop our international presence as much as possible. Many initiatives exist with FrenchTech, Business France or the IDF region, which has launched numerous calls for projects to finance incubators over 3 years on an international scale... One of our current priorities is therefore to create satellites around the world that will allow start-ups to keep their bases in France. Moreover, expanding France's international presence is also the best way to attract foreign talent by presenting France as the gateway to the European market.

WHAT OPEN INNOVATION SYSTEM HAS ALLIANZ IMPLEMENTED? HOW DO YOU SEE INSURTECHS? AND MORE GENERALLY NEW TECHNOLOGIES? At Allianz, we've set up several types of collaboration with start-ups. We're always watching Fintechs/Insurtechs, but unlike the banking sector, we're not under attack from all sides. The core insurance First of all, partnerships with start-ups to test their solutions according to the needs of the business teams. Our scope of review is quite business isn't yet being challenged by Fintechs/Insurtechs: they're currently only targeting certain parts of the value chain while seeking broad; we work with Insurtechs, Regtechs and start-ups in the collaborative economy. to optimize processes. In addition, we still have many competitive advantages such as our customer base, experience, geographic Two years ago, we also created a strategic investment fund (InnovAllianz) to help start-ups finance themselves. Since then, we've made footprint and the strength of our networks and brands. more than 10 investments, including Heetch in mobility, Tanker in cybersecurity, Biomodex in Medtechs, while other investments will be announced soon. The objective is firstly to secure our partnership with the start-up, and secondly to support it as well as possible during For that reason, we see Fintechs/Insurtechs much more as potential partners than competitors. They're transformation accelerators that its development. This initiative goes beyond the simple "media buzz", but is rather part of a truly qualitative approach. make our industry even more interesting. They help us to take a fresh look and to be part of the growing global platform. Both sides Moreover, Allianz can also become a significant shareholder in more advanced start-ups; last June, Allianz France became a shareholder would benefit from being partners: On the one hand, Fintechs/Insurtechs still have a lot to learn about the insurance world, and on the of October (formerly Lendix, leader in SME lending platforms), which demonstrates our ability to fully and deeply support young other hand, corporates need to improve their agility and ability to find solutions quickly. innovative companies. Finally, 3 years ago, Allianz launched an accelerator based in Nice. About 30 start-ups have already completed the intensive 5-month Beyond Fintechs/Insurtechs, we're very interested in new technologies. For example, at Allianz we have a "Blockchain" research group acceleration programme. The accelerator doesn't only focus on Fintechs and Insurtechs, but rather welcomes all types of profiles (with that's working in collaboration with the FFA (Fédération Française de l'Assurance). We aren't aiming to position ourselves as the market particular support for companies in the region). leader with this technology, but rather, we want to use this innovation as a tool for collaboration and information sharing between the All of these initiatives have made a significant contribution to changing mentalities. From now on, there's a real desire on the part of different insurers. We also have a team dedicated to Artificial Intelligence, in the service of all of Allianz's businesses. Their scope of businesses and employees to meet with these new actors and to understand their working methods. As such, Jacques Richier has action is quite broad, such as finding anti-fraud solutions, optimising processes, helping to identify prospects, etc… successfully brought about a real change of cultural paradigm within Allianz.

WHAT OBSTACLES STILL REMAIN IN THE RELATIONSHIP WITH FINTECHS? IS ALLIANZ IMPLEMENTING SOLUTIONS? HAVE YOU BUILT BRIDGES WITH THE GERMAN ECOSYSTEM IN TERMS OF OPEN INNOVATION? Generally, regardless of the sector, start-ups complain about the delay and slowness of large groups. At Allianz, the purchasing We work with the group's investment fund, Allianz X. For example, when we want to support an international start-up, we rely on our department has been working on how to sign contracts with start-ups in order to implement an agile process. In the case of a pilot, for colleagues at Allianz X to help the start-up to find the right contacts in each country. In addition, Allianz X makes it easier for us to example, only a short brief of a few pages is enough. There's a real effort to simplify internal procedures in order to improve our make contact with actors in its portfolio that are active in France. This is the case for N26, for example, with which Allianz France is relations with these young actors. now studying collaboration opportunities.

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 74 CEDRIC NIEUTIN Director, B612, Start-up incubator and accelerator run by the Caisse d'Epargne Rhône-Alpes

CAN YOU TELL US MORE ABOUT THE B612? The B612 is the accelerator-incubator of the Caisse d'Epargne Rhône Alpes. It was launched in 2016. So we've been welcoming start-ups After that, there's daily work with the Caisse d'Epargne Rhône-Alpes and start-ups. On the banking side, we're in contact with a large to the B612 for a little over 2 years. Initially located in Lyon, the incubator is now expanding in the other CERA territories. For example, number of teams. The bank's management, which strongly supports the incubator, is also a big help when it comes to moving issues we opened another B612 in Grenoble in mid-2018, and other openings are planned in the coming months : in Annecy and in Lausanne, forward. This is a key point of this integration. A large group comes with its share of procedures, processes and politics. If the decision to Switzerland. work with start-ups doesn't come from top management, it's often perceived as risk-taking, and this can block a project. On the start-up Our model is very complete within the incubator / accelerator landscape. We implement a support methodology for early-stage start- side, we teach them that with a large group, you sometimes have to be patient ; if decisions are made "slowly", there's a reason. They're ups. We're able to welcome entrepreneurial teams within our various co-working spaces and we have an investment fund (LeB612 taught to work with and reassure their contact people during the decision-making. Participations) that start-ups can turn to at the very beginning, when it's generally difficult to raise money. The B612 currently supports nearly 30 start-ups. Fundamentally attached to a large financial group, we support start-ups that are To facilitate the relationship between the group and start-ups, we invite the entrepreneurs to include the bank's experts within their addressing the overall group's issues: either vertically, the overall group as a financial institution - or horizontally, the overall group as a board, when relevant. Each one learns from the other and can be a source of added value while building this relationship. large organisation. Along the first axis, this involves actual start-up Fintechs. Along the second axis, it involves start-ups taking part in the digital transformation of mature companies. These are the two priority targets of the B612. In addition, start-ups applying to the B612 must have a strong Tech dimension and must-have development plans using a start-up model. This is important for the B612 THE FRENCH ECOSYSTEM NOW SEEMS TO BE ADEQUATELY STRUCTURED TO HELP FINTECHS TO START UP, AND TO GROW THEM ON because, as I've explained, we have an investment fund that can be mobilized by the incubated start-ups. The incoming selection is A LOCAL OR EVEN CONTINENTAL SCALE. HOWEVER, WE HAVEN'T YET MANAGED TO BRING TO LIGHT A SCALE-UP/UNICORN. DO therefore of great importance. Each B612 start-up can receive help of up to €250,000, that can be used on one or more occasions. The YOU SHARE THIS OBSERVATION? AND WHAT DO YOU THINK ARE THE AREAS FOR IMPROVEMENT? fund was opened at the end of 2017, and since then, we've participated in about 10 investments in our start-ups. For half of the The French start-up ecosystem is largely structured. Throughout the chain, entrepreneurial teams can find help in order to develop their operations, we were in syndication. This allows us to work with other funds or business angels in advance and thus to support start-ups company. Some moments are more difficult than others, of course, especially in the first two years, but generally, over the past 20 working with us over the long term. years, the French entrepreneurship ecosystem has become more professional on all sides (financing, support, public sector, project The B612 is now positioned as an actor in support of Tech start-ups operating primarily in Fintech or the digital transformation of key orientation within their native ecosystems, training of directors...). accounts. Our ambition is to cover the Rhône-Alpes region and French-speaking Switzerland and to position ourselves as a benevolent player within the ecosystem, at its service and in the service of start-ups. This is how we built up the Lyon area. The co-working spaces To return to the Rhône-Alpin ecosystem, we have a very supportive ecosystem and we don't hesitate to direct start-ups to the right in Grenoble and subsequent places will follow the same path. If we can put together a community of benevolent start-ups in several contact people according to the subjects ; Lyon French Tech and French Tech in the Alps are useful gateways for this purpose. However, cities, then we'll feel that we've been useful. there's no doubt that it's difficult for French start-ups to emerge. Relative to the dynamism of our ecosystem, we only have a few unicorns. We have an internal market that's both an opportunity and a hindrance. Locally, start-ups have access to key accounts and large markets, allowing them to anticipate several years of development. Unfortunately, this possibility "locks" them into very France- AT B612, HOW DO YOU HELP FINTECHS TO FACILITATE DIALOGUE WITH MAJOR BANKING GROUPS, TO ACCELERATE centric development, and the transition to international markets can sometimes be complicated if it isn't considered from the start. PARTNERSHIPS AND TO PROMOTE INDUSTRIALIZATION? IN YOUR VIEW, WHAT ARE THE MAIN PROBLEMS? However, a unicorn is generally global. It's true that collaboration between a start-up and a large group isn't always easy. The two entities aren't on the same page and don't have the same priorities. When a start-up's offer begins to interest a large group, it quickly becomes a priority for the start-up team, In the relationship with a key account, a start-up must be able to benefit from the key account's business network, which also happens to whereas it's often "business as usual" for the large group. This differing perception of priority is undoubtedly the source of be international. It's thanks to this type of relay that a start-up will really be able to scale up its business. On the Fintech side, it's misunderstandings and differences. This isn't specific to Fintech, however, it's true as soon as you're in a "David-Goliath" relationship, to essential from the start to consider an ecosystem that's open to the world. use the title of a study. At B612, we're obviously faced with the same problems. We're always striving to get the CERA group or BPCE to work with start-ups. We try to reduce the risks associated with "Fintegration". The Fintech world is made up of large and very powerful groups, created many decades or even centuries ago. These groups are We can add something different to a discussion within the relationship, since in some ways, we're neither on the side of the Group nor on interconnected within a global market. A place in the value chain is expensive and if a start-up wants to disrupt one of the chain's links, that of the start-up. We're an intermediary promoting efficient work between the two and we can often use more direct words on one then it will have to quickly develop an ability to be global. We see this for all Fintech start-ups, whether B2C or B2B. side of the relationship or another. This makes it possible to solve, or even better, to anticipate problems related to differing views of urgency and priority.

HOW DO YOU ASSESS THE OPEN-INNOVATION INITIATIVES OF BANKING AND INSURANCE COMPANIES? WHAT DIFFICULTIES DO YOUR FINTECHS STILL FACE WHEN IT COMES TO WORKING WITH FINANCIAL SECTOR ACTORS? E.P. The open-innovation question in the banking and insurance sector can be asked in terms that are basically similar to all sectors FARIDA POULAIN within the French economy. The oversizing of the actors is creating a de facto start-up-large group articulation that could be likened to David against Goliath, rather than David with Goliath. In this case, some actors who've chosen to launch single-corporate initiatives Incubation Manager, Le Swave (Paris&Co) (often characterized by equity investments) generate mistrust amongst entrepreneurs who are afraid of asymmetry in the balance of power. The proposal of Le Swave, which is non-profit, supported by the public authorities and created in an assumed and promoted multi-corporate logic, helps to partly address this issue. However, the relational dynamics between our Fintechs and our partners require the support of our team to keep things moving smoothly and resolve possible misunderstandings. In effect, we're talking about actors that WHAT'S THE GENESIS OF LE SWAVE? AND WHAT MAKES THIS OPEN-INNOVATION PLATFORM UNIQUE COMPARED TO don't speak the same language and that follow different chronologies. The perception of time by the actors of Le Swave community OTHER FINTECH ACCELERATORS? (Public authorities, Start-ups, Key Accounts, Institutions) is a subject that drives us on a daily basis. E.P. Launched in October 2017, Le Swave is the first French innovation platform to be 100% dedicated to Fintech and Insurtech. The initiative was led by the State, which commissioned the Paris&Co economic development and innovation agency to put together this tool and make it available to the banking / insurance / payment sector in France and worldwide. The initial observation that we wanted to THE FRENCH ECOSYSTEM NOW SEEMS TO BE ADEQUATELY STRUCTURED TO HELP FINTECHS TO START UP, AND TO remedy was that of the brain drain when it comes to entrepreneurship in the financial sector. In this regard, France actually has GROW THEM ON A LOCAL OR EVEN CONTINENTAL LEVEL. HOWEVER, WE HAVEN'T YET MANAGED TO BRING TO LIGHT corporate actors of international scale, internationally recognised academic education and a promising institutional panorama. It was A SCALE-UP/UNICORN. DO YOU SHARE THIS OBSERVATION? AND WHAT DO YOU THINK ARE THE AREAS FOR therefore disappointing to imagine that Fintech and Insurtech entrepreneurs had the feeling of having to move abroad in order to IMPROVEMENT? succeed. E.P. This upscaling question is at the heart of our concerns, and can be explained in several different ways. The first observation is The particular context of Brexit also proved to offer a promising dynamic for the sector, insofar as the uncertainty surrounding the future undoubtedly the very macro one of European integration. Today, despite a favourable regulatory framework, it's still difficult for our of the regulatory framework within the United Kingdom is prompting business creators to give some thought to relocating to continental young companies to look beyond France to truly rely on a market of European consumers (whether we're talking about B2B or B2C), which Europe. The launch of Swave is therefore also the embodiment of a French desire to put Paris back at the centre of Europe's financial is the only market capable of competing with the North American market. The determining factors are obviously cultural, to begin with, innovation map. Our difference is based on this flagship dimension, supported both by State services and by a community of key players but will (hopefully) be reduced with the emergence of a new generation of entrepreneurs and the increasing number of exchange in the sector (Société Générale, NewAlpha AM, Crédit Municipal de Paris, Exton Consulting, AG2R La Mondiale, Mastercard, Groupe programmes such as the ones set up by Business France. Casino, but also Paris Europlace, Finance Innovation, France Fintech, the Banque de France and the Louis Bachelier Institute). The second reason is potentially the reluctance of investors and potential clients. The Anglo-American culture, more specifically in North America, has made it possible to create a business environment that facilitates risk-taking. In France, we still sometimes tend to try to CAN YOU TELL US MORE ABOUT THE DAY-TO-DAY SUPPORT THAT LE SWAVE PROVIDES TO START-UPS? rescue success, and wait for innovative solutions to prove their worth elsewhere before adopting them. The current example is that of F.P. At Le Swave, the day-to-day support provided to start-ups is illustrated by both individual and collective coaching. blockchain and crypto-currencies. French players are interested, but few have so far ventured down that path. Hence the saying that the We perform a monthly review with each of them in order to map the activity at a given moment T, and we ask the managers to focus on blockchain is like Ibiza, everyone talks about it but nobody goes there. their current issues so that we can help them as efficiently as possible. The objective of this monthly review is also to challenge them in F.P. That's about right. In France, change is not always well received. Overall, we're very attached to our habits, while innovation often terms of their strategic choices. In addition, we provide individual coaching sessions on specific topics (value proposal, business model or makes it possible to do things better. commercial strategy). We also call on our partners and industry experts to participate. Start-ups like to be challenged. For example, we fear new usages, as perfectly illustrated by the subject of crypto-currencies. Each start-up has its own specific features, but they do have common problems for which high added-value support is proposed: business I also think that exporting a financial and therefore regulatory model involves a deployment factor that can take time and incur development, public and private financing, structuring of their teams. When a subject seems relevant to several of them, we carry out considerable costs. It is not easy to achieve regulatory compliance in France or Europe, and then in North America or Asia. The opposite collective workshops that include external speakers, as well as workshops amongst the start-ups. The objective here is to provide them is true. One of our start-ups with a solution that has been operating very well in Taiwan for three years, where its head office is located, with quality information, sometimes from insiders. For example, some founders of successful Fintechs have come to Le Swave to tell our has opened an office in Paris. We've been working with her for almost 7 months in order to obtain certification that will enable her to managers about their careers, their choices, their mistakes - to be avoided! - and to give examples of best practices to be adopted. market her product in France. Each country has its own regulatory specificities, and the finance-related ones are complex. Becoming a And of course, our job is also to listen and show kindness : the life of an entrepreneur is far from easy! scale-up requires an international deployment strategy. Today, our Fintechs must go beyond our borders in order to be sustainable in the long term.

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 76 YOU'VE PARTICIPATED FROM THE INSIDE IN THE DEVELOPMENT OF MANY FINTECHS AND YOU'RE NOW SUPPORTING On the other side of the world, it's interesting to see Singapore's pivot from fintech to 100% blockchain when it comes to providing a START-UPS ON A DAILY BASIS AT LE SWAVE. WHAT DO YOU SEE AS THE MAIN DIFFICULTIES FOR A FINTECH theme for their innovation ecosystem. This pivot is something that we're watching closely, though we aren't particularly in favour of the ENTREPRENEUR IN FRANCE? creation of ecosystems that only have a single underlying technology vector. F.P. One of the problems is financing: developing innovative and efficient financial solutions can be expensive, even very expensive at times. Fundraising can sometimes take time. In addition, the average French ticket is lower than that of our Anglo-American counterparts, for example. To grow, resources are also needed and this requires sufficient cash flow. As such, the first signing of a WHAT MEASURES CAN BE TAKEN TO MAKE FRANCE MORE ATTRACTIVE SO AS TO ENCOURAGE THE DEVELOPMENT OF customer contract or partnership is the top priority for a start-up, especially for those that still have to prove the relevance of their START-UPS IN FINANCE AND TO ENSURE THEIR SCALING? solution. E.P. In absolute terms, France's attractiveness will depend on our ability to demonstrate that the country is ready to welcome foreign This first signing is very often difficult. On their own, start-ups have trouble identifying the right internal contact within a large group, entrepreneurs. It's a cultural shift, with France having to look to the world, while no longer waiting for the world to look to France. The for example, as organisations are often complex. Once identified, making contact and being received is often a real challenge. At Le issue of bilingualism and the increased use of English (obviously in addition to French) in administrative procedures is a subject that Swave, we speed up business meetings by directly suggesting the right contact person. Our task is to make relevant contacts between our we've already put to the authorities in order to respond to the questions of our foreign entrepreneurs who wish to establish themselves in partners and start-ups, and to support them over time during their relationship. the country. In this respect, the efforts to welcome the European Banking Authority to Paris (and even to La Défense) are to be welcomed. This pivot towards the world will result in a change of the brand image of French entrepreneurs... Epinal's image of the Another point is that we still have a great deal of trouble with industrializing and democratizing new uses. Some solutions are attractive, French must be undermined... France is smooth, efficient and professional. That's the key and we're fighting for it. but our large groups are still too reluctant to collaborate with start-ups. Nevertheless, recent years have brought about significant improvement: there's good reason to be happy! On the other hand, volumes are still much too low. Sometimes trying means adopting! Large groups have understood that Fintechs are allies, but they don't always know how to work with them, and how to use them wisely while contributing to their success. At Le Swave, through our support, we provide the keys to this ecosystem: to start-ups and to our partners, who have trusted us by joining the adventure.

IN THE CONTEXT OF BREXIT, HOW IS PARIS POSITIONED RELATIVE TO OTHER FINTECH MARKETS IN EUROPE AND AROUND THE WORLD? E.P. As high as possible... that's the ambition, in any case. Paris must once again become the driving force behind financial innovation in Europe and, hopefully, in the world. Today, though London is still one step ahead of Paris, the dynamic is turning around, and more and more foreign entrepreneurs are contacting us. Today, 15% of the applications that we received after our second call for projects are coming from abroad. And we're aiming for 25% next year. Brexit has obviously created a promising phenomenon for us and we're still currently benefiting from the lack of visibility of German actors (as Berlin and Frankfurt sometimes compete between B2C and B2B Fintechs) and the lack of competition in southern Europe. To date, Amsterdam is still in the race and well positioned. It's up to the ecosystem to win this race for European leadership. Elsewhere, we see that New York has never really considered the creation of a Fintech ecosystem despite the importance of this financial centre. However, very easy access to investors for start-ups still isn't encouraging players in the marketplace to make a proactive move in this area.

© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. 77 ALEXANDRE VELUT CEO, INVYO, Market intelligence start-up specializing in the Fintech sector in Europe, the Americas and Africa

YOU'VE BEEN OBSERVING THE WORLDWIDE FINTECH PHENOMENON FOR A FEW YEARS, SO WHAT IS YOUR CAN BREXIT CHANGE THE SITUATION AND STRENGTHEN FRANCE'S ATTRACTIVENESS / COMPETITIVENESS IN THE PERCEPTION OF THE FRENCH FINTECH ECOSYSTEM: COMPARED TO OTHER CENTRES AROUND THE WORLD? AND MORE FINTECH SECTOR COMPARED TO OUR EUROPEAN NEIGHBOURS? PARTICULARLY, HOW WOULD YOU SITUATE FRANCE RELATIVE TO ITS EUROPEAN COUNTERPARTS? It's true that the news in recent years has strongly contributed to strengthening France's attractiveness on the international scene: the In France, like in the rest of the world, there's an accelerating consolidation of the historical Fintech sectors such as payment and appointment of Donald Trump in the United States, Brexit and the appointment of a pro-start-up president are examples of this. alternative financing. As such, the downward trend in the number of financed Fintech operations is continuing in the first half of 2018, Indeed, the Brexit announcement has helped to bring to light certain "tech" ecosystems that had previously been overshadowed by the for the benefit of national champions that are looking for new growth drivers. London market, notably Paris, Frankfurt and Dublin. New hubs have also emerged, such as Luxembourg or Brussels. In Europe, for example, investments are mainly concentrated on a few operations in the first half of 2018, such as the record fundraising However, the reality is that London is still the European Fintech capital, home to 6 of the 8 Fintech unicorns identified within the region campaigns carried out by the Estonian Revolut ($250M) and the German N26 ($160M) or the acquisition of the Swedish iZettle by PayPal and with a diversity of talents that is unmatched in Europe. ($2.2B). Another example is the planned IPO for Funding Circle in England, that would enable the company to raise more than 300 million euros. France is following this trend with strong activity over the past two years and a concentration of investments in the first half of 2018. On WHAT KEY MEASURES SHOULD OUR COUNTRY TAKE TO ENCOURAGE THE EMERGENCE OF START-UPS IN FINANCE, TO a European scale, the country ranks second ahead of Germany and behind the United Kingdom in terms of the number of Fintechs, with SUPPORT THEM OVER TIME AND TO ATTRACT MORE FOREIGN FINTECHS? more than 450 start-ups. All the lights are green today to make France shine on the international scene. A completely different dynamic will take hold on the day when France finds its "Revolut". Still, the company mustn't fall into the hands of a bank before it can attain its much sought-after unicorn status. IN TERMS OF WAVES AND SEGMENTS, DO YOU NOTICE ANY SIGNIFICANT DIFFERENCES FROM ONE FINTECH PLACE TO ANOTHER? ARE WE SEEING A SPECIALISATION OF THEMES IN TERMS OF HUBS? WITH REGARD TO FINANCIAL TECHNOLOGY, WHAT IS FRANCE'S STRENGTH? The current trend in Europe is towards sectoral specialisation, with most countries wanting to create poles of expertise in Fintech sub- nomenclatures. In only a few years, for example, Switzerland and Malta have become international reference hubs in cryptocurrencies. Another emblematic example is Sweden, which is at the forefront of the payments sector and has a vision of a cashless economy. Estonia also stands out in RegTech with the e-Estonia initiative for a 100% digital economy, which is attracting companies from all over the world that are seeking to penetrate the European market. France's strength comes from its ability to innovate in all areas of banking, and to offer a wide range of solutions to move towards an "open banking system" or Open Banking. The country is also positioning itself on the technologies underlying the services offered by Fintechs. Recent initiatives in artificial intelligence are indicative of this desire to make France a world leader in the technologies of the future.

8 EUROPEAN FINTECHS ARE ALREADY ON THE UNICORN LIST, BUT NOT YET A SINGLE FRENCH ONE. WHAT DO YOU THINK OF THIS OBSERVATION? WHY HAVE WE NOT YET MANAGED TO MAKE ANY UNICORNS EMERGE? HOW CAN WE PROPEL MORE FRENCH START-UPS AND MAKE THEM CHAMPIONS ON A EUROPEAN OR EVEN INTERNATIONAL LEVEL ? Several of our Fintechs may one day be eligible to join the European Unicorn Club: Younited Credit, Ledger, Lendix or Alan. These same companies are the ones that, so far, have attracted the most funds in France. Several elements could justify the absence of French Fintech unicorns: regulatory barriers, despite the significant improvements seen in recent years, or the cultural factor that would explain lower penetration rates for Fintech solutions between France and the United Kingdom or Germany. However, one of the main obstacles seems to be the lack of investors able to support start-ups in more advanced financing stages. However, the significant increase of invested amounts and France's attractiveness to foreign investors could reverse this trend in the coming years.

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© Exton Consulting, France's attractiveness for the development of the Fintech ecosystem, October 2018. Since 2006, Exton Consulting supports General Management teams, from the strategy to the implementation of their transformations

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EXTON RESEARCH DEPARTMENT FOR FOUNDING MEMBER THE FINTECH APPROACH OF MONITORING AND STUDIES OF LE SWAVE OUR CLIENTS

• Studies/White Papers (Connected car, • Accelerator dedicated to Fintech, Fintech Phenomenon, Neo-banks in launched in October 2017 by Paris&Co Europe...) and the State Fintech seminars • Detailed segmentations and overviews of • Co-innovation platform on 2,500 m² at and meetings FinTechs and InsurTechs the Grande Arche de la Défense • Coaching of about thirty start-ups in different domains and based on various technologies (Robot, AI, Machine Learning, Blockchain, etc.) Oversight of the Business POC

EXPERTISE CONNECTED TO PARTNERSHIP WITH THE THE TECH ECOSYSTEM FINANCE INNOVATION POLE Acquisition due diligence • Dedicated cells organised by theme Neo- • Member since 2015 bank, Insurtech, Fintech, RegTech, Robo/IA, • Participation in the labelling committee Data for Banking and Insurance intake • Participation in market events projects Transformation • Meetings and projects with start-ups in the • Contribution to White Papers Projects sector • Organisation of thematic workshops In cooperation with • Sponsoring of a team that meets with or inspired innovation clusters on the various continents (Learning expeditions)