Regional Focus

France: the home of stability

Published: Mar 2016
Paris at sunrise, with the Eiffle Tower

One of the leading European nations, France’s economy didn’t suffer to the same extent as other countries in the economic crisis. Growth, however, seemed to stagnate in the years following and is now set to rise steadily in 2016 and beyond.

Christophe Roy, Head of Payments & Cash Management, HSBC France

Christophe Roy

Head of Payments & Cash Management, HSBC France

Key facts

Geography and society
66m (2015 estimate)
Capital city:
Time zone:
Land boundaries:
Andorra, Belgium, Germany, Italy, Luxembourg, Monaco, Spain, Switzerland.
3,427 km
Economy and business sector
Financial capital:
GDP annual growth:
1.2% (2015)
GDP per capita:
$35,670 (2015 estimate)
Ease of Doing Business rank:
27th (2016)
Index of Economic Freedom:
73rd (2015)
Government type:
François Hollande
Prime Minister:
Manuel Valls
Trading partners
Top import partners:
Germany, Belgium, Italy, Netherlands, Spain, China, UK.
Top export destinations:
Germany, Belgium, Italy, Spain, UK, US, Netherlands.
Country credit rating
  • AA

According to the European Commission 2015 winter forecast, GDP growth in France, the Eurozone’s second largest economy, is expected to rise 1.4% in 2016 and 1.7% in 2017. Having stagnated over the three years prior to now, lower oil prices, low inflation and sustained wage growth encouraged private consumption throughout 2015. Whilst positive consumer sentiment should remain a growth engine, drivers of growth, in a globally competitive environment, should be diversified. Aptly, Audit firm EY predict that France’s economy will become less reliant on consumer spending (EY Eurozone Forecast, October 2015). EY suggests that businesses will accelerate their investment spending supported by pro-competitive reforms in the country, underpinning an expected increase in consumption and export volumes.

Gaining traction

Encouraged by the euro’s depreciation and the French government’s competitiveness policies – such as a reduction of labour costs, increased flexibility of the labour market and a greater promotion of Research and Development (R&D) – foreign trade will make a positive contribution to growth throughout this year (+0.2 GDP points in 2016, the same as in 2015, according to the French Economic Observatory). And the foundations are in place to support this; the World Bank Group’s Ease of Doing Business 2016 report ranked France first globally for trading across borders, alongside 14 other countries.

In France, HSBC’s barometer of Trade Confidence amongst corporates, declined slightly in H2 2015 (a Trade Confidence Score of 119) compared to six months earlier (127), but it appears to reflect a less optimistic view regarding the global outlook rather than in-country pessimism. The number of respondents expecting global economic conditions to improve in the short term fell 30%, but the Trade Confidence Score (TCS) remains firmly in expansion territory and the majority of companies surveyed (60%) continue to expect trade volumes to increase in France. HSBC’s Trade Forecast Report, produced in conjunction with Oxford Economics, predicts France’s exports, in current US dollar terms, will grow by just under 1% in 2016, but will pick up steadily towards 5% a year by 2020. Germany will remain France’s largest trading partner and is its primary export and import destination.

A value proposition

The country’s economy boasts leading companies in a number of manufacturing sectors, including aerospace, pharmaceuticals and agri-business, as well as in the automotive and railway sectors. And this global leadership is supported by generous government support for France’s cutting-edge R&D – the French tax credit can reduce the cost of research by almost a third, for instance. A supportive environment for R&D activity (Deloitte, October 2015 Global Survey of R&D Tax Incentives), in addition to the country’s successful educational establishments, will continue to support France’s activity at the top end of the value chain (see Chart 1).

Chart 1: Exports by sector

Chart 1: Exports by sector

Source: Oxford Economics/HSBC Trade Forecast

As such, it is no surprise the country is a large recipient of foreign direct investment (FDI). Certain declarations and permits are necessary but there are limited restrictions to FDI – in fact, France offers multiple investment incentives, especially for small and medium-sized enterprises (SMEs). With a number of trade corridor links relating to France, appetite to invest in the country remains high as it is still ranked fourth place after the US, China and the UK regarding FDIs. Key investors into France come from the US, Germany and UK.

Asides from also being the most visited country in the world, maintaining the third largest income globally from tourism, other contributing factors to France’s attraction as a place of business include: well-maintained industrial infrastructure, one of the most developed transportation systems in the world and a highly educated labour force – the country has the highest number of science graduates per thousand workers in Europe, for instance. “External companies, from China and Middle Eastern countries for example, are coming to France as the first port of call in Europe. It’s a decision based upon getting access to the Eurozone via a stable economy in a stable environment,” says Christophe Roy, Head of Payments & Cash Management, HSBC France. “Having a financial centre in France, together with operational centres, is something we are seeing from a lot of corporates looking to manage their European activities.”

HSBC – Payments and Cash Management

HSBC France provides corporate banking services to French and international companies and their subsidiaries. Services available include treasury and capital markets solutions, in addition to commercial banking products. HSBC’s in-country Payments and Cash Management (PCM) team consists of a sales team covering both Global Banking and Markets (GBM) and Commercial Banking (CMB) sectors, as well as product managers and a client service team. A wide range of services are on offer to both domestic and international companies operating in France, covering accounts in both local and foreign currencies. Available channels include HSBCnet, SWIFTNet, HSBC Connect, and at a local level Elys PC and EBICS©.

In the Commercial Banking space, HSBC’s International Subsidiary Banking (ISB) team are experienced in facilitating market entry and providing guidance to international companies looking to enter the local market. The team sits in a number of European markets and comprises a number of highly-skilled Relationship Managers with experience of working in a variety of different markets including Asia, the UK and North and South America and for France, is located in four centres throughout the country (Paris, Lille, Lyon and Toulouse). HSBC offer a full suite of Payments and Cash Management solutions plus Trade and Receivables Finance, Markets, Investments, M&A, ECM and DCM, and Lending as well as the day to day role of support with funding and FX (see Table 1).

Table 1: HSBC Cash Management solutions at a glance

Investment products Payments Collections Liquidity management Channels
  • LCY/FCY current accounts.
  • LCY term deposits.
  • FCY term deposits.
  • Certificates of deposits.
  • Electronic payments:
    • High-value.
    • Low-value.
    • Multi-currency.
  • Cash.
  • Cheques.
  • Cards.
  • Bills of exchange (BOE).
  • Incoming electronic payments:
    • High-value payments.
    • Low-value payments.
    • Multi-currency.
  • Cash.
  • Cheque collection.
  • Cards.
  • Bill of exchange (BOE).
  • Overdraft facilities.1
  • Interest enhancement.2
  • Cash concentration (LCY/FCY for residents and non-residents, domestic and cross-border).3
  • HSBCnet – our internet-based electronic banking platform.
  • SWIFTNet – we provide a full range of SWIFT services for corporates.
  • HSBC Connect under EBICS© protocol – local host-to-host multi-banking solution.
  • Elys PC – HSBC France’s local internet-based electronic banking platform.

Potential subscribers must ensure beforehand that their subscription is compliant with the applicable regulations.

  1. Overdraft facilities are subject to credit assessment.
  2. Balance contribution only.
  3. Cross-border cash concentration is available but there may be regulatory and taxation issues that need to be resolved prior to setting up such an arrangement.

Christophe also expands on the latest developments: “The HSBC team is also looking at new innovative technology to create flexible, more efficient solutions. Long-term investment in HSBCnet Internet Banking and HSBCnet Mobile will see the deployment of new mobile solutions in different markets, such as B2B mobile collections. HSBCnet, the online e-banking platform, is an accessible gateway to effective corporate financial management on a global scale. Corporates can manage payments, receivables, liquidity and the changing value of their assets with one secure, global solution; connecting markets and giving you the real time information to compete in today’s business environment.”

France boasts a mature financial sector, one where cash management solutions are driven by corporates. “There are strong relationships between corporates and banks. The treasury association also leads technical discussions on the evolution process in cash management,” says Christophe. “It is different to countries where banks may lead those discussions.” HSBC has a unique position, dating back to 1894, in the competitive sector that is France’s multi-bank environment – the country has 170 commercial banks, 88 branches of foreign banks and 110 savings, cooperative and rural banks operating. “HSBC is one of the largest international banks and our extensive network ensures we can support domestic requirements with strong local knowledge.” No other foreign bank has a nationwide branch network. Also operating in the country are purely international banks offering offshore capabilities and locally-focused banks. “For corporates looking to successfully establish operations in France, choosing a banking partner with global reach and local knowledge is a good starting point,” says Christophe.

In terms of competitiveness in the country’s banking sector, there are two things corporates should note, according to Christophe. Firstly, because of the current regulatory environment and specific technical requirements, some international banks are withdrawing to their local markets. “Secondly, and hugely important, is the SEPA environment. As the result of the creation of a zone where all electronic EUR-denominated retail payments are to be treated as domestic payments, a local bank can offer services all over Europe.”

What’s more, the XML format of ISO 20022 affords banks, and corporates rich information regarding payment information. “One of the key parts of efficient cash management is clearly managing that information well,” says Christophe. Aptly, the European agenda on e-invoicing using XML format is being pushed as a means linking invoices to payments. “It will afford the ability to make a payment against real electronic invoices. It will be a real change in the industry in terms of control and transparency over the transaction and the reconciliation of a corporate’s payment activity,” says Christophe. “Once you have this electronic invoicing information coming together with the payment information, you can converge the working capital of the supply chain activities with cash management.”

This matches current ongoing trends, Christophe observes, where treasurers are looking for more and more visibility. “Getting information faster, with more accuracy, helps treasuries manage working capital activities as well as protect themselves against fraud and money laundering.” These are areas of concern, increasingly so, for treasurers.

Overseeing this environment is France’s central bank, The Banque de France, responsible for implementing and controlling interest rate policy, and formulating credit and monetary policies. The three French authorities with supervision powers over money laundering regulations are: The Prudential Control and Resolution Authority (ACPR), The National Enforcement Commission and The French Ministry of Foreign Affairs. Banks and credit institutions must make certain declarations to the Ministry of Economics and Finance service against money laundering.

Chart 2: Payment services are converging

Chart 2: Payment services are converging

Payments innovation

Electronic payment opportunities available to corporates in the country are on the rise. Instant payments, for example, have been “silently revolutionising” the landscape, according to Christophe. “It may change the business to consumer (B2C) relationship as instant payments can be a direct competitor to card schemes.” When banks offer instant payments, without dependence on the main card networks, it could change the way the industry is using banking payments.

Christophe also believes the growth of fintechs “will be a gain for both banks and fintechs and, ultimately, corporates”. Why? Because, “in a new ecosystem”, fintech companies will bring a lot of innovation and value add technology, but banks will continue to be important accompaniers, not least because of important regulatory control reasons. For corporates, Christophe advises: “Follow ongoing projects in order to anticipate the practical consequences on your daily activity. The digital revolution has not finished surprising us.”

Points of interest

Aligned with the developments in electronic payments is an increased governmental will to do more regarding anti-money laundering activities. As mentioned earlier, “corporates are spending more to ensure their payments and cash management processes are resilient. The responsibility is falling on them more and more. The bank, however, is here to help with these concerns that are playing on treasurers’ minds,” says Christophe.

The benefits of the Eurozone are clear – integrated financial markets, reduced cost of trading, and a stronger presence in the global economy, for instance – but recent troubles, including the Grexit dilemma, migrant crisis and worries over Russian aggression, are hard to ignore. What treasurers should look for, therefore, is a single entry point which offers collaborative innovation and stability amidst volatility. France offers that: an economy with secure offerings in terms of banking environment, infrastructure and investments, as well as a recognised focus on the value-add end of the chain.

International presence

Christophe concludes: “HSBC’s extensive local presence and global footprint gives us access to 85% of world trade flows. We can also manage cross-border requirements with global reach and recently became the first bank to implement a two-way RMB sweep between Europe and China.

With our international connectivity and footprint, HSBC is committed to supporting our clients and helping them discover the strongest avenues for business growth, helping them increase control over their cash flow, optimise their working capital and help connect to opportunities in Europe and beyond.”

Payments instruments in France

  • Payments cards.

    The use of payment cards in France has increased in the past decade. Visa and Mastercard are the principal payment card brands issued in France.

  • Cheques.

    Cheques are declining in use due to the increasing preference for electronic payments – both for high value and low value transactions. They are, however, still a common cashless payment instrument, particularly for retail payments.

  • Direct debits.

    Direct debits are available in France and are used for low-value recurring payments. On 1st August 2014, SEPA direct debits replaced all legacy direct debit schemes in France. SEPA direct debits can be settled on a same-day basis via CORE or STEP2.

  • Credit transfers.

    Credit transfers are used for both high-value corporate and low-value retail payment transactions. Companies with a gross turnover above €15m must use credit transfers for tax and social security payments. All credit transfers are automated.

  • Electronic banking.

    Electronic banking is available in France and offered by all of the country’s banks. The SEPA-compliant Electronic Banking Internet Communication Standard (EBICS) is used in France. EBICS is a secure, IP-based, XML-file transfer protocol.

  • Mobile banking.

    It is offered by many of the country’s banks, but remains mainly retail orientated.

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