French students have followed two major trends: They are increasingly creating their own businesses alongside their studies, as well as taking internships or studying abroad. These phenomena have led French banks to adapt their student offerings to meet the new needs. Jessica Longley reports
How do banks ensure they attract the biggest market share of students, as well as keep these new customers in the long run? This is what RBI set to find out by speaking with four French banks: BNP Paribas, Banque Populaire, La Banque Postale and Soon, Axa’s online bank.
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Although banks’ customer churn rates have increased since the financial crisis in France, clients remain relatively loyal.
According to research published in 2015 by Bain and Company, the churn rate of under-25-year-olds in France is 5%, higher than the French average of 3.9%. However, the rate jumps to 7% for 26–35-year-olds due to their increasing demand for banking products and higher revenues.
Thierry Meric, in charge of the mass market hub at La Banque Postale, explains the importance of targeting students.
“Banking mobility in France is rather limited, with only 2–3% changing banks each year.
“We know that half of students choose their first bank at the start of their student life, with approximately 10% of them changing banks each year. We target this crucial stage because it becomes much harder in the later years to recruit new clients.”
La Banque Postale is not the only bank in France strategically targeting students.
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By GlobalDataVincent Duval, the director of pricing and marketing of retail markets at BNP Paribas says: “In the French market, clients are relatively loyal to their bank. There are two main points where customers choose a bank: when they are studying and, later, when they need a mortgage. It is important for BNP Paribas to be present and provide these customers with dedicated offers on a long-term basis.”
If students are not always the single specific main target for French banks, they are often one of their most important points of focus and a core market segment.
BNP’s strategy encompasses targeting students and first home owners; Banque Populaire focuses on students and clients in professions with a public function such as teachers; Banque Postale looks at students, asset management customers, seniors and families; while Soon’s target audience is almost exclusively students.
Jean-Philippe Van Poperinghe, director of the retail market at the Banque Populaire Caisse d’Epargne (BPCE) group explains: “At Banque Populaire, we believe it is important to keep renewing our customer base and ensure we attract a young audience. It is for this reason that students are one of our two key targets. We constantly need to capitalise on the new relationship we build with clients.”
Raphaël Krivine, director of Axa’s online bank Soon, adds: “Axa announced in 2013 that it would target more aggressively the market segment represented by young people. Axa’s main incentive was to launch Soon, which has now become one of the many points of entry into Axa’s world.”
French banks have also focused more extensively on students as their client bases age as a consequence of the natural distortions of French demographics.
“This translates to young people becoming a strategic challenge for banks. Indeed, clients stop changing banks after a certain age, giving even more reason for banks to take action and target clients at a younger age,” Meric says.
Students are also often indirectly targeted through their parents. Indeed, Bain and Company research shows that eight out of 10 under-25-year-olds choose their parents’ bank for their first current account.
Meric tells RBI: “We believe that recruiting students is not only done by offering attractive deals, but also through the parents. It is important to convince the parents when the young person has yet to become independent.”
Meric adds that while students are of interest to French banks, they are not without risk.
“Students are one of our key targets. They have a high potential due to their future employability and the future rents that they will generate. However, unlike the other market segments we target, they are not an immediate source of profit, but rather an investment in the future we are willing to make.”
Which students are more profitable?
In the UK, the biggest banks – including HSBC, Barclays and Santander – all offer gifts and special deals on current accounts catering to the specific needs of students to entice them to open an account in the hope of keeping them as clients in the long run.
Similarly in France, most banks give out cash rewards and exclusive offers for limited periods to persuade students to open an account with them.
However, more peculiarly, several French banks offer different cash prizes depending on the grades achieved at their final exam, the French Baccalaureate; top achievers in school often receive higher cash bonuses than their less successful peers.
Of the four banks RBI spoke to, three offered cash bonuses to high school graduates.
At Banque Populaire Alsace-Lorraine-Champagne, students are given between €15 ($16.75) and €100, depending on their grade. At Soon, it ranges from €80 to €160, while BNP gives €40 only if the person has graduated from high school.
Online bank Monabanq and French bank CIC also follow this pattern.
“At the end of the French exams, we intensively promote Soon through cash bonuses that we give to high school graduates. Rewards vary depending on the grades the students receive,” Krivine tells RBI.
This begs the question: Why?
It seems that banks introducing this offer believe that smarter high school graduates will become more profitable, generate higher income and be less likely to fall into debt.
Krivine reveals: “We try and attract the best students by offering the biggest cash bonuses to the highest achievers.”
On the other hand, La Banque Postale has adopted an altogether different strategy.
“Several banks offer cash bonuses to students relative to what grades they received in their final exams. We do not offer these cash prizes; we tell our youth organisers to partner with universities that might be less prestigious but with a higher employability,” Meric explains.
“We are a bank that accepts everyone, which I agree has both its good and bad sides. We know that some clients choose us because we have different values to several of the big banks. We hope to show an image of collaboration and modernity.”
All big banks in France compete against each other in the hope of getting as many students as possible to sign up. To differentiate themselves, banks try to offer unique services and competitive prices, fees and interest rates.
Meric describes La Banque Postale’s approach: “To seduce this clientele, we offer three main things: a full package devoted specifically to them, a team of representatives dedicated to their needs, and promotions over a limited period.
“What we call a full package is account formulas and cards designed for young people, and more specifically students. The package includes student loans that are repayable only once students have finished their studies and have started working. It also gives students the possibility of having house insurance, with an offer on studio apartments that are very popular with students. Other offers include health insurance for students studying or having an internship abroad.”
While most online banks are unbeatable in terms of credit card pricing, few can provide the entertainment and cultural offers that are very popular with students.
Van Popperinghe tells RBI: “For students staying in France, we have a €1 formula that gives them access to the beneficial NRJ Banque Pop’ debit card, which gives students access to the entertainment world by giving them a chance to win VIP seats at concerts and film premieres.”
BNP also offers entertainment gifts and deals, discloses Duval.
“We guide and help students through their day-to-day lives and offer them a free-of-charge credit card for the duration of their studies. We are especially present in the world of cinema and the entertainment sphere. We have a programme called WeLoveCinema that allows students to have cinema deals and two-for-one cinema tickets”
To ensure students’ needs are met at all times, La Banque Postale has a team of 25 youth representatives in large university cities such as Montpellier and Lille where student potential is high.
“What we ask from these youth organisers is to negotiate partnerships with universities and schools, as well as represent the bank in student forums and in universities via the form of advisers,” Meric explains.
“They also ensure that the branches themselves are marketed to young people and students with what we call ‘street marketing’.”
Most French banks, including Banque Populaire, BNP Paribas and La Banque Postale, have partnerships with schools and universities; however, Soon is slightly different.
“We do not have any direct major link to universities because we have partnered with La Mutuelle des Etudiants (LMDE),” says Krivine.
“This nationally exclusive partnership allows LMDE to work with us, who in turn promote Axa products to students, in particular Soon.
“Every bank offers cultural deals to students. At Soon, we choose to be different and select a few start-up offers to promote them. For example, what we offered last week to our customers was a free trial for several months of a password wallet.”
La Banque Postale also differentiates itself when it comes to crowdfunding.
“We have a partnership with Kiss Kiss Bank Bank, one of the three key market players when it comes to crowdfunding in France, which allows us to put in place measures where clients can finance their own projects,” says Meric.
Addressing students’ expanding needs
With travel now cheaper and easier than ever, taking an internship or studying abroad has become increasingly popular in France. Some schools and universities have even made it part of their curriculum. Banks have had to adapt to this trend.
According to Van Popperinghe: “Many students in France decide to live abroad for an internship or study for six months to a year. We cater exceptionally well to these students by offering them an Erasmus loan guaranteed by the European Investment Fund (EIF) with preferential rates. We also offer bundles that allow students to have lower fees.”
Duval adds: “At BNP, we hold a very strong position when it comes to helping to students studying temporarily internationally. Around 50% of students with an account at BNP Paribas go abroad, either to study or to do an internship. That’s why we offer them a free-of-charge premium Visa card during their stay.”
However, Krivine explains that this phenomenon, although widespread, may not apply to everyone.
“I do not think that the phenomenon of French students studying abroad encompasses a big majority, but rather is only true of certain schools. The opportunity to study abroad in universities with subjects such as classics or psychology is rarer. However, the number of students studying abroad is definitely increasing and we have improved our tariffs in the eurozone to help students that do decide to study abroad.”
However, it seems that some are worried that France may potentially be suffering from a brain-drain as more students decide to work abroad after their studies.
Meric reveals: “Some numbers have alarmed universities and schools in France where they’ve started to seriously worry that they might be shaping students for work-life abroad where it’s easier to succeed and where there are fewer constraints.”
A less prominent trend, but a trend nonetheless, is the rising number of French students starting their own businesses alongside their studies. A social security law implemented in 2015 requires self-employed persons to have a professional bank account exclusively for professional activities, as well as their own personal bank account.
Krivine believes Soon’s offer is perfect for entrepreneurial students: “Most banks offer a professional bank account at high monthly costs. However, at Soon, we give students free access to a professional account, therefore boosting innovation and creativity.
“Soon’s current account for entrepreneurs, made available in January 2016, has met with great success and has been promoted through word of mouth.”
A common area of concern in student life is making it to the end of the month with enough money to survive.
According to Duval: “To study in France, you have to take in consideration a budget of approximately €8500 per year for a student. That’s the cost of their studies but also the cost of day-to-day life: accommodation, clothes and entertainment.”
Unlike most students who apply for massive student loans to cover their annual university fees, French students are less likely to need or want a loan. Universities are cheaper in France, and several are even free.
Duval explains: “In France, only about 10-15% of students take out student loans. For those in need, BNP offers student loans at a preferential rate of 0.9%, one of the best rates on the market.”
Furthermore, some students do not need a large overdraft to cover their expenses.
“Students are rather prudent. Only about a third of students ask for an overdraft. It’s a question of ‘protect me against myself’,” Meric tells RBI.
Krivine adds: “There must be at least 20- 25% of young people working while studying to make ends meet.”
Banks have different approaches to helping students with day-to-day activities. Soon categorises students’ spending to help them budget accordingly.
Similarly, BNP has personal finance tools on its app and website that allow both students and non-students to manage spending by categorising different expenditures. Banque Populaire offers a website dedicated to the cost of life outside France for people living abroad.
Van Popperinghe says: “One of our proudest achievements is our unique website that allows customers to cross-reference prices in different countries of food, entertainment, accommodation. Customers now have a better idea of the cost of living abroad, and can budget accordingly.”
He continues: “Several public organisations have expressed an interest in our site. We hope to partner with them in September or October.”
La Banque Postale, on the other hand is about to launch an online bank where categorising spending would potentially be a service offered. Meric explains that students will be the online bank’s key target market.
Keeping students for the long haul
In France it seems that most students want a bank with a branch network, rather than an online-only bank.
This may be because, as they embark on their banking life and become more independent, they need support and help in making important decisions.
Duval says: “We might think that students want everything to be done online, but that is not always the case. Around 85% of students want a bank with a branch network. What students look for and want is an advisor in the flesh but with modern tools. They want a qualitative and functioning website. They want both!”
However, several French banks, in answer to the rising number of online banks offering free debit and credit cards, have decided to launch their own online bank to compete.
Duval tells RBI: “The BNP group also has an online bank, HelloBank. These two banks have quite complimentary positions. Here at BNP, we have a strategy of developing the digital tools together with HelloBank and not separately.”
Although online banks may be the short-term answer in grabbing students’ attention, it is of interest to ensure the students stay loyal to the bank in the long term.
Van Popperinghe explains: “Ensuring the loyalty of customers has always been a difficult task for banks. The highest churn rate can be seen with our clients who are between the age of 24 and 28. To fight against this phenomenon, we have put in pace a number of procedures. At Banque Populaire, through our NRJ Banque Pop’ card and great customer service in branches, we have managed to reduce the churn rate.”
One in three people give quality of service as a reason for changing bank, according to Bain and Company research. Banque Populaire strives to exceed expectations when it comes to service, explains Van Popperinghe: “We have a unique relationship with our clients that perhaps other banks don’t have. We invest in the quality of the service we provide and use this to our advantage to ensure customers stay with us.”
Meric tells RBI that customer satisfaction is critical to La Banque Postale.
“To ensure customers are loyal and stay with us in the long run, we aim to simplify their day-to-day lives while always keeping a sharp eye on security.”
Making sure that students are accompanied not only through university but also later on in life through a continued service is also important.
Duval explains that the notion of continuity and helping them through key moments in life is very important at BNP.
“We are the bank that offers the best deal in time. That is our policy.”
Similarly, Meric explains that La Banque Postale strives for continued service: “We want to accompany the youth through the important moments of their lives. We are still a relatively young bank that did not offer some of the services we do today, such as mobile contracts and house insurance. We are trying to avoid any ruptures at that level.”
