Bankers who think getting rid of branches is the key to making money might need to think again. Nowhere is this more obvious than in France, where it is increasingly difficult for digital banks to turn a profit.
Telecoms firm Orange, and reportedly Altice, are wading into a market already well served by online-only players.
At the same time, new no-frills accounts such as Nickel, Carrefour’s C-Zam and Crédit Agricole’s EKO are offering cut-price alternatives to the big banks.
It seems those that want to grow as a universal retail bank, like Orange, might have to lose money for now.
The biggest online bank, Société Générale-owned Boursorama, is also one of the most aggressive.
Boursorama has grown from around 270,000 clients at the end of 2008 to around 1.5 million now.
The first half of 2018 was another record for client acquisitions, putting it well on its way to reaching a target of two million by 2020. That will be about double the number for ING Direct, the next biggest online-only bank in France.
Boursorama’s origins are in online retail brokerage. When that sector fell on hard times after the dotcom bubble, SocGen was able to act as a consolidator. In 2002, its subsidiary Fimatex bought Boursorama, which at the time was a portal for other firms.
The first big shift came with its 2006 purchase of CaixaBank’s French business, including 55 branches (most of which it promptly closed) and more importantly the back office and some of the skills it needed to become a retail bank.
After that integration, Boursorama gained around 50,000 customers a year between 2010 and 2013 and then around 100,000 a year until 2015.
If we were to stop focusing on new-client acquisition, Boursorama would be immediately profitable - Frédéric Oudéa, Société Générale
A 2014 delisting paved the way for a new surge, shortly before CaixaBank sold a residual stake in Boursorama in 2015. Boursorama has subsequently closed its businesses in the UK and Spain, and sold its German franchise Onvista to Commerzbank’s Comdirect, allowing it to refocus on France.
Since then it has accelerated even further;. the number of customers has roughly doubled every year since 2015, although it has since stopped making a profit.
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| Frédéric Oudéa, Société Générale |
Frédéric Oudéa says it was his choice to give Boursorama the green light to focus on growth shortly after he became SocGen’s chief executive 10 years ago.
“My view has always been to manage Boursorama as an internal startup and a model corresponding to the evolution of client needs,” says Oudéa.
He says it is one of France’s few real online banks – doing mortgages, savings, and debit cards, rather than just payments – but it has much better customer satisfaction than the traditional banks.
These days almost all clients come for a current account and payments. On average they pay less than €12 a year in fees, compared with almost €200 in the sector on average.
As part of its growth strategy, it has redesigned its product with the young in mind – including the removal of a previous €1,000 minimum monthly deposit to gain an international Visa card, bringing an account within reach of students.
The average age of its customers has consequently fallen from 41 to 38 in the last two years.
“If we were to stop focusing on new-client acquisition, Boursorama would be immediately profitable,” says Oudéa. “We have an efficient platform, and we want to take advantage of it to acquire as many clients as possible and as quickly as possible. The idea is to grow as quickly as possible.”
