LONDON — BNP Paribas, France's biggest bank, plans to double investment in technology to €3 billion (£2.5 billion, $3.2 billion) over the next three years as part of plans to adapt to changing consumer behaviour and cut costs.
BNP announced its new 2017-2020 transformation plan alongside full-year results on Tuesday, saying it wants to "build the bank of the future by continuing to grow the businesses and implementing an ambitious programme of digital transformation, new customer experience, and cost savings."
Banks around the world are investing millions in new technologies as consumers increasingly favour digital — Deutsche Bank has committed €750 million investment by 2020, for example. But BNP's three-year transformation plan is perhaps the most ambitious and costly investment yet publically outlined.
The huge investment will go into tech labs, company incubators, and new internally developed apps and platforms. The bank aims to streamline internal processes, create new ways for customers to access services online, improve its use of data, and become more "agile" — an industry buzzword for being about to quickly adapt to change.
Chief Executive Officer Jean-Laurent Bonnafé says in a release announcing the plan:
"After the success of its 2014-2016 plan, which allowed to attain the defined targets, the Group now unveils its 2020 business development plan that announces an acceleration of digitalisation and targets an average growth of net income of more than 6.5% per year until 2020. Serving its customers all over the world, the Group is thus building the bank of the future."
Bonnafé told the Financial Times that some of the €3 billion investment would go towards retraining staff in new skill such as data analytics but warned that branch closures would continue and headcount reduction is likely. He told the paper: "We are in an environment where we don’t create jobs — we are managing the transition."
Banks around the world are struggling to adapt to the post-financial crisis world, which has seen profitability hobbled by regulation and low interest rates. At the same time, customers are quickly moving towards online financial services rather than face-to-face or telephone interaction, spurring new fintech challengers for the banks and leaving them to deal with increasingly costly branch networks.
However, investment in digital is not only a necessary to please customers, it also offers banks a way to cut costs and deal with their profitability issues. Accenture estimates that blockchain technology, for example, could save investment banks up to $12 billion a year in back office costs. BNP has been one of the most forward-thinking of Europe's big banks in its adoption of blockchain and in December its clients conducted the first real-time payment using the technology.
BNP says the €3 billion investment is expected to generate €3.4 billion in savings by 2020 and €2.7 billion in annual recurring savings after that.
BNP announced its digital transformation alongside strong 2016 results. Here are the highlights: