Innovation at La Banque Postale: The importance of remittances

Jean Marie Dragon, director of marketing – means of payments at France’s La Banque Postale, spoke to the Mail & Express Review about challenges in the postal sector, the bank’s remittance business and how it is responding to pressure from new payments legislation. La Banque Postale and La Poste

Technological innovation is at the forefront of La Banque Postale’s financial strategy. Developing its financial arm by offering new multi-channel services through mobile phones and the internet is at the heart of this French leviathan’s mission to remain at the top.

As the international postal sector comes under pressure from increased liberalisation, falling letter volumes and a shift towards other means of communication, France’s La Poste is seeking to strengthen alternative revenue streams in its financial arm. The banking business accounts for about a quarter of the overall post office business, and as such is an important tool in the overall postal strategy.

Jean Marie Dragon, Director of Marketing – Means of Payments at La Banque Postale, told the Review that the challenges being faced by the postal industry are having an impact on the financial arm. “There is more pressure to make better results (at La Banque) to compensate for the evolution in activities within the post office. The financial arm is an important revenue stream.”

The role of remittances

One aspect of alternative revenues at the forefront of technological innovation is in the area of remittances, or money transfers. While remittances make up only a small portion of the business it is a crucial part said Dragon, representing about 2-3% of turnover. “Remittances are an importance area for us. Remittance activity constitutes twelve million transactions per year – but it concerns all people and not only clients of La Banque Postale. Everybody can use money transfer services in the post office – they do not have to have an account within the bank” he emphasised.

The bank offers both ‘cash-to-cash’ and ‘account-to-cash’ offerings. There are three levels of products for money transfer at the bank. Through its cooperation with Western Union the bank offers Western Union® Money Transfer services to its customers. The bank also offers international ‘express’ and ‘ordinary’ money order services. These three levels of services offer customers a range of transfer speeds, from Western Union’s same day service to the ordinary money order’s D+4 (Day + 4) service, and at a range of prices.

The relationship with Western Union

The agreement with Western Union came about in 1994. The service was gradually rolled out through the La Poste branch network. In 1997 Western Union services were offered in 500 post offices, increasing to 1,900 in 2001, 3,000 in 2004, and 3,200 branches in 2008. La Banque Postale has 17,000 outlets in France, and today offers Western Union products in 6,000 of those branches.

“These branches have been chosen as locations where Western Union quick transfer products are most used. We placed these products in those post offices where there is a strong business case – and a strong business demand for the almost instant transfer of funds. Our objective is to deliver the best product for the best price to our clients. So depending on the customer’s need we propose the most appropriate option. When the customer comes in asking for a Western Union product – that’s what they get if they agree to pay for this premium service” Dragon stated.

He was forthright when discussing this strategy: “We chose Western Union because it was the first and principal player in the market in 1994. It really was the only company in this business. It had the trademark (branding) and the IT skills to be our mutual partner. While they are the leader for remittance in the world – we are the leader in France, making Western Union a natural fit for us. Their expertise in speedy money transfer products combined with our extensive branch network in France made sense for us to work together.”

According to Dragon investments are made every year to support this cooperation. A new information technology system, fully integrating the Western Union services at the point of sale, was deployed in 6,000 post offices in 2009. Dragon explained: “We have invested a lot in IT during the last two years to rebuild our IT systems throughout the group as technology is at the forefront of our strategy going forward.” Part of that investment in technology has been an investment in education too, with some 40,000 desk clerks taking part in an e-training solution for the new system.

For the last five years money transfers and remittances have seen significant growth. In 2009 the volume of transactions was stable even though the volume of money being transacted was slightly down by 2-3%, underlining the resilience of the remittance business despite a global recession.

Dragon said that the cooperation with Western Union is a strong one which involves daily communication. “We are very satisfied with the collaboration and continue to work together to maximise the potential in the area of remittances.” The agreement also means a close marketing collaboration between the two companies which helps to define the level of promotional branding at the point of sale, and targets communications to the main communities of migrants.

The impact of the Payment Services Directive

La Banque Postale believes the success of working with Western Union is self evident as it remains the main operator in France of money transfer products. So far this position has not been affected by the introduction in November 2009 of the Payment Services Directive (PSD), pan-European legislation designed to liberalise the payments market. Exactly how this position will change over the coming eighteen months, as the legislation settles into play, will be interesting to see, but  Dragon is adamant that La Banque Postale’s position as leader in the French remittance market will be retained.

“With the PSD, more competitors will arrive in this market – but it is up to us to stay competitive and attractive for our clients. Currently 40% of our money transfer clients have a checking account. We have an opportunity to build services with our new technology to keep and expand that customer base. We are aiming to build products that combine remittance and banking products and make it easier for clients to transfer from accounts. We’ll give more value to our customers by giving them more information” he said.

Dragon saw La Banque Postale’s credibility within the remittance market as a huge plus in the post-PSD era. “While we do have the credibility the threat from PSD is real, so first we have to reinforce the trust. However, the corner shop who can now offer a remittance product, and the new distribution channel for remittances, are going to be cheaper and maybe more convenient to the customer than post offices. This is going to be a challenge for us. And the other competitors are not only going to be on the physical channels – they will be on the new channels too (internet and mobile technology). We have to be on the new channels as a consequence.”

Improving customer service

La Banque Postale and its mother company La Poste are addressing improved convenience for customers by extending opening times in some branches, particularly, Dragon explained, in urban areas. And it is addressing the group’s goal of reducing queue times, which is an ongoing project. Looking forward, Mr Dragon saw the bank’s remittance business as stable and expected that it would start to grow again as economic conditions improve.

“We are the first operator in France today and our strategy is to be the first tomorrow too. We have to invest in the new channels to stay on top and provide the best possible quality of service to our customers. We need to have the new technology to keep our costs low so we can provide good value for money to those clients. We are focusing on the internet and mobile phone technology. We see the internet as the way forward today and payments over mobile phones as the way forward tomorrow. The first stage in the mobile phone channel development is the provision of information about a remittance via the customer’s mobile phone handset – perhaps through SMS about the status of the transaction.”

La Banque Postale intends to maintain and accelerate the progress made over its first four years, while remaining faithful to its public service role, driving growth and effectively containing costs. The company says it is open to all types of initiatives and any partnerships that will enable it better to meet its customers’ expectations and progressively establish a comprehensive product and service offering. Dragon concluded by saying that La Banque Postale will carry on its expansion programme leaning on the network of post offices first, and then through its multi-channel strategy.

Key facts and figures:

€4.815bn in Net Banking Income.
11.2m postal bank accounts.
9.53m customers having La Banque Postale as their first banking provider.
480,000 business, local authority and non-profit customers.
5,191 ATMs in France.
€270.6bn in customer deposits.
Over 6.2m bank cards (11% market share).
17,000 post office outlets.
(Figures as at 31 December 2008)