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Digital Currency, Fintech and Inclusive Finance
Date:11.30.2020 Author:Frederic OUDEA

Frederic OUDEA

Chief Executive Officer, Societe Generale

Hello, everybody, it's a real pleasure to address you this afternoon from France, where, as you know, the COVID contagion is still active. And unfortunately, I cannot be with you physically, but I hope to be back sooner in China. I will make a few comments which will echo certain points made by other people, and just a minute ago by Benoît.

Let me give at first the perspective of private bank, in particular, based in Europe, but having also operations elsewhere in the world. I just would like to remind you that we have more than 150 year history. We are European leader in financial services. We have 140,000 people operating in 62 countries, dealing with close to 30 million clients every day. We have French retail operations. We have international retail operations in very diversified geographies, such as central Eastern Europe, Russia, and Africa. We have financial services such as insurance, corporate management and leasing. And we have also wholesale banking operations, capital markets and financing, so dealing with large corporate and financial institutions all over the world, including in China.

Let me just also highlight that technology is really something very present in our strategy very recently, like our French institutions. We have designed our sense of purpose, and it's building together with our clients a better and sustainable future through responsible and innovative financial solutions. So you see that innovation is at the heart of what we want to achieve. Let me just come back to something which was already mentioned. Everywhere we provide new services based on digital technology.

But I'd like to precisely highlight the diversity still, that we can see in the digital usage. And here, I'm speaking to people based in China, where I think we all acknowledge that it is in China that the usage of technology for financial services, for payments, is the most advanced.

We deliver services in France. It's a developed economy. Let me just mention that consumers are still attached through their branches, through their dedicated bankers, and overall to still traditional means of payments, albeit, of course, declining progressively, I have in mind, usage of cash, but also, for example, checks.

We also provide banking services, for example, in Russia, the country probably some of you know it well, and by comparison, the penetration of digital services is actually probably higher than in France, in relative terms.

And then we are one of the two international banks very present in Africa. We have a presence in 19 countries. And the penetration of banking services and financial services is still limited. Something like 10% of citizens in Africa have a banking account, and very clearly, and we see that ourselves, the usage of digital technology, mobile payments through electronic wallet, is certainly the way forward, and a very strong tool to create financial inclusion for people who have no access to the banking services.

So really, what I just would like to, again, further emphasize, is when we talk about technology, digital usage and financial services, digital currency even more, the usage will vary quite a lot from one country to the other, even if we can see certain global trends.

Let me just say one word also on the COVID crisis, and unfortunately, as we all know, the virus is still there, particularly in Europe. Overall it's a crisis, which I think is going to accelerate certain trends, which were already there. But I'm not sure it is changing the picture fundamentally. What I mean by this, again, is acceleration, but the trends were there before. What we'll see is again, effectively more transition, the strongest switch from a traditional consumption of traditional banking services towards digital channels.

And here, let me just use a survey made recently by the Boston Consulting Group, which asked something like 17,000 clients in 30 markets, the changes of habits. During the crisis, according to the survey, one in three customers overall, and one in two in the 18 to 34 year age group, have used mobile banking more than they did before the crisis. And something like 16% of these customers enrolled in digital channels for the first time.

COVID has also accelerated cashless payments, with a jump of digital payments above 20% on average, and of cards about 10% on average, and cash usage has dropped in most countries, and up to -60% in the UK and Canada, it was -45% in France. Of course, we also see people spending less, in particular, during the lockdown periods. During the crisis, digital channels had the highest satisfaction levels among customers, compared with other channels. So as we can see, of course, a trend towards more usage and more people using digital channels.

And at the same time, we also have seen in this survey the discrepancies from one country to the other. It's not something which is homogeneous. So again, this crisis will contribute to the acceleration of the global trend, toward more usage of digital banking, even if, as I said, it will vary from one country to another.

And let me now conclude my speech by addressing a few general comments. First, again, we've seen so far in the last 10 years, I think, a usage of digital channel by financial institutions, which has developed pretty well. And I'm convinced of the benefits of using technology to provide a better service to clients, more inclusion, in particular in regions where people do not have access necessary to banking accounts.

And effectively in terms of also compliance, without technology, we cannot succeed. This progress can vary from one country to the other. Again, it's fair to say China is a header with financial institutions, which are well known, of course. I have in mind like Ant Financial. So it’s a specific moment for this company. I was visiting China in 2013, myself with my executive committee to see the progress in the usage of digital technology.

But I have also in mind, more traditional players, banks, insurance companies, which have done a lot. As I've said, in Europe, we are moving also forward. And anticipation is high, probably ahead of the pack with the usage of digital technologies and the capacity to develop alternative models, such as digital banks.

I'm a little bit more disappointed in our global capacity to develop global framework. And when I see this, first, let me highlight trade finance. Obviously, compared with some expectations, I think the progress takes more time than expected. There are a lot of consortia with different players to develop digital ledger or so called block chain technology in an area of activity, which obviously would benefit from technology. As you know, trade finance is a process which involves some operational risk.

And using this technology will provide more security, more transparency, more efficiency, to a process which still uses too much paper. But so far, we've not been able effectively to establish a standard, a global standard, and without the global standard, there will be limitations to the usage of technology and international trade is something global by essence.

In terms of payment, let me also mention that we are still working in a fragmented world. And of course, here I had in mind more specifically Europe. Europe has not been able so far to establish an integrated payment framework. From that perspective, it would benefit the clients, the users, again, with more transparency, more efficiency and lower cost.

From that perspective, let me comment on an initiative, which I think is promising, which is the European Payments Initiative (EPI). It's an initiative which has just been launched by 16 banks in Europe from different countries, with the support of the European authorities, of the European Commission, and the central bank. And the idea is really to establish a common infrastructure, which would provide instant payment mechanisms and tools, based on digital technology. I've been CEO for Societe Generale for 12 years, I've seen for 25 years, the banking industry in Europe, this is perhaps the most important initiative that I've seen in the last 20 years. And I hope it will move forward.

In terms of digital currency, many people have much more competence than me to talk about it. And when one was commenting on that just a few minutes ago, we are of course supportive of such initiatives and trends. I think, as a player of international mobile payment, as a player in banking in Europe, it will help also probably to give more security, more transparency, and reduce costs. And at the same time as it was already effected, digital currency and currency in general is a sovereignty issue. And I must say, I think it could take some time. And of course, we are happy to participate in the innovation process.

Let me highlight that, from that perspective, we have established an internal startup, which is called Forge, which is designing a framework, again, based on block chain, to deal with crypto assets. And there is an avenue, and there is perspective for crypto assets. We cooperate from that perspective with Banque de France, the central bank in France, and European authorities. And I see, again, going forward, some potential for that, and which will be beneficial both for individual clients as well as financial institutions and corporate.

Let me also point out another issue, which is around coupling, combining innovation and responsibility. And here I have in mind, in particular, two fields in terms of responsibility, the usage of data, the protection of privacy, which is of course very important in Europe, and makes the whole process a little bit more complex to deal with.

And also, of course, the compliance with many regulations such as Anti-Money Laundering (AML), etc. What I mean by this is that we as a bank have to compete sometimes with FinTech, with non-banking institutions, which at this stage might benefit from a framework which might be a little bit easier to deal with. And of course, that means sometimes for us, the capacity to move forward might be a little bit laggard.

As a conclusion, let me share with you that digital technologies will be a great support for financial activities going forward and financial inclusion. I'm a great believer that digital technology can help to make the financial sector, the banking sector safer, more efficient, and toward the benefit of our economies, and all the users of the financial services. At the same time, as I have highlighted, things will take some time in certain areas. There will be some discrepancies from one region to the other. It's difficult at this stage, in particular, to build some of the collective framework beyond what each institution can achieve on its own. Thank you very much for your attention.