If the big financial institutions are not wary, they will soon be reduced to the role of mere distributors. And in this area, Fintech players are a step ahead, says Michel Cicurel, founding president of the La Maison group.

Decidedly unprecedented, the Covid-19 crisis will have spared finance. The central banks will have financed the States which will have financed the victims of the crisis, businesses and individuals. The financial system will only have served as a pipe, rather effective by the way, for the flooding of public liquidities.

However, the major financial players are facing two megatrends, which the crisis has amplified, which alone would justify our concern about finance afterwards: the major and lasting role of States and central banks which absorb the financial system from above; the vertiginous acceleration of the digital transition which deprives it of oxygen from below.

The local business

Our world in full metamorphosis creates major risks that only States can face. We know that viruses, whether they attack humans or computer systems, will be able to paralyze the global village again. From then on, States, international organizations and central banks will be at the forefront for decades to come. Inevitably, major financing and coverage of major risks will partly escape the market financial system.

But then, what becomes of the role of the financial sector if not that of distributor? However, in its role as a “corner business”, the major financial player finds itself threatened by fintechs, as traditional commerce, small and large, is threatened by Amazon. A threat made exponential by the health crisis. Obviously, in financial commerce, with the "one stop shop" of the smartphone, there are no more queues, inconvenient appointments... However, the financial sector is more exposed than any other to digital disruption because that it is immaterial, deeply standardized and more familiar and sympathetic in virtual. Moreover, the financial markets, which never lose their heads in the long term, value the capital invested in digital finance with double-digit multiples, while no major European bank is worth its equity. Thus, for the Stock Exchange, between traditional finance and digital finance, the mass is said.

Financial Amazon

On the other hand, fintechs could only exercise the core business of the big players by supporting the same constraints of capital and rules, which would lead to a collapse in their value. This has been proven time and time again: by the absurd, with the scandal of the insufficiently regulated German neobank Wirecard, by the unanimous agreement of the authorities on the framework of the right to exist of Facebook 's Libra, and spectacularly by the Chinese authorities who suspended for reasons of preventive regulation the biggest IPO in history, that of Ant, mother of Alipay and daughter of Jack Ma, the Chinese billionaire founder of Alibaba.

Conversely, the major financial players, rooted in the norm, admit they are incapable of innovating and therefore depend on the outside for financial technologies, techfins, such as regtechs, insurtechs, artificial intelligence and, last but not least, cybersecurity. It is vital for our financial system to organize partnerships with these innovative companies because if the big players do not boldly clear the financial Amazon, they will suffer the same fate as traditional commerce.

vital priority

The French banking and financial system is remarkable, and the place of Paris perfectly capable of recovering the pieces of the City detached because of Brexit. France benefits from a good momentum on fintechs but still embryonic, with a few hundred million annual financing while the world market mobilizes nearly 50 billion. Our financial system has no time to wait and must fish for technology where it is, in the hubs of Silicon Valley, southeast China and Israel, the world's number one in cybersecurity.

Today, our major financial players are seriously working on their digital transformation but, at the heart of the crisis, have not made it their vital priority. But tomorrow it will be too late. The Chinese are busy regulating their giant fintechs while the Europeans are sharpening their weapons for consolidation. Let us beware of not celebrating the nuptials of the blind man and the paralytic, when on the contrary the betrothal of the sting of the nimble gnat and the power of the colossal lion but with a foot of clay, in finance as in health ( Pfizer and BioNTech), would make the fable a conquering saga.

Michel Cicurel is the founding president of the La Maison group.

If the big financial institutions are not wary, they will soon be reduced to the role of mere distributors.

In this area, Fintech players are a step ahead.

Michel Cicurel

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