France is often discussed in the context of the European Union, which is in the midst of major overhauls of the business and finance community. While France is directly impacted by the array of new regulations in the works among EU authorities – including cross-border lending and payments regulation, bank industry overhauls and SME financing rules – the nation has its own robust SME community, particularly in the technology and IT sector. What’s more, French businesses are among the world’s most global, which presents unique benefits and challenges to the economy.
Last week, global technology giant Intel announced the launch of its new Big Data research lab, and that it had chosen France to house it. According to the company, the new lab will be home to innovative initiatives to implement Big Data analytics practices in an array of markets, including agriculture and health care.
Intel’s decision to focus some of its Big Data operations and exploration in France is not random. The center will be located in the Teratec science and technology park, which includes more than 80 technology companies, labs and innovators to collaborate on initiatives that will impact the whole of Europe. Teratec says that it is particularly focused on aiding small- and medium-sized businesses in gaining access to Big Data analytics and computing services to remain competitive in the global market.
Also last week, Moody’s released a report that showcased France’s handling of small business lending as one that exemplifies how the rest of Europe could perhaps tackle the issue. As Europe looks to streamline and disintermediate its banking system, Moody’s concluded that the recent CLO transaction by French portfolio management firm GIAC Gestion “illustrates how securitization can finance SMEs and mid-caps without the direct involvement of an originating bank,” according to Moody’s Vice President and Senior Analyst Monica Curti, who also authored the report, “The French Market Shows That Bank Disintermediation Is A Viable Way Forward for European SME CLOs.”
Compare with standardized EU CLOs, Moody’s found, GIAC’s transaction offers cheaper financing to SMEs while still protecting the interests of investors. Even with France’s recession, the transactions are performing “in line with expectations,” Curti added.
While this is just one example of the way France is approaching small business finance, the Moody’s report suggests that analysts may want to take a closer look at the French market. And it’s not just the banking sector that is catching the attention of the rest of Europe.
France’s own alternative lending platform Lendix is making a name for the nation’s alt-finance market with big goals for the year ahead. Just a few weeks ago, the company revealed a $30 million financing round from an array of investors, which followed only days after the platform secured its first official business customer, Alain Ducasse Enterprise.
The array of financial backing, said Lendix president and founder Olivier Goy, “demonstrates the interest SME loans have for every type of investor.” In the months ahead, Lendix said that it will aim to provide loans for 200 SMEs.
Lendix is part of Europe’s massive alternative lending community, ranked among the strongest in the world by analysts. But France in particular is considered a solid contributor to the growth of alternative finance.
A University of Cambridge and Ernst & Young study released earlier this year pinpointed France as a star in the EU alternative lending industry with a market value at more than $170 million.
The financial support of France’s SMEs is emerging at a time when the nation’s businesses are developing a global vision. According to a report published last month by eBay’s Public Policy Lab, France was second only to the U.K. when it came to global business operations; researchers found that more than half (50.6 percent) of French small businesses were considered “global” based on how many continents to which the companies export their products. Additional research by Retail Week also found that an average of 78 percent of consumers in France, the U.K. and Germany make online purchases from foreign companies, though high delivery fees remain a significant barrier to completing a transaction.
France’s high standing in the global cross-border commerce market positions the nation as a key market for an array of B2B firms, including Commerce- and Software-as-a-Service provider, a massive emerging market for companies looking to globalize their operations, as well as B2B logistics firms like shipping service providers.
But this global mindset among SMEs has raised some challenges for France. In addition to Big Data, France – though not always recognized as one – is a major global hub for technology and IT development. The “La French Tech” Initiative is a momentum aimed to acknowledge and support France’s bustling technology startup community, and includes entrepreneurs, venture capitalists and investors, government agencies, and a mix of technology and communications players.
La French Tech is one of the backers of the recent “Come Back Leon” campaign, started and supported by French business people who want to entice the nation’s entrepreneurs to stay in the nation. France’s SMEs have a largely international mindset, which has led to an exodus of its small business owners in recent years. This movement, experts said, is particularly crucial to France’s technology innovators.
“The future and growth engine for French industry today is the IT sector,” said Louis Gallois, the President of think tank group Fabrique de l’Industrie, in a recent interview with Forbes. “This is where our education and our abilities lie. France has capabilities in this regard and this card must be played.”
If France can keep its innovative entrepreneurs from leaving, the effort will undoubtedly support French businesses’ needs of effective technology to support international commerce and operations.
And, according to reports, France will implement new regulations that require public sector businesses and their suppliers to digitize their invoicing in 2017, so domestic companies will be somewhat prepared for paperless, electronic business operations. E-invoicing practices, coupled with France’s robust IT sector, will be key to not only streamlining local businesses, but also for companies looking to reach beyond borders for new corporate customers.
That position also means that the country will be especially impacted by the EU’s cross-border payments and investment plans, more so than some of its EU peers. Analysts will surely be keeping one eye fixed on France as it grapples with the effects of EU-wide regulation on its own business and finance industries.
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