France's two largest banks, BNP Paribas and BPCE, have unveiled an ambitious strategic partnership to establish a joint payment processing venture aimed at becoming one of the top three providers in Europe's rapidly evolving payments sector.

Under the agreement, BNP Paribas and BPCE will each invest €100 million between 2024 and 2028 to establish a separate legal company with its own governance structure and proprietary technology platform. While the banks will utilise the same underlying processing technology, they will continue to market payment services separately to their respective customers.

The prospective joint venture builds on the existing collaboration between the two French giants through their Partecis software development partnership. By combining their operations, BNP Paribas and BPCE can leverage their formidable domestic market share - handling around 30 per cent of French card payments – to scale up internationally.

With 17 billion transactions flowing through from the partner banks alone, the new processor would immediately become the number one player in France and the third largest in Europe. BNP Paribas and BPCE state their goal is to create an "efficient and scalable" platform that can be marketed to other banks seeking to outsource their payment processing requirements.

"Given the unprecedented development of payment infrastructures and its future prospects, it is essential to invest in a way that is commensurate with the challenges," the banks said in a joint announcement. "The partnership project announced today between BNP Paribas and BPCE will respond to ongoing market developments, in particular those relating to the digitalisation of payment systems, the virtualisation of debit cards and promotion of instantaneous transactions."

The tie-up reflects escalating competition in the European payments landscape, with established providers like Nexi and Worldline facing challenges from non-traditional fintechs and big tech firms. It also comes as rival Credit Agricole forges its own joint venture with Worldline to offer payment solutions to French merchants and retail customers.

BNP Paribas chief exec Jean-Laurent Bonnafé highlighted the "exponential" growth of card transactions as a key driver, stating "our ambition for this processor is to create a device that is efficient and scalable across all our European locations."

His BPCE counterpart Nicolas Namias echoed the need to "accelerate innovation" amidst rapidly evolving digital payments, saying: "With this new industrial partnership project, we are taking an important step towards accelerating innovation in payments in the coming years."

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