Next time you visit the local tobacco shop to get your weekly pack of cigarettes, why not sign up for a new bank account while you’re at it?
This scenario is longer too farfetched, as the Wall Street Journal reported tobacco shops may soon be offering bank accounts and credit cards on their shelf alongside metro passes and tobacco packs in France
A former French banker developed a small company that will allow customers to apply for a credit card and open up a bank account at local tobacco shops. Hugues Le Bret, co-founder, raised $3.9 million from 50 entrepreneurs and aims to launch the business by October this year. The company set high goals and projects to have at least 100,000 customers by the first 18 months of operation.
Tobacconists in France that plan to sell the bank accounts need only scan the customer’s ID to immediately create a client file and swipe the new credit card to activate the account. The new “tobacconist” accounts will compete as a cheaper alternative to regular and online bank accounts.
“There won’t be any commission fees,” Le Bret insisted. “We will accept everyone, even those who have been banned from holding a bank account.”
Le Bret’s new initiative aims to satisfy a broader trend in the French economy aside from banking fees. Unemployment rates and the credit crunch effects have hit an all-time-high in France, and the need to offer low-cost bank accounts has become more important to frugal customers. New entrants, such as tobacco accounts, will present competition for traditional retail banks. The 27,000-strong network of independent tobacco shops in France has the potential to become a large threat to the 38,000 bank branches.
Ideally the increased competition pressures will push the French government to reduce banking costs with regulation that will corner lenders into capping penalties on overdraft fees and bad checks.
Le Bret announced his new company will require cardholders to pay an annual €20 fee and one-time fee for cash withdrawals. This is a bargain compared to general small bank accounts that cost an average of €64 in France, which includes cash withdrawal fees.
The country’s regulator will monitor the tobacco shops that choose to participate in the new account offers closely. However, the Wall Street Journal reported the shops will not be given a complete banking license according to the French banking regulator. This means customers must keep their account out of the red, and in the black.
The French regulator also stated that all tobacconists will need to “satisfy good repute requirements and have specific qualifications.”
To read the full story at The Wall Street Journal click here.