Competition enables the financial sector to make progress

In the highly regulated world of finance, as in so many other sectors, the existence of competition can be a source of progress. Discover some of the innovations driven by competition.

Crédit Mutuel abolishes the health questionnaire

Crédit Mutuel's recent decision to abolish the health questionnaire for its most loyal customers, a document which until now had been mandatory to obtain loan insurance, is the very illustration of the innovations made possible in finance thanks to the existence of competition.

The mutual bank is the first in France to take such a decision, and intends to use this initiative to set itself apart from other banking establishments. Of course, the abolition of the health questionnaire will only apply to customers who have domiciled their income with Crédit Mutuel or CIC for at least 7 years, are under 62 years of age and are borrowing less than 500,000 euros.


Despite these conditions, which are nevertheless met by 97% of loan applications submitted to Crédit Mutuel, according to its Chairman Nicolas Théry, this is an innovation in the French banking landscape that could well be emulated. The generalization of this measure would be a real step forward for all those who are blocked in their real estate projects due to their past history or current state of health.


China and Italy: when competition means progress

This innovation, driven by competition, would not be the first to enable finance to progress. Several economists have recently examined the effects of competition in this sector, all concluding their studies by emphasizing its benefits.

3 researchers from Peking University, New York University and Stanford University, Jiayin Hu, Shang-Jin Wei and Greg Buchak, have analyzed the impact of Yu'ebao's arrival on the Chinese market in 2013, an investment fund backed by Alipay, the payment solution from giant Alibaba.

This new service was a phenomenal success, with the equivalent of 20 billion euros invested by 40 million Chinese customers in the space of 6 months. In 4 years, 140 billion euros have been invested, making Yu'ebao the world's no. 1 money market fund.

In response to this competition, Chinese banks launched their own money-market fund offerings, which ultimately benefited customers without undermining the performance of the banks.

3 Italian economists from the Italian Central Bank and the European Central Bank, Sara Pinoli, Paola Rossi and Diego Scopelliti, and a researcher from the University of Zurich, Steven Ongena, studied the impact of a decision taken by the Italian government in 2012. At the time, the government authorized unlisted SMEs to issue "mini-bonds".

4 years later, 13 million euros worth of mini-bonds had been issued by a hundred or so SMEs, which certainly had a cost, but also enabled the SMEs to increase their resources and obtain bank loans at more attractive rates. This example, too, illustrates the improvements that competition can bring, and the innovations that result from its existence.