An independent institution, the Banque de France – the central bank of France – was founded in 1800 and is based in Paris. It has three main tasks: monetary strategy, financial stability, and services to the economy. It contributes to the definition of monetary policy in the euro area and its implementation in France. It ensures financial stability by regulating payment and securities settlement systems and supervising credit institutions and investment firms.
Banque de France, in conjunction with the French Prudential Supervision and Resolution Authority (ACPR), and the Consulate General of France in New York, is sponsoring a half-day symposium called Transatlantic Perspectives on Fintech Innovation and Regulation in New York on March 28th, 2018. (It’s free. Register here.)
One of the speakers will be Thierry Bedoin. As Banque de France Chief Digital Officer since 2016, Thierry is in charge of leading a digital transformation at the bank. This includes digitalizing of business processes, improving data management, and promoting new digital usages and a digital culture.
Q. Thierry, what will you be discussing at the FinTech symposium?
A. We will present two things. The first one will be the role of Nathalie Beaudemoulin, who is in charge of the relationship with the FinTechs at ACPR which delivers licenses to all banks and insurance companies. On my side, it will be a presentation to explain that the central bank, Banque de France, is in a process of digitalization and that we connect with FinTechs and startups.
The message will be that the central bank and ACPR are proactive and try to develop and foster an environment for FinTechs in France. The Monetary Authority of Singapore has a similar position and is very active to develop an ecosystem for FinTechs, Hong Kong, too. Bank of Netherlands is also quite positive. It is very important for us to change the way that a central bank relates to innovative actors. We have to be proactive, not only observers.
Q. What steps have you taken to promote a digital culture inside the Banque de France?
A. Central banks are facing two major challenges in digitally transforming themselves:
- on the one hand, their long history has produced a legacy of enduring habits based on manual and formal processes, and
- on the other hand, a strong culture of prudence and control, progressively built up to match the Nation’s expectations about their reliability, strength and credibility.
A digital transformation therefore has to go far beyond introducing new tools. It must formally transform processes. We have to gain the hearts and minds to the perspective of deeply changing habits and ways of interacting, and above all, prepare people to play a more proactive role in transforming their own work and the way the Banque is interacting with its users and counterparties.
This will be a long way. We have already taken numerous initiatives to spread the digital culture among our colleagues, among which I’d like to mention, as examples, the three following actions:
- we did open a Digital School last November with a number of digital and interactive supports and already have a lot of accesses; this school is part of the Banque de France University, a program devoted to training the workforce in a digital environment;
- we launched a 12-episode series of videos devoted to digital initiation with a quiz at the end of each episode, that met a very large success; and
- we also organized a number of conferences, in the framework of our open innovation strategy, open to everyone on a number of digital subjects, such as blockchain, and AI, including changes in management modes.
Digital culture is also doing things differently: agility, open mindedness, co-operation. Hence, we foster new ways of working which break the hierarchies and promote local initiatives, such as stand-up meetings, pizza teams. . . We also want to reach a greater involvement of our counterparts in the disruptive design of our digitalized processes, through design-thinking sessions.
Q. Where does the Banque de France stand compared to other central banks in terms of openness to innovation and digitization?
A. Banque de France is with no doubt one of the most innovative institutions among central banks, especially in Europe. Apart from the Bank of Netherlands and Monetary Authority of Singapore (which conducted similar approaches), I don’t know of any other central bank having a similar innovation approach, at least in a systematic way. I would like to point out that I am the first Chief Digital Officer nominated within a central bank.
Q. Tell me about the most impactful digitization projects you are working on.
A. I wish to focus on four projects:
- we introduced an operational blockchain with actors from the financial sector in order to deliver SEPA identifiers (European standard for payments);
- we are working with Paris financial center, in order to boost the European commercial paper market, in offering appropriate digital services designed with the financial institutions;
- we are working on the licensing processes of the ACPR to replace paper-based exchanges of information with banks and insurance companies by a fully digitized process which will speed up the process and enhance the users’ experiences; and
- we are finalizing the construction of a data lake which will replace the siloed data warehouses by a single data repository. It will foster the sharing of information throughout the Banque de France and allow for new ways to analyze data and identify risks.
Q. Digital transformation initiatives generally require close collaboration and coordination across the entire organization. How have you organized your team to maximize its effectiveness?
A. As the Chief Digital Officer of Banque de France, I participate to Board meetings, whenever they discuss strategy and transformation.
Concretely speaking, we have regular contacts with business departments in order to define which business processes need to be digitized. We also assist business lines in the innovation initiatives. And I have regular contacts with business lines’ Boards.
Furthermore, le Lab is a place open to every business to imagine, experiment and prepare their transformation.
Q. The Banque de France is more than 200 years old and has more than 10,000 employees. Forming and implementing a comprehensive strategy to capture the benefits of digitization can’t have been easy. What are some of the challenges you’ve faced and how are you overcoming them?
A. When nominated, our Governor Francois Villeroy de Galhau launched the elaboration of a transformation plan, which is called “Ambitions 2020”, in order for the Bank to reach a triple goal of gaining in efficiency, innovation, and visibility. In practical terms, the main challenge was to overcome the traditional, siloed, organizations and hierarchies, to open the way for transversal cooperation.
Under the sponsorship of our Governor, a number of working groups were organized in a transversal way, including a digital working group which I co-chaired with the Head of the Operations and Financial Stability Department. It helped to define a number of actions including the creation of le Lab, the digitization of business processes, actions on the digital culture, enhancing data management capabilities, and improving the workplace.
Q. Francois Villeroy de Galhau has clearly stated his commitment to fostering innovation in financial services. What is your opinion of the state of FinTech innovation in France? Where do you think the biggest opportunities lie?
A. FinTech and start-up ecosystem in France has become increasingly buoyant in the past few years with many initiatives coming from the public and private sector. A number of incubators and accelerators have been created, which help designing a favorable environment to innovation and creation.
Payments, of course, is definitely a very hot topic, with a lot of innovation. Many FinTechs are already working on new payment facilities.
Everything related to new technologies, such as artificial intelligence and blockchain are very disruptive, and of course this shows that these new actors will provide new services – new financial services, new banking services – which means the roles of the different actors will change. Because we are in the center of the relationships with these new actors, we have to take care of that and be a player not only a follower (of trends).
Q. Are there things that regulators can do to support adoption of newer RegTech solutions? Or is it really up to the regulated entity to make that case that any solution they adopt is appropriate?
A. A good question. I would say there are two sides on RegTech. We can see a lot of new initiatives and new players in the industry. We, as the regulator, make sure that the good practices are well respected.
We are also concerned by RegTech on the supervision side. I don’t know if it is RegTech or “SupTech”, but it is a full topic of organizing the way we will supervise. The new technologies can help a lot. Maybe the data collection will change, because the right data will be readily available in the banking information system.
Q. To what extent is it the role of the central bank to create a competitive advantage for France? Are you helping establish centers of expertise in certain technologies, or helping establish France as the Hub of FinTech innovation in Europe post Brexit?
A. Our role is to contribute to an environment favorable to innovation in the financial sector and attractive for the French financial industry. On one side, the ACPR (the French banks and insurance supervisor) has created a Fintech expertise unit, helping new actors to find their appropriate status, and facilitating their Authorization process, and on the other side, Banque de France is able to accelerate innovative projects through le Lab.
Q. You’ve mentioned the innovation lab you’ve created which is known as “le Lab”. Which opportunities are you targeting and what sort of support does the Lab provide?
A. Le Lab is working closely with the business units in order to identify opportunities for innovation and is helping them to select the proper tech approach and the relevant innovative actor, start-up, or Fintech.
Q. Is le Lab open to startups domiciled outside of France who are interested in the French market?
A. There are no such barriers, and le Lab is open to these actors, providing that they are visible on the French market. For FinTechs specifically, for those being licensed as a financial institution, some conditions may exist, and they should get in touch with the relevant French authority.
Q. When will le Lab issue the next call for projects and do you know what the themes or topics will be?
A. We’ll determine this when the time is right taking into account the lessons of the first experiments, and of course the priorities of our institution.
Q. I know you see a lot of potential in the blockchain and the Banque de France has built its own prototype onto the Ethereum Quorum ledger. What are some of your other blockchain initiatives and how specifically do you envision blockchain being used by Banque de France?
A. The main symbolic experimentation that we have led is the launch of the blockchain application. We first started in le Lab with a proof of concept working with a startup, and for us it was probably the first time we experienced to work that closely with a startup.
For us it was quite interesting. On the first day, they arrived wearing ties and suits, because they were invited to the central bank. I arrived without any tie because I was receiving a startup! We learned with them new methods and a lot of agility.
We ran this proof of concept with them in a very short time. Because it had positive results, we decided to develop an application, and we involved seven big banks in France to work on this. Now we are in production. The blockchain is live. On the 15th of December we went live with the first node that delivers payment identifiers. Banks can now post their demands directly on the blockchain when they have their own nodes.
This was probably the most important experiment that we have done, and it was important for us to have good feedback on the first experimentation. It brings credibility to our program. To explain our approach, we selected a very good use case for blockchain with quite manageable performances and a manageable number of participants.
We have launched other experiments, for example in the payment systems area to test the potential of the technology. We also think about the future of large registers for payment incidents. . .
Q. What other technologies are you most interested in? AI, I imagine. What else?
A. Of course, there are many opportunities in the field of AI. Once again, we are working with concrete experiments with the business lines, including embarking on initiative with actors like FinTech or other start-ups.
Looking at artificial intelligence in particular, our role is to be sure that the algorithms are clear for the customers, there are decision points that remain under human control, and that advice and decisions are not taken only by the algorithm. Personal data of course must be used within the right rules that protect the consumer. That is our role as regulator.
We are also looking at data visualization, VR, IoT, chatbots, etc.
Q. You’ve launched an “open data room”. What data are you making available and to whom is it being offered?
A. There are around 400 million series available, mostly of an economic and financial nature, issued from data collected from banks and the corporate sector at large.
For the time being, as a first step, these series are open to researchers, academics, and students who need to get registered and have to come on the premises of Banque de France. We intend to give access from NYC on our Banque de France premises. But we will of course enlarge the approach and prepare an API service for easier access.
Q. What else would you like to know about what you are doing at the Banque de France?
A. Through digitization, we try to view things in another way. That means that we need to change the culture, to change the mindset, and to be open to disruption.
What we try to do is to change our relationships with our counterparts. We must be open to discuss with them, to co-design new solutions with them. This will change the traditional role of the central bank, which used to decide on its own.
Q. At some point, do you expect the CDO position to fade away, as digital becomes part of everyone’s job?
A. Central banks are very old and stable institutions whose credibility is essential for the public at large. Therefore, they tend to evolve cautiously, and are only at the beginning of the process of their digital transformations. At this stage I am confident on the momentum that we have already reached, but there are still some steps to take.
The CDO’s role will remain important in the near future.
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