Despite French banks being
particularly careful when it comes to lending and profits being hit
hard, the past couple of years have seen credit cards experience a
rise in popularity and an increasingly sophisticated range of card
products are now making their debuts in the market, as John Hill reports.
France is famous for its notoriously
cautious financial system, and French banks are especially wary
about which customers they lend to. During the last year, corporate
and investment banking profits were hardest hit by the financial
crisis through asset write-downs and increased funding costs. The
economic slowdown then compounded the direct effects of the crisis,
eroding retail banking income and the creditworthiness of debtor
companies, which caused overall risk-related costs, already pushed
higher by bank failures, to go up still further.
French banks were not immune to these
macroeconomic conditions, and their 2008 earnings were down sharply
on 2007 levels. But despite the year-end losses posted by some
groups, the French banking sector’s capital base enabled the
industry to weather the crisis.
State of the card market
The role of Groupement des Cartes
Bancaires (CB) is central to the French cards industry. Set up in
France in 1984 to establish an interbank card payment and cash
withdrawal system, CB is a group with almost 146 members from
French and foreign banking and financial institutions, mostly
operating in France. CB does not have the status of a credit
institution and does not issue payment instruments nor manage
customer accounts. All operational aspects related to CB cards are
the reserve of the member banks and credit institutions.
In 2008, the number of CB cards increased by
3.14 percent (57.5 million cards) compared to 2007 while the number
of transactions grew by 6.9 percent (7.75 billion transactions) and
total revenues saw a rise of 8.1 percent (€412.9 billion [$619.2
billion]). There were 1.5 billion interbanking cash withdrawal
transactions from ATMs, for a total of €109 billion, while payments
by CB cards reached 6.2 billion transactions for a sum of €303
billion. The number of CB ATMs amounted to 53,325, with 1.16
million retailer contracts at the end 2008.
In 2008, the volume of fraud in CB payment
transactions increased by some 21 percent compared to 2007, to a
rate of 0.036 percent for a total of €106 million. This increase
can be explained by the rise in remote payment fraud, which
represents 65 percent of the payment fraud in the CB system and for
which the rate rose to around 0.25 percent in 2008, with a peak of
0.38 percent in August.
The volume of fraud in CB card payments abroad
rose by 4.7 percent in 2008, amounting to €91 million. The fraud
rate is around 0.71 percent (compared to 0.53 percent in 2007). The
use of counterfeit magnetic stripes on cards in face-to-face
payments has also increased by 26 percent for CB cards used abroad.
Since a quarter of this counterfeiting takes place in North
America, it is borne by the CB issuers.
The volume of fraud in payments with non-CB
cards with CB acquirers remains stable at around €62 million and
represents a fraud rate of 0.36 percent. With cash withdrawals, the
volume of fraud in the CB system is identical to that of 2007 (€18
Carte Bleue had been the exclusive licensee
for Visa cards in the country, up until October 2008 when the two
merged to form Carte Bleue Visa. Since 1992 all Carte Bleue and CB
cards have been chip-enabled. There are a few transactions such as
small autoroute tolls that are paid without PINs. Foreign cards
without chips can still be used at French merchants, with the usual
procedure of swiping the magnetic stripe and signing the
The simplest card is a ‘carte blue’, which
works as a cash or debit card and can be used everywhere in France
for payment and withdrawing cash. They usually cost €15 to €25 per
year, but have the downside of not working outside of France.
Internationally accepted cards (such as Visa or MasterCard) usually
cost €25 to €45 per year.
Data from the European Central Bank
(ECB) and France’s central bank, Banque de France, illustrates the
growth of card usage in France over the last few years, with the
market growing from 78.8 million cards in circulation in 2005 to
85.4 million in 2008. Of these cards, the growth rate in the
separate payment functions has been wildly different. In terms of
credit cards, there were 34 million in circulation at the end of
2008 compared to 32.7 million the previous year and 31.2 million in
2005. If this is then compared to the number of debit cards in the
country – which has almost doubled in the last 5 years, from 38.9
million in 2005 to 64.3 million in 2007 and 65.9 million in 2008 –
it is obvious where the major market growth has been.
In 2003 card payments became the number one
interbank payment instrument processed by the retail clearing
system. They accounted for 39.4 percent in volume terms of all
transactions processed by the system in 2008. Cheques are the
second-largest payment instrument in the retail system, accounting
for 22.5 percent in volume terms. Then there is the share of credit
transfers – 15.2 percent in volume terms – and the one of direct
debits – 16.1 percent in volume terms.
Up until 2007, co-branding in France was
banned, with the ban itself being lifted in October that year and
cards being issued almost instantly. This decision was made in an
attempt to facilitate SEPA compliance in the country. Despite
co-branding being previously unavailable, co-badging has been
allowed under the CB system (for example, the logo of the partner
payment system, usually Visa or MasterCard, can appear on the card
along with that of the issuer).
This has meant that retailers (or other
non-banking organisations) offering cards to customers have not
been able to offer cards that carry both their own logo/brand and
the MasterCard/Visa/CB badges. Instead, they have had to offer
customers cards that are part of a closed-loop system and can not
be used across the entire CB interbank network of ATMs and POS
terminals or outside of France.
Société Générale is France’s
second-largest bank by market value and most of its card and retail
banking operations are run through subsidiaries Credit Du Nord and
Franfinance. Credit Du Nord arose from the merger of 80 French
banks, and is today a federation of seven regional banks operating
throughout France. Owned 80 percent by the Groupe Société Générale
and 20 percent by the Dexia Group, the group serves 1.3 million
individual, professional and business customers through a network
of 625 branches.
A specialist in revolving credit and
associated loyalty cards, Franfinance launched a co-branded
international bank card two years ago. They have launched eight
debit and credit cards in the last two years. These include four
retail cards: Nouvelles Frontières, Expert, Connexion and Havas;
and four general-purpose cards: Caducea, Intima, Fédération
Française de Golf and Fédération Française de Bridge.
BNP Paribas Personal Finance
In 2008 BNP Paribas Personal Finance
joined forces with telecom operator Orange to offer the ‘Jump’
card, the first co-branded prepaid, rechargeable card to be
launched in France, aimed at youngsters in the 12-17 age
The card came on the market in May
2008 and enables parents to give their children more independence
whilst keeping control over their spending. BNP Paribas was also
the first bank to issue a Visa business card in France and had a 60
percent market share at the end of 2008.
On 16 May 2008, BNP Paribas Personal Finance
launched its mortgage financing business under the Cetelem brand.
This marked a major milestone in their integration, creating the
first French brand to cover the entire range of personal finance
products from store cards to mortgage loans, personal loans,
automobile loans, revolving credit facilities, debt consolidation
and associated financial services.
PayPal has included BNP Paribas Personal
Finance’s Aurore card in its range of accepted payment methods. The
12 million Aurore cardholders in France, Italy and Spain can
therefore now make payments via PayPal.
Crédit Agricole is the largest
retail banking group in France, launching the Double Action dual
credit and debit card in June 2008. By August 2009, nearly 850,000
cards had been sold.
The card is the first universal
payment card that gives holders the choice to pay for goods at any
retailer or withdraw money from any ATM on a debit or credit basis.
During the year, Crédit Agricole increased its market share in
premium cards, and launched the first French football team official
A subsidiary of Crédit Agricole, Finaref is
the leader in private-label cards and distance selling of financial
products. Finaref develops and distributes financial services for
customers of its partner stores and companies (La Redoute, Fnac,
Printemps, Club Méditerranée, Surcouf, Verbaudet, Cyrillus, etc) in
France and abroad. Crédit Agricole’s other subsidiary Sofinco has
launched co-branded cards with Renault, Total and Intermarché.
Crédit Mutuel-CIC has also been
experimenting with contactless cards compatible with mobile phone
payment equipment, whose key advantage is rapid payment of amounts
of less than €20. There are already 4,500 Crédit Mutuel-CIC
customers using these cards.
Crédit Mutuel ranks second in France in
electronic payments with a 20.7 percent share of the overall market
and a 26.5 percent share of card payments at merchants. It is also
number two in bank card issuance with 9.4 million cardholders, and
in ATM networks with 7,558 ATMs. In 2008, 1.7 billion card payments
were made at 222,500 acquired merchants.
The group’s expertise in electronic payments
allows it to handle 34 percent of international payments made by
French companies with sales of €50 million to €500 million. In
2008, it signed major electronic payment processing contracts with
distribution groups Carrefour and Leclerc (through the latter’s
banking subsidiary, Edel). These contracts strengthen its position
as Europe’s second-largest acquirer of electronic payments.
The acquisition in mid-2008 of Citibank
Deutschland, Germany’s leading consumer credit provider, and in
early 2009 of a controlling stake in Cofidis, with operations in
around ten European countries, has enabled the group to enter a new
phase of strategic development: it is now Europe’s fourth-largest
consumer credit provider, with outstandings of €27.3 billion.
Groupe BPCE was created from the
merger of Banques Populaires and the Caisses d’Epargne, two
complementary co-operative banking networks. Groupe BPCE serves 37
million customers, equal to one in two people in France, with 8,200
branches across the country.
BPCE has said it intends to create a single
payments platform for all the Banque Populaire banks and Caisses
d’Epargne. This platform is to be a front-ranking player both in
France and in the wider European market with 13 million bank cards
under management, processing an annual total of 1,135 million card
transactions, 7 billion block transactions, and 5 million unitary
transactions for large amounts.