This is a decision that should shake up much of the banking fintech news. Your neobank might not be one and the ACPR will set the tone. The French regulator has decided to reach an agreement once and for all and end a term used by most of the new banking institutions on their way to online banking.
It all starts with an observation: the current young neobanks, which started with the approval of a payment service provider, offer to open an account and own a card, all from one application. On the other hand, most are not authorized to offer savings accounts, loans, checks, and all the products and skills that make a bank … a bank.
What kind of fintech is a “neo-bank”?
“It is imperative that the term ‘neobank’ qualifies a financial institution. Using this word to qualify any other activity is prohibited by law and is likely to result in penalties for companies that violate that institution.” the supervisory and resolution authority wrote in a press release. The sanction in question: Up to 3 years imprisonment and a fine of 375,000 euros for these young shoots, who are already facing the difficult integration of the market.
“It can happen that certain companies are incorrectly qualified as ‘neobanks’ to define their status and activity. Passed on by the press, this incorrect qualification is not without consequences for these actors. ” then added the French regulator. In the foreground: access to credit, impossible. At Qonto, the payment institute for professionals, this customer awareness was particularly evident during the first delivery in March 2020.
The risk would therefore be too high “Confusion about the identity of the entity responsible for these activities”. The ban would affect unauthorized companies that partner with another approved entity even more. With Revolut and N26, the risk is eliminated. But for the majority of the new “neobanks” that have arrived in the past three years, it will be necessary to reinvent themselves in order to find a new way of presenting … and gaining customer trust.