This week: Managing payments for the Olympics & Climate Risk Analytics

Antoine Grimaud (CEO and co-founder of Payplug) and Lukky Ahmed (CEO and co-founder of Climate X)

Apr 14, 2024

The standout, top student in the field of payment solutions in France. (in 🇫🇷)

This refreshing episode serves as the perfect "playbook" for the successful acquisition of a start-up by a major financial group.

Antoine provides us with a rich yet concise retrospective of Payplug's decade. We discuss its inception with Camille Tyan following their MBA, the early days involving a pivot preceding the first Payment Services Directive (PSD1).

It's also an opportunity to realise how much the payment landscape has evolved over the past 15 years.

During the episode we delve into discussions with Natixis and the transformation into a subsidiary of BPCE. You'll learn about the pivotal role of internal sponsorship and how the Group managed this merger without stifling it.

We explore growth prospects in an extremely competitive environment and the advantages Payplug leverages to compete with industry giants.

We also touch upon certain clients like the Olympic Committee and the tight specifications the scale-up had to meet to handle millions of transactions within an incredibly short timeframe.

Acquisitions

For the past four years on Finscale, I've been covering a topic I find particularly interesting: acquisitions by financial groups. This is often seen as a potential exit strategy for founders. The process resembles alchemy. It either succeeds or it doesn't.

Some of the most notable FinTech acquisitions in the French market include:

In 2017, BNP Paribas acquired Compte Nickel for EUR 200 million. This move is considered a success, as Compte Nickel continues to draw a large number of customers with its unique model. I had the chance to discuss this with Hugues LeBret during the peak of the COVID-19 pandemic (Episode #45 in 🇫🇷).
We also covered the acquisition of Leetchi by Crédit Mutuel Arkéa with Romain Mazeries during his first podcast appearance in 2020 (Episode #19 in 🇫🇷).
In 2020, Crédit Agricole purchased Linxo, an app for managing personal finances.
Also in 2020, Société Générale acquired Shine, an online bank for freelancers and independent professionals, for an undisclosed sum.
In 2019, Société Générale purchased Treezor, a pioneer in Banking as a Service.

I could also mention Fiducéo by Boursorama Banque, KissKissBankBank by La Banque Postale, or Pumpkin by Crédit Mutuel Arkéa.

Although it's still relatively uncommon, acquiring FinTech companies could seem like a smart move for financial groups, especially given the current climate, to enhance their capabilities in technology and talent. However, based on my experience, many executives still view FinTech as too expensive and remain skeptical about the potential benefits of these acquisitions.

👉 If you're interested in an overview of M&A activity in the industry, I recommend McKinsey's study: 'Rebound of financial services M&A: Focus on growth and capabilities'.

Payplug

PayPlug is a French scale-up that specialises in online payment solutions.

Founded in 2012 by Camille Tyan and Antoine Grimaud, its aim was to simplify online transactions for SMEs, primarily focusing on the French market. Right from the start, PayPlug stood out by providing user-friendly tools while adhering strictly to regulatory standards.

In 2017, PayPlug reached a significant milestone when it was acquired by the BPCE Group. This acquisition gave PayPlug access to BPCE's extensive resources and expertise, accelerating its growth and expanding its presence in the payment services market across France and Europe.

Today, the company boasts:

400 employees,
17,000 clients (especially in FinTech and e-commerce),
Offices in Paris, Milan, and Amsterdam.

Understanding climate risk with a business approach.

The topic of climate risks deeply concerns me, as it does many others I know.

In the finance sector, perceptions of this issue vary widely depending on who you ask. I was particularly keen to record this episode because the approach taken by ClimateX is pragmatic, sensible, and well-suited to business realities, which is quite rare in climate risk analysis.

In addition to his exceptional personality, Lukky has a profound understanding of this area. He has consistently impressed me from our first conversation. This episode covers their commercial approach and the development of their model, Spectra.

We explore how this start-up achieves global reach by supplying data on climate risks, blending scientific research with econometrics to enable detailed risk analysis.

Integrating climate risk

Addressing climate risks is essential for all players, especially banks.

Factors such as increasing extreme weather events, the shift towards a low-carbon economy, and stricter environmental regulations significantly impact financial institutions. These issues affect not just their finances but also their reputations.

Climate risks can profoundly influence financial outcomes, directly impacting capital, profits, and solvency.

As Lukky points out, floods, storms, and fires damage clients' properties, leading to substantial losses on loans issued by banks, especially in real estate. These events can also incur additional costs in crisis management and service restoration.

We don't specifically discuss it, but transitioning to a greener economy also comes with risks. Companies that fail to adapt to new environmental regulations or to adopt sustainable business practices risk becoming liabilities. I explored this subject in depth with Rachel Delacour, founder and CEO of Sweep (Episode #183 in 🇫🇷). Notably, banks are increasingly under pressure from investors and regulators to reduce their exposure to industries that heavily emit carbon.

Given these challenges, it's crucial for financial institutions to have the right tools and methodologies for assessing and managing climate risks. This enables them to evaluate the impact on assets and portfolios, compare their exposure to climate risks across different business segments, and make well-informed decisions, which helps in creating long-term value.

If you're still unsure, I recommend checking out two resources:

ECB study on banks' climate risk exposure👉 here.
My special episode #19 with Nathalie Wright (iNED at Amundi), which mainly focused on covering data and sustainability topics in the Risk Committee. Listen 👉 here.

Climate X

Founded in 2017 in the United Kingdom, is a scale-up highlighted by Lukky in its latest funding round. The company specialises in developing solutions to anticipate climate risks in accordance with current standards and regulations, such as TCFD and ICAAP.

Spectra is the name given by Climate X to its software that assesses climate risk. This tool provides location-specific risk assessments and estimates potential losses for extreme climate events up to the year 2100.

The tool utilises various global warming scenarios to generate these assessments. Simply input an address or upload a CSV file on the platform, and you will receive a comprehensive overview at both the portfolio and individual asset levels.

I've tested it, and it's quite impressive!

This week's recommendations

From Lukky and Antoine:

Five disfunction of a team by Patrick M. Lencioni
The podcast “la confiture” (in 🇫🇷) by Sébastien and Guillaume
Zero to IPO by Frederic Kerrest (founder of Okta)

As for me, I recommend:

The theory of information by Aurélien Bellanger, which I devoured during the holidays
Understanding the ECB Climate Risk policy, requirements and best practices 👉 Download