Big Dossier: Are banks still at the service of entrepreneurs?
The banking sector, which was thought to be untouchable, sure of its strength and achievements, does not escape the joint movement of the development of technologies, changes in social uses and the evolution of business models. In recent years, many changes have taken place in the way the economy is thought. As much as in the way of consuming. Major global companies such as Google, Uber and Amazon have implemented different business models that have disrupted markets and destabilized a model that seems well established. Banks, between disaffection of the SME and fundraising that sometimes seem incongruous, a two-speed economy…
The traditional role of banks battered by the new economy
In a context of increased regulation, and sometimes lack of anticipation, it is difficult for banks to face new competitors who are shaking up the traditional role of the bank. These newcomers rely on different services that banks, which are less flexible in their management, find difficult to offer.
Despite the digital shift made for most of them, they face costs that these competitors have freed themselves from. Starting with the structural cost of bank branches. Direct relationship, ease of use, speed of transfers, subscription in a few clicks to financial products … Speed and ease are therefore the watchwords of these new financial companies that target individuals and SMEs: an important market segment for banks.
It is obviously too early to announce that traditional banks will lose their key role, but it is certain that we do not yet measure all the sectoral changes to come. Whether in the context of cost reductions related to digitalization, or in view of the changing expectations of customers, especially professionals.
A “distance” that is created between business leaders who need responsiveness and efficiency; and banks that are struggling to “take over” as quickly as desired on the Aquitaine territory. Bordeaux Business spoke with Edouard BEFVE, Director of Territorial and Corporate Development at Crédit Agricole d’Aquitaine.
“Responsiveness, expertise and dialogue”: re-establishing bank/entrepreneur contact
“Today, more than 500 people at Crédit Agricole d’Aquitaine are dedicated to supporting companies in the three departments of Gironde, Landes and Lot and Garonne. The dynamics of our territory are expressed by the diversity of the companies that develop there. From agriculture to advanced industries to a powerful service and residential economy. From established and well-established ETIs, to innovative and fast-growing SMEs/PMIs, to digital start-ups.
Each of these players does not have quite the same expectations towards their bank, nor the same knowledge of how they work and how they can be supported. One thing in common, however, is that they all seek “responsiveness, ease of contact, expertise and dialogue”.
There is often, behind the potential disagreements, a problem of understanding, of pedagogy of entrepreneurs towards banks and vice versa. As always, it is necessary to spend time explaining the needs, constraints that each one encounters and the solutions that can be considered. Anticipation of difficulties and transparency are often decisive parameters. In the event of a deadlock, the focus should be on re-establishing the dialogue.
Overall, customers need, as in any industry, a lot of responsiveness and simplicity in the relationship. In terms of sectoral conditions, it is difficult to make generalities because in all sectors, we encounter, depending on the context, very different situations. At the same time, the low interest rate environment allows investment to grow and financial burdens to be lowered.
Our goal today is to give more sales time to advisors and project managers in order to be closer to their customers and prospects. The human relationship remains extremely important for customers but also for the bank in order to fully understand the issues and risks associated with a development project. In terms of risk, Crédit Agricole d’Aquitaine “continues to take it” to promote entrepreneurship and support for sectors in difficulty. Finally, regarding FINTECH, I do not see them as a threat. It is rather an opportunity that will allow in a partnership framework to integrate innovative services and offers. »
Between lack of real support and voluntary disaffection of business leaders
In Gironde, where SMEs account for 80% of the economic fabric, some voices are beginning to speak out against the traditional banking system. At issue is the lack of support for financial institutions, which they say no longer play their role as economic support, for fear of “taking risks”. Thus, the gap would be greater and greater between business leaders who do not feel supported, not heard by their bank advisor; and banks that think they are doing the “maximum”, but sometimes no longer understand the expectations of these companies. Companies subject to an increasingly dense competitive environment. And at the same time to payment delays, or even unpaid bills more and more frequently on the part of their own customers.
Beyond that, this discrepancy sometimes seems incongruous, in terms of the mechanisms of development and growth of companies. A concrete approach that is lacking, as Florent Faivre, Director of Dépanordi,in Bordeaux explains:
“Are Bordeaux banks always at the service of entrepreneurs? Well… No! Have they ever really been? That’s another question… Here are some examples since I was an entrepreneur in Bordeaux.
Need for cash over a very short period of time
One of my clients orders several computers from the famous brand to apple. This brand does not facilitate the purchase by small businesses because it requires a prepayment. My cash of the moment does not allow me the order. So I call my financial advisor asking him what financing solution he can offer me quickly and in the very short term. Ten days maximum, because my customer pays me on delivery. No answer to my first two calls, or two e-mails. Finally I manage to reach him. He promises me an answer within two days. Three days later, without news, I call him back: “You know we’re not here to lend you money”… For the record, my client agreed to pay for his order in advance.
Financing a company vehicle
I need a company vehicle. I’ll find it at a dealership. I send the offer to my financial advisor who tells me that this is not going to be possible. “You didn’t make a profit last year, it’s not going to pass.” For information, I didn’t have any losses either) Still, Mr. Banker, the car dealership offers to finance me, and you “My” bank you refuse? “Ah. Well, I’ll see.” He’s going to see, and weirdly he’s willing to fund me. And until today I have not missed any refund.
Credit card cap problem
In IT I often need to order products for my customers on the internet.
Obviously my CB has a ceiling that I reach regularly. Preventing me from ordering when I need it. When it’s during the day, I can get away with calling my advisor who sometimes (not always) manages to raise my ceiling in an exceptional way. But when I want to place orders after 5:00, or in the evening or on weekends? No one to help me. I therefore ask my advisor to find me a lasting solution. More than 6 months and several raises to see me offer a second bank card. The other solution: take a high-end card with an exorbitant contribution amount.
I would like to explore the possibility of funding for two [porteurs de croissance pour l’entreprise – ndlr] projects: Re-arrange my store Buy another company’s client portfolio The answer: “Your last exercise is not positive, so we’ll see next year if you do better.”
Here are some examples… »
This testimony is far from being an isolated case and can be explained by the great caution shown by the banks. Which, as part of their development, seem to be turning to the diversification of ancillary services (mobile, remote monitoring, etc.). And for good reason, they present a financial risk a priori lower than the financing of companies. By reaction, or by conviction, many business leaders have chosen to turn to alternative sources of financing. More than a plan B, they create new opportunities for investment diversification.
Banking market, alternative investment methods in full swing
The main service that the business manager asks his bank for is the traditional role of financing. A sensitive subject, which must be put in context, as Marcel Castège, former executive of Crédit Agricole Pyrénées-Gascogne and head of the company Crédit Epargne, explainsto us.
“It’s important to understand ‘how it works’ in order to negotiate with your bankers. Most of my career has been spent in a bank, mainly in financing to individuals, VSEs / SMEs / SMIs, traders, craftsmen, with a large delegation of decisions on the granting of credits. I also managed within this Bank, an amicable collection agency (excluding legal proceedings) with companies that were experiencing difficulties in repaying their loans.
Some reminders on how banks work
A bank is not a public body, so it does not have to grant you credit. Unlike for example the Social Security which can not refuse a reimbursement of care respecting the regulations.
A bank is a private company, with revenues, expenses, an annual result and financial targets to achieve.
The bank itself borrows most of the money it lends to you in the form of loans. It borrows from savers in different markets. So it also has to repay its lenders. This explains the caution they show before lending, business plans, warranties requested etc. If a significant percentage of borrowers do not repay their loans, the bank itself may find itself in difficulty. This also explains these Basel II and IIIregulations, and others, which you may have heard of.
Banks: three main sources of income
Credits and savings, which were their only sources of income until about 30 years ago.
Billing for services and banking malfunctions
Ancillary services and diversifications in the broadest sense: insurance, telephone, car, real estate etc.
Credit has two major disadvantages for the banker: the risk of not being repaid and the rate risk. To date, for a home loan at 1.50% fixed rate, if in 10 years the rates are at 5%, the customer rate remains at 1.50%, it is managed but it is complicated and expensive.
The banker is a trader. Unlike the majority of merchants who are paid “cash”, it is paid in full only after 5, 7.15 or even 25 years for certain home credits. With the risks related to time: the appearance of new competitors, new concepts, personal/life accidents (separation, etc.).
This may explain their diversification into the sale of multiple products and services that are less complicated to manage. Credit is essential, but with discernment and caution.
Three consequences for the borrower entrepreneur
Know how to present your project to your bank
Please avoid presenting 30-page business plans. Sales consultants who have production goals are not going to read them. On the other hand, three key points: the product, the market and the men. All in understandable language.
Know how to negotiate
By a negotiation an acceptable result is achieved for both parties. Otherwise, there is frustration. Whether you, the borrower, are in a position of strength given the quality of your file, or weakness, you must set goals to achieve with limits beyond which you can not go.
All with rational arguments, because finance is not poetry.
Competition between banking institutions
Because the products offered may be different, the conditions offered may be different. Credit agreement, amount of credits, amount requested, duration, guarantees, rates, flexibility use, advice etc …
Beyond that, banks may be reluctant to finance certain activities. Others have a high risk profile, so they will demand higher guarantees than their counterparts. On the other hand, there may be opportunities with temporary “canon” conditions. We do not attract flies with vinegar. Banks that decide to penetrate certain markets, to finance certain activities as a priority, which are behind in their objectives etc…. »
France, Europe’s leading market for alternative financing to banks
In addition to the financing criteria of banks, other financing methods highlight their agility and simplicity, in order to allow business leaders to avoid wasting valuable research time. France is the leading European market for alternative financing. Business Angels, corporate investment funds – more and more large companies are launching investment funds dedicated to SMEs and start-ups; and even public funding (the State supports the financing of companies, in particular via BPI France – see below).
This is a booming way to crowdfunding. In contrast to generalist crowdfunding platforms, it serves to “connect” directly to private investors and borrowing companies, without bank intermediation. In France, you can see the Platforms Lendix, Wiseed or Bolden.
Nouvelle-Aquitaine, a complex network of financing actors
The Nouvelle-Aquitaine Region has clearly understood the interest of alternative financing (and therefore investment) methods to grow local SMEs. It participates in the implementation of dedicated forums, such asInnovaday,under the aegis of Bordeaux Unitec and the Aquitaine Limousin Poitou-Charentes Development and Innovation Agency.
At Bordeaux Gironde Funding, we welcome applications of all types. From the merchant who wants to finance the expansion of his showcase to the manager of an SME who wants to expand its range or develop.
François PERRIN, in charge of the file
On the Bordeaux scene, Le Bac à Sable, ONA or VITIROVER were boosted by the platform. Proof that these new sources of funding are working… And can be credible alternatives to the financing needs of companies, especially from a local point of view.
The rise of FinTech in the face of the entrepreneur’s need for proximity
In addition to alternative financing methods, recent years have seen the emergence of innovative companies in the financial sector. Their main goal is to rethink traditional banking services through technology; while providing an appropriate response to entrepreneurs in their financial management, where traditional banks seem to be in default. Faster funding procedures, modern websites and applications with multiple features, transparency on costs, drastic reduction of bank account operating budgets…
FinTech thus assumes its ambition to be the instigators of the revolution in the financial sector. They highlight improved service through increased availability, simpler use, quality experience and attractive rates to appeal to business leaders.
Bordeaux FinTech, building the finance of tomorrow
The city of Bordeaux is positioning itself as an important player in the democratization and exploration of fintechs with Bordeaux FinTech, the French FinTech event. After a successful first edition in 2015, Bordeaux FinTech 2016 welcomed nearly 500 participants and about 50 FinTech. The event has been renewed every year since then. It is aimed at Members of french or international FinTech. Thus, it allows nourished exchanges between its different members. The opportunity to take stock of the progress of companies or projects, to the world of Finance, Banking, Insurers, Wealth Management Consulting and capital investors, Incubators, accelerators, … Looking for innovative projects to support in the medium or long term.
After two editions the craze is no longer to be demonstrated and it places Bordeaux as the French capital of the sector. A good initiative to create exchanges, structure the market and make a name for itself in the world of fintech. Even if it is more for the moment a strange phenomenon to observe than the reality of a market, these companies can provide VSEs / SMEs with value-added services that correspond to their needs in many areas. For example, there are simple, easy-to-manage credit card payment solutions that are much easier to manage than investing in a payment terminal through a bank offer: if the merchant does not cash in a card payment, he pays nothing. Others like Aston Itrade allow companies to optimize their cash flow through different levers.
Banking and financial services complementary to traditional banks
Gadgets or real added value, “alternative” banking and financial services are slowly starting to take hold in the landscape. Without questioning the role of traditional banks. Instead, according to BPI France, there is now a range of financing methods for companies. Bordeaux Business interview with Bruno HEUCLIN, Regional Director Nouvelle Aquitaine BPI France. E Philippe BOURDIER, Innovation Delegate, Réseau Ouest, Nouvelle-Aquitaine BPI France.
“Today, BPI France, particularly in New Aquitaine, is a pretty good broad-spectrum indicator of markets. The offer of financing and support covers very well the needs of mature, structured companies. When the project to be financed is adapted to its size and evolution, there are no major problems. On the contrary, there is a supply glut for medium and high balance sheet financing.
Many companies thus have a good ability to anticipate, to register in the future. These include start-ups with technological content, start-ups with proposals for services in the digital economy in particular, and also human services companies, businesses.
A completeness of the financing offer, for all types of companies
On New Aquitaine, the general feeling from the point of view of BPI France is a good organization, a good mesh of the financing offer, especially with regard to the Region. The project support network is well done. Therefore, when the files arrive on the banks’ desks, they are well prepared. The CCI of Bordeaux, the Regional Council and the Agency thus form an effective competitiveness cluster. A good project, well presented, will always find solutions, financing.
In particular, BPI France has forged a recognised expertise in supporting the financing of JEI (Young Innovative Companies). An upstream round of the table mixing financing possibilities (“love money”, equity, BPI, region …) usually succeeds favorably.
A need for legibility of the offer and responsiveness for managers
However, there is such an explosion in front of companies that not all have a “good vision of the market”; or a good understanding of the time required for funding. On the BPI side, delays have been significantly reduced over the past three years. Many fundraisers allow for a positive dynamic, with, in addition, alternative methods of financing that find their place (which however remains marginal).
BPI France is now able to offer a “financing toolbox” to business leaders. For companies in difficulty, the concern is that often requests are made when the original plan has not been respected. Nor explained to the financial partners. The business manager thus delays in reacting, and only seeks the upstream proceedings and the Commercial Court when the situation is degraded. In addition, in these cases, financial issues often hide other dysfunctions. Linked in particular to social difficulties, disagreements between partners, etc. Financial support is therefore not a solution.
Overall, BPI France’s activities are on the rise, with products moving towards the intangible sphere. Access to the national market, access to the international market as well. Funding for expenses to improve the competitiveness of companies or team training is well supported.
Bordeaux, a financial centre for entrepreneurs
Bordeaux is becoming a major financial centre. Even if it is not the “great love” between banks and entrepreneurs, they are starting to communicate together again thanks to digital. So we must not see “the glass half filled”. The response rate is rather positive, with a neutral and objective assessment of the project.
BPI France sits in this favourable environment its positioning as a player allowing leverage. A role almost “label” on the validation of the project. The services were also positioned three years ago for international support; a structure that is still fairly recent. A recommendation for entrepreneurs looking for financing? Do not hesitate to “open up the capital rather than go into debt”.
Technological advances, speed of service, “reinvention” of the banking sector… What if, finally, faced with the rise of Fintechs, the “salvation” of banks, on the sector of VSEs / SMEs and entrepreneurship was played on more proximity and human relationship, thanks to a reinforced local involvement?
Banking and entrepreneurship, a model to reinvent locally
According to the Syntec Numérique Odoxasurvey, more than 4 out of 10 French people are ready to adopt alternative financial services. The idea of being able to have your invoices or your credit card tickets in a single application seduces 49% of French people. 40% see it as a considerable time saver.
Only 58% of them still need to be reassured about the capabilities of this type of technology to guarantee data security and confidentiality. Thus, 39% are apprehensive about relying on a small structure that could disappear in the long term (the Morningexample). More surprisingly, 57% express their fears of seeing human contact disappear. Attached to their ATM and the opportunity to meet their banker, they fear automated responses. And therefore a less personalized approach, important in the eyes of entrepreneurs and business leaders. A boon for traditional banks, which can listen to the new needs of their customers while benefiting from this search for proximity.
Development of the local involvement of traditional banks
To keep up with innovations and the latest advances in the sector, most banks are starting to set up monitoring devices for the local ecosystem.
Crédit Mutuel Arkea (Crédit Mutuel de Bretagne, Sud-Ouest and Massif Central) relies on a role of animator of the start-up ecosystem. With the establishment of partnerships; by being as close as possible to the local ecosystem; multiplying initiatives; for example, creating links with French Tech start-ups.
The creation of co-working spaces and innovation centres is becoming more and more common within banks. In Bordeaux, Crédit Agricole d’Aquitaine has opened the XXX July course“Le Village”. For example, in 2020, it welcomes 26 start-ups. This new configuration must create a dynamic and value-creating ecosystem.
It is also an opportunity for some banking players to completely rethink their customer approach to professionals. BORDEAUX Business spoke with Societe Generale,which is implementing a digital and local transformation policy, “Ambition 2020”.
Strengthening relationships with professionals
“Today, aware of the demands of professionals, Société Générale has made major changes towards closer proximity, a certain reactivity and a concern for customer service dedicated to professionals, especially among small and medium-sized enterprises (SMEs). An assumed position of consolidation and development of the professional market. Which today represents nearly 20% of retail banking revenues in France.
Simplification of exchanges and procedures, support for business development, enhanced digital integration… Here are some of the axes addressed to meet the current expectations vis-à-vis their bank.
Involved in the local economy, which they energize, business leaders want more expertise and autonomy; while being able to have a direct contact of proximity if necessary. According to Laurent Goutard, Director of Societe Generale Retail Bank in France, “In order to better meet the needs of professionals, our business system is evolving towards more proximity and expertise.” In a minimum of time. The Societe Generale @sg_etvous Twitter account is thus committed to a response in less than 30 minutes.
To this end, more than a hundred “PRO spaces” are being created throughout the territory with dedicated advisors. They are accompanied by more than 625 self-service spaces with extended hours.
Expansion of the range of business banking services
Beyond proximity alone, professional advisors are specializing and developing their skills, especially with the professional professions. Banking services are evolving with a wide range of web and mobile services: online credit, mobile TPE, Paylib, contactless payment, e-commerce offer… and remote banking management (Progeliance Net and Pro App).
It is also a commitment of Société Générale to those who make the local economy, thanks to a partnership with Tudigo, a crowdfunding platform. With the common desire to promote the emergence of new projects, to support innovation and to encourage entrepreneurship in the regions.
Banks, new coworking spaces?
Finally, it is worth noting, an initiative that takes into account the new ways of working by the self-employed and professionals with mobile offices. In recent weeks, Societe Generale Grand Sud-Ouest has launched a pilot program in the Bordeaux region. In partnership with base10,a workspace sharing application, it is a question of allowing everyone to use the free spaces of Société Générale’s agencies and sales departments.
Supporting entrepreneurs and innovating has been in Societe Generale’s DNA for more than 150 years. Now some of our bank branches are becoming real collaborative spaces open to all, user-friendly.
Jean-Yves Dupuy, General Delegate of Societe Generale For the Greater South-West
Accessible on a half-day, these workspaces have a single price. The office at € 15.00 ht and the meeting room at € 3.00 ht per possible place.
This initiative is fully in line with our values. Our application intends to place the human at the heart of its model. This avant-garde approach for the sector will help to give a new impetus to these places. And, finally, to inscribe them differently in the urban landscape. With a good deed as a bonus, since the funds collected in this context are donated to the association Les Apprentis d’Auteuil de Bordeaux.
Vincent Panier, Base President10
Banks, a key player in a market that is rebalancing
For banks, the challenge lies in their ability to highlight physical contact via local agencies, combined with digitalization in connection with this proximity. With the overall objective of enriching and improving the customer experience. However, they remain (still) the key players for payment, credit or investment services. Thanks to the strength of their infrastructure and their links with all the components of the financial ecosystem.
In the end, digital transformation, new financing methods, without destroying the current system, should have the same effect as in other economic sectors: a redistribution of cards, market consolidation, losers, and winners. Let’s bet that business leaders will be able to take advantage of this evolution.
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