Cash & Liquidity Management

PSPs and what the future holds

Published: Feb 2023

Olivier Praneuf, Head of PSP Business Development at BNP Paribas, talks about PSPs, the banks relationship with them, and what the future holds in this space.

Olivier Praneuf

Head of PSP Business Development

Payment Service Providers (PSPs) – such as PayPal and Stripe – are sometimes seen as disruptive rivals to traditional established top-tier banks. But Olivier Praneuf takes a more nuanced view.

“My philosophy is to look at them as clients, not as an enemies or competitors,” he says. “It’s win-win, because we all have our strengths and advantages.”

One reason that BNP Paribas has set up a dedicated PSP business is because of European law. European directive 2015/2366, aka Payment Services Directive 2 (PSD2), says that payment institutions – such as PSPs – should have access to credit institutions.

“Basically, banks have to accept PSPs as clients,” Praneuf says. “So one reason why we have developed this business is because it’s expected by law.”

The second reason is pure pragmatism. “We are here to do business,” he says. “PSPs have taken such a market share in the payment industry that not only they are competitors, but they are also clients bringing to the bank volumes of transactions to be processed.”

Initially, PSPs gained market share by filling gaps in the market left by the traditional players.

“First, they leveraged the gaps we left empty,” Praneuf says. “Services having business verticals that we as a bank did not really want to serve, because either they’re not really profitable, or maybe too sensitive from a from a reputation standpoint or from a compliance standpoint – gaming, gambling and dirty industries.”

But PSPs didn’t stop there. Praneuf explains: “They then went after our plain vanilla business – e-commerce, for example – and thanks to their innovative approach and product offerings, they took some business. But now I believe we are clearly regaining market share with our own innovative solutions.”

The final reason for Praneuf’s role is the most interesting. Praneuf and BNP Paribas recognise what PSPs can bring to the table to benefit their own processes and products.

“They are innovative companies,” he says. “Serving PSPs as clients is a good way for us as a bank to foster innovation. PSPs bring that fast-acting ability to seize opportunities and to innovate complexity. We have a lot to learn from them and that’s part of the deal.”

But that’s not to say BNP Paribas is not an innovative organisation.

“You might think that maybe as banks, we are perceived as less innovative than PSPs,” Praneuf says. “But I think that’s a wrong perception. Maybe we are a bit slower to seize the opportunities. But once we come to the market with innovation, we are pretty good at spreading that innovation quite efficiently.”

The relationship is highly beneficial for PSPs too.

“We have industrial capacities they don’t have,” Praneuf says. “A whole business of platforms, international reach, and a level of regulation that brings trust. I believe we have a reach in terms of clients, markets and investment capacity, that very few PSPs have.”

PSPs need traditional banks in order to access clearing systems and meet regulatory requirements on safeguarding funds. And then there are the clear reputational benefits that come with working with a top-tier organisation like BNP Paribas.

“Lots of PSPs that are coming to BNP Paribas to do business, one of the things they are looking for – it’s not only our products’ capability or our international network – but it’s also very much our reputation and our brand name. When they say, ‘I’m using BNP Paribas,’ it’s a way to tell their clients and the market that they have a good reputation and have reached a level of maturity.”

We asked Praneuf what he makes of the rise of the banking-as-a-service model and the role PSPs play in it.

It’s something he sees referred to more and more, because it’s meeting a need to offer off-the-shelf banking solutions and off-the-shelf payments solutions to companies that aren’t necessarily that familiar with banking services.

“My job is to serve PSP as clients,” he says. “We serve some of the PSPs that are players in the banking-as-a-service market, providing them API connectivity, open banking solutions, payment solutions, account management solutions, and access to the clearing system.”

And banking-as-a-service is favoured by companies who are digitalising their business practice, thinking of new ways to make revenues and new ways to deliver their services.

“If you look at the different articles and media on the PSP ecosystem,” says Praneuf. “You have an illustration of this almost every day, and banking-as-a-service is clearly part of the dynamic of the sector.”

What does the future hold for the PSP space? It’s not an easy question to answer, but Praneuf has some insights.

First of all, the overall business environment has changed – and will continue to change.

“Where we used to be in a kind of globalisation, now it’s becoming more regionalisation,” Praneuf says. “There are different factors: the US and China becoming less close, the risk of recession, rising cost of living and lots of vulnerability among consumers. Not to mention climate change, and higher risk of fraud and cybercrime. There are lots of challenges in the air.”

But where there are challenges, there are opportunities for PSPs.

“The more the environment is challenging, the more you need innovation. You’re motivated to achieve more with less, and consumers will need to make more with their money.”

But things won’t be easy. Only the strongest PSPs – the most robust from a financial standpoint – will survive.

“The market will continue to support growth of the PSPs, but at the same time, they are already impacted by shrinkage in terms of sources of financing, and the stronger pressure they have now to become profitable.”

Gone are the days where PSPs ignored profitability in the quest for market share, compensating their losses with VC funding.

“At the same time, there will be new opportunities that we don’t see yet today,” Praneuf says. “Newcomers will come to the market as well. There will be some kind of turnover. I see more of the same actually, even if the environment is dramatically changing.”

What about the future of Praneuf’s role? BNP Paribas has big ambitions for the PSP client segment.

“Clearly our objective is to become a reference bank in Europe,” he says. “We are investing a lot in organisation, from a product standpoint, but also from a compliance standpoint, because it’s a sensitive activity.”

The bank has been adapting its compliance framework for doing cash management with PSPs, in order to address the specific risk they bring in terms of financial security. Praneuf expects growth in this space.

He concludes, “Now we have deployed our business across Europe, which is mostly countries in EU, but also the UK. And I believe you will see more and more from BNP, in that respect.”


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