Finance

Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Welcome to the revolution. Here's your suit, tie and computer login.

France's biggest bank, BNP Paribas SA, is buying the country's biggest anti-bank, Nickel -- a start-up with no branches that markets itself as an alternative to the "toxic" financial establishment.

The reported price tag, 200 million euros ($249 million), is a mere goutte d'eau next to BNP's 1.44 billion euros of profit in the fourth quarter. Still, Le Monde reckons this is the biggest fintech deal by value yet seen in the country. Rebels don't come cheap.

Not everyone is keen to see an upstart join the establishment.  Liberal commentator Gaspard Koenig says he opened a Nickel account to escape BNP. He took to Twitter to brand the deal a victory for "the oligopoly." France's top five banks, a frequent target of Koenig's, control about 81 percent of the market.

Oligopolie
France's top 5 banks control 81% of the French market; the top 13 control 95%
Source: ACPR regulator

It's also an odd move for the co-founder of Nickel, former journalist and banker Hugues Le Bret. He wrote a book called "NoBank" and bragged of one day becoming bigger than the dinosaurs of the industry.

But let's not get carried away. Selling out to The Man could be a good decision for both sides, even if it comes with a whiff of hypocrisy.

Ensemble
Nickel boasts 550,000 clients next to BNP's 300,000 Hello Bank France clients
Source: Company filings

Nickel has done a good job of growing so far. It says it has more than 540,000 customers, about twice the number at BNP's home-grown mobile-first brand Hello Bank. But growing much beyond that level, or to Nickel's target of 2 million clients by 2020, will need serious financial muscle, if the experience of other fintech firms is anything to go by.

Nickel could be rolled out overseas or sell more products to teenagers or small businesses, but that would likely bring with it more regulation, more compliance and more employees. These are surely areas where the dinosaur can help the underdog.

Nickel's business also has an old-school streak that could benefit from the tie-up with BNP. The start-up relies on some 2,500 tobacconists and newspaper kiosks across France to handle the more prosaic tasks of issuing payment cards and taking cash deposits.

Government subsidies for these smoky symbols of French life, hundreds of which close every year, have become politically controversial: the national audit body has criticized government support for the industry.

Adieu, Branches
Change in retail branch network by country at BNP between 2012 and 2016
Source: Company filings

But they could allow a bank like BNP, which has been seeking to cut its branch network and reduce costs, to replace some outlets with a lower-cost physical presence. That could also provide a handy revenue stream for the tobacconists.

Finally, there's the question of people. BNP has pledged to run Nickel at arm's length and will keep the firm's management team on board. The French bank clearly knows that if it wants to make good on its investment it needs to make sure that the halo effect of the upstart brand remains intact and that employees feel they're still independent.

That's surely a position of strength for Nickel: being able to wield influence and offer ideas to one of the biggest banks in the country without the need to ditch its own ways of working.

Selling out doesn't have to be a bad thing. The tobacco, banking and technology industries have more in common in a deal like this than you might think.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at llaurent2@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net