One of the largest European banks, the French BNP Paribas, strengthens its activities in the Czech Republic. With its new Hello bank brand it targets young clients and cooperates with fintech companies. "The Bank is designed to expand the use of digital technologies that are popular with young people. We are doing the same in Germany," says BNP Paribas Chairman Jean Lemierre to e15.cz.
Do you perceive Fintech companies as a competitor?
No, vice versa. In cooperation with them, we see a high added value.
In what in particular?
They bring innovation and creativity. We finance many fintechs, some we buy or invest in. These are teams of talented young people who have great ideas but no clients and data. We have clients and data and we love great ideas.
How do you see Google, Facebook, Apple or Amazon from this perspective?
They are not fintechs, they have a different business. They use client data and sell it. We do not do that. And that is a big difference. Fintechs are trying to use technology and good ideas in the right
In addition to the companies mentioned above, the significance and influence of cryptocurrencies have been significantly increasing. How do they penetrate the traditional banking business?
I do not know any cryptocurrency. I only know cryptocommodites. The currency is operated by the central bank. So called “cryptocurrencies” are not. They do not have the specifics and quality of traditional currencies. I have a problem with cryptocommodites. I do not know where they come from, I do not know where they're flowing. This is a fundamental issue for a bank. We have implemented anti-corruption regulation and anti-terrorist financing regulation.
And blockchain is more important for you?
See, that is different. It can be part of our future. You can use it to trade securities, but also for a number of other functions. This is a challenge for the banking sector. We must accept that. In our 2020 plan, BNP Paribas is investing three billion Euros into a digital transformation, including these technologies such as blockchain. We need to be ready.
So the blockchain change banks significantly?
The implementation of the blockchain will have a significant impact. We know the trend, but no one knows to which length it will go.
Since the end of last year you operate a new Hello bank! in the Czech Republic focusing on young clients. Are they your key target group?
The bank is designed to extend our approach by using digital technologies that are widely used by young people. We are also doing the same in Germany, where we launched a new bank on the same principle. In the Czech Republic as well as in Germany, we are expanding retail banking through digital technology. Competition is high, but we try to set the bar. We have been focusing on consumer finance for a long time, we know this market very well. From here, we move on to retail banking.
Are not there too many similar players on the Czech market like Hello bank?
There are some locally, they belong to strong competitors - but that suits us. Our goal is to offer a good service at a fair price. We know from Germany that client needs are becoming more diversified. I think we can distinguish ourselves from our competitors in the Czech Republic.
You want to attract 400 thousand clients within three years. How do you want to convince them?
By the cutting-edge technology mentioned above. BNP Paribas never invests in the short term to boast with one-shot "cool" story. We invest in the long run.
What cutting-edge technology is it?
We want to offer normal mainstream banking services; the difference is the quality of technology. If we tried to diversify too many products, it would not work. We want to offer well-known products to be predictable for the client.
So, the young clientele is what is attractive about the Czech Republic for BNP business?
We have been present in the region for some time. In recent years, we have started to focus more on the region and we have invested very significantly in Poland for example. We have always had a strong presence in Hungary. And the Czech Republic is for us a big part of this renewed focus in the region.
The first reason is the successful process of joining the European Union. Since 2004, we have been monitoring newly admitted member countries and the Czech Republic has been one of the bestmanaged transformation processes in the economy, if not the best.
Today it is fully integrated into the European economy, suppliers are very closely connected to the Czech Republic. BNP Paribas is one of the largest banks in the Eurozone, and the Czech Republic is now part of our development plan as it is a significant economy. That is why we are here and investing.
Do not you perceive the Czech economy, as shown by the last macroeconomic numbers, just behind the peak of the cycle?
No. The Czech economy is doing well, inflation is low, wages are rising, employment is very high, as well as people's skills. In addition, the economy is increasingly integrated into the European one. The trend is positive in Germany or in my home France, which also benefits the Czech Republic. Growth is limited by supply side constraints rather than by the demand side. It is important to mention that one of our priorities is to support the corporate sector in the Czech Republic with our cross border financial services.
You say that the Czech economy is increasingly involved in the European economy and more influenced by it. Interest rates in the Eurozone have long been on the bottom, can it be an entry point for the next crisis?
The world economy is in good shape. Clients, are positive. In Europe and in the world. They want and can invest, they recruit new people. At the present time, we are rather observing the atmosphere of questions and ambiguities. There are two major ones. The first is a bubble – cheap money always creates bubbles. This is why central banks stress this issue. They say, "Be careful." And they are right. The other one is world trade, I am pointing at the USA and China. European monetary policy has been set up to prevent deflation and thus the crisis. Central banks have done a great job. They know the economy is changing and developing. Should the inflation rate increase, they tighten monetary policy. But they must not proceed too fast, a subsequent shock would have a very negative impact.
Are the banks prepared for a potential crisis better than a decade ago?
Yes. Over the past ten years a lot of work has been done, banks are stronger. They have changed. They have adapted their business models in many ways. Consolidation has taken place in a number of countries, for example in Spain, and also recently in Italy. We will probably see it in Germany too.
Cheap money generates bubbles - what is the significant one that will have an impact on the European financial system?
In the Eurozone I do not see a striking bubble. Asset prices have risen in a natural way. It is clear, however, that US stock prices have grown significantly. US companies use profits instigated by the tax reform. They returned back home. Most of this money is used to buy their own shares.
This of course increases their price. It is always interesting to compare the price of the asset with the income it carries. When we focus on US stocks, we see a gap between the growth in asset price and the income on the asset. From my own experience I know it is not good. It cannot last for long.
From the perspective of bank stocks, during last year US banks are doing significantly better than European ones.
American banks have recovered from the crisis faster than the European ones. Their (US) economy is mainly financed by the market, not by banks. They contribute less than 25 percent to the US economy. This is exactly the opposite in Europe. Banks are the main source of finance for the economy, the markets are very small, depending on each country. When you have a smaller role in financing the economy, recovering after the crisis is easier. What we are seeing today is, I hope, only a temporary situation during which European banks will fight for a better position.
You are a banker, you have years of experience and you can look at the Czech Republic from the outside. Did the Czech Republic benefit from the four-year fixed exchange rate?
Yes. It has brought stability and predictability. Retail growth and the unemployment rate is the proof of a success.
Should the Czech Republic accept the Euro?
The Czech Republic is committed to accepting it. I always say it is just a matter of time. When you are ready, you should join the Euro.
You are still in the process of adjusting. The key is enough flexibility to adapt. The Euro has brought more positives and stability than negatives to Europe. We can talk about flexibility when everything is going according to plan, if it is not, the consequences can be painful. I believe that the future lies in the Eurozone, however, the Czech Republic should probably not join at this moment. Let us look at the world. The USA introduces protectionist measures, China is constantly expanding. Russia is assertive, Britain is leaving the Union. We should not underestimate the fact that the world of tomorrow can be far tougher for Europe than the world of today.
My generation has spent all its time creating rules. We thought obeying by rules was the best for the world economy. But today I see that people are not following this. I do not believe that divided Europe is the way to success. We need to be connected, moving on the European agenda. We talked about a group of great world players - Facebook, Google, Amazon and Apple. Is Europe represented (among such companies)? No. Why? We do not have a fully developed single market. We have the people and the capacity to invest, as well as clients.
Jean Lemierre (68) Jean Lemierre has acted as advisor to BNP Paribas since September 2008. In December 2014 he became Chairman of BNP Paribas Group. Before joining BNP Paribas he was President of the European Bank for Reconstruction and Development (EBRD). He also worked as Director of the French Treasury and held various positions at the French tax authority. Mr. Lemierre is a graduate of the “Institut d’études politiques de Paris” and the “École Nationale d’Administration”.
AUTHOR: Jiří Liebreich 19th of July 2018, www.e15.cz, Image source: profimedia.cz
23rd November 2018
19th January 2019