Becoming the beyond banking companion for customers at BNP Paribas 17 January 2022

Pierre Ruhlmann, Chief Operating Officer and Chief Transformation Officer of Retail Banking France at BNP Paribas, outlines the major trends shaping the retail banking scene. 

Efma and Infosys Finacle have again teamed up with the Financial Brand’s Jim Marous for the 13th edition of the Innovation in Retail Banking report. To coincide with its publication last month, we spoke with some top executives at the biggest global banks to get their take on the retail banking landscape. Below is our interview with Pierre Ruhlmann from BNP Paribas. 

Embedded finance is growing in prominence. What role do you think embedded journeys and products will play in banking of the future?

PR: Embedded finance is the integration of a financial service within both non-financial or financial services, products or technologies, anytime and anywhere.

Customers don’t necessarily have a favorite app or product. They have a preferred ecosystem, a preferred destination through which they are ready to interact, experience, and transact with brands that make themselves readily available. Embedded finance is a real game changer as it’s a huge opportunity to bring services to a larger audience. It’s the opportunity to be only one click away from our customers.

In addition to this notion, there is bank-as-a-platform, which revolves around the beyond banking services provided in our channels. In France, as a bank, we appear to be a trusted third party serving our customers. The challenge now is to capitalize on this trust to move beyond financial services and to support our clients in all their projects at every moment of life, such as mobility and health. What is striking is what our clients expect from us, as a trusted companion. Most of our clients say they are willing to work more and strengthen their relationship with their bank.

We must therefore respond to this by developing new and more embedded services, as we are doing for example with Papernest, a start-up which helps everyone in the daily management of contracts and subscriptions. Deepening and valuing our customer journeys will help us become the trusted beyond banking companion for our customers.

The cost-to-income ratios of banks looks set to continue declining from current levels. Can reduced costs be largely attributed to digitization and automation or are there other factors at play? 

PR: Yes, digitization and automation are major factors in cost reduction. But there are other factors. Firstly, the issue is not so much to digitize the past, but to digitize the future! We are constantly creating new customer journeys, for new products and services. They are necessarily digital and end-to-end to meet customer needs (e.g. immediacy) and to provide a great customer experience.

Another major source of cost reduction is reached by increasingly relying on infrastructure or service mutualization with other banks or partners. It’s not a new trend, but it is an increasing one and the topics on which we are currently working, like ATM pooling, are ideas that in the past we wouldn’t have thought possible. 

Finally, even while we continue to insource our most sophisticated and secure items, we are increasingly buying standard services from service providers. 

The payments space is increasingly competitive, with the growth of non-bank owned channels such as Apple Pay and Google Pay. How do banks ensure they stay relevant in the payments space going forward? 

PR: Speed, fluidity, and security are the key words for the customer experience when it comes to payments. Fintechs have often distinguished themselves in the first two areas, while traditional banks have maintained their competitive advantage on security, a key aspect in the bond of trust with their customers.

The European Payment Initiative (EPI) sets the European ambitions: to counter the supremacy of Visa, Mastercard and GAFAM* giants in the field of payments. While consumers and merchants will have a unified pan-European payment solution in 2022, many advances have already improved their digital lives. 

The notion of immediacy guides innovations in the service of consumer experiences. Transfers between bank accounts were one of the first beneficiaries. Instant transfers are increasingly used by BNP Paribas customers - almost one in ten today.  For credit card payments, the contactless limit was raised from 30 to 50 euros, before the biometric card removed the limit completely (up to each customer’s personal limit). This card, offered on the market for the first time by BNP Paribas in 2021, enables payments of over 50 euros in shops with one's fingerprint.

Payment-related innovations are also being made for smartphones. From Apple Pay for iPhones to PayLibfor Android, BNP Paribas’ credit cards are being dematerialized in mobile phones. Dedicated applications such as Lyf Pay also allow payments in certain stores, click & collect, as well as associated services such as loyalty cards, vouchers or online kitties. For wearers of connected watches, Fitbit Pay or Garmin Pay enables payments using the watch’s pin code up to the payment limit of the registered bank card.

The service Paylib between friends enables you to send money to your friends, relatives, family, etc. very simply, thanks to a telephone number, instantly, irrespective of the recipient’s bank, directly into his or her bank account. 

For merchants, the instant payment solution Instanea also offers instant payment using the aggregation technology of open banking specialist Token. This is proof that the Second Payment Services Directive (PSD2) and the SEPA instant transfer are being implemented by European banks. Immediacy is also a matter for suppliers, especially for large companies who need visibility on the payment of their invoices. The international dimension complicates this need in some cases, given the number of actors involved and the local regulations.

Another market trend, split payments - enabling consumers to pay in several installments - has taken off phenomenally. They quadrupled between 2018 and 2020, to reach 80 billion dollars worldwide (source: Kaleido Intelligence). In response to this market transformation, particularly in e-commerce, BNP Paribas signed an exclusive agreement in July 2021, to acquire the French leader in split payments, FLOA.

Finally, innovation is not just about technology. The partnership signed by BNP Paribas with Accor Group to operate the ALL-Accor Live Limitless Visa credit card opens up new horizons. For the first time, BNP Paribas is managing transactions that do not necessarily originate from its own customers. Points earned when paying entitle you to benefits offered by the Accor Group.

Some of these innovations are not exclusive to BNP Paribas. Fintechs are bringing innovation and disruption to this ecosystem. Detecting their innovative solutions remains a challenge to affirm and strengthen BNP Paribas’ leadership in payments.

Most banks are in the midst of reducing their branch footprint. Do you see this trend continuing? Or will we see more creative repurposing and redesigns of branches as well? 

PR: In France, the reduction in number of bank branches started ten years ago. The Covid-19 crisis has accelerated the pace (from 5 to 12%), both to respond to the way customers are wanting to interact with banks, more digitally than physically, and to improve the banks’ cost-to-serve ratio.

French and European players have turned the Covid crisis into an opportunity to speed up the emergence of new ways of working. What seemed unthinkable for advisors in branches only months ago is now a reality: video-advising or distance working.

The trend will undoubtedly continue for some years, even if the easiest closures have already been made. On the other side, banks will need to open new branches to better cover evolving movements of populations.

To answer your last question: yes, repurposing and redesigns of branches is a subject, a challenging one because of the cost implications. In BNP Paribas French Retail Banking, we want to become the trusted companion for and beyond banking of our customers; this implies that we will need to adapt -and to some extent reinvent- our stores by being more welcoming and by providing diversified services tightly linked to the local ecosystems.

Will the transition of enterprise banking applications such as core banking and payments continue its transition to the public cloud? What potential obstacles are there to this transition? 

PR: As a trusted third party, we forbid the placing of customer data in the public cloud for matters of security, sovereignty and risk.

Instead, we are developing a specific solution with IBM, which is a secure cloud in which we want to deposit banking systems or applications that are essential to security. Its implementation phase has just started with a service center application. It will continue at a steady pace until the end of the year (before the freeze period).

The aim is to enable our customers to master their data through storage in a controlled and highly secure environment.

Blockchain-based business applications are highly touted for their potential business impact. Will blockchain use cases continue to grow or is the technology over hyped? 

PR: It’s a good question, and to tell you the truth, it isn’t an easy one. It isn’t totally clear for us the full cost/benefit of using blockchain technology nor the full array of use cases where it makes perfect sense. What seems obvious is that blockchain technology has become a standard for certification and for traceability, and most of the times they come together. It does provide a very secure way to collaborate between partners and institutions. When used on such use cases, we witness a real potential to enable transformations, mainly on multi-entity work flows. There, we imagine it could be an important enabler to many innovations. Moreover, the growing usage of smart contracts and the developing field of tokenization and cryptocurrencies, all based on the blockchain technology, will most certainly fuel the dynamic and bring new possibilities and applications.

To go deeper in the world of retail banking, download your copy of this year’s Infosys / Finacle Innovation in retail banking report: Beyond the pandemic.


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