Germany’s FinTech Ecosystem: A Wheel in the European Innovation MachineFebruary 9, 2016    By : Sofia
If we thought 2015 was a great year for FinTech, 2016 is going to surprise us. As the LTP team has been actively exploring the FinTech ecosystems around the world, we have seen some outstanding examples of the world’s most forward-thinking and prosperous FinTech hubs such as London, Singapore, Silicon Valley, New York, etc. The global FinTech has evolved in a way that the Western world overwhelmingly dominates in the amount of investments made into deploying innovation. However, it doesn’t mean that European or Asian FinTech is far behind.
A quick snap of European FinTech shows that some of the hottest FinTech companies were born in the region and had success conquering other continents.
The continent’s ecosystem with innovative companies in emerging financial services has been a serious competition to the global financial industry giants with some of the most promising startups and FinTech “unicorns” coming from the region. Well-known and extremely successful FinTech players like Klarna, iZettle, Adyen, Funding Circle, TransferWise and POWA Technologies came from Europe as a proof of a strong standing of the market in the global arena. In fact, according to Bloomberg, TechCrunch and Huffington Post, South East England is actually outpacing California on the number of jobs in the FinTech space along with rapidly growing funds and deals in the FinTech industry.
While the whole of Europe is a hot FinTech hub, this time, we pay particular attention to Germany as one of the wheels of the European innovation machine.
Germany has a rich and vibrant FinTech ecosystem, which attracts attention and funding from major financial institutions. Particularly, one of the largest banks in Germany, Commerzbank, actively invests in startups through its Main Incubator and CommerzVentures. The bank is reported to have relationships with FinTech players such as Traxpay, Gini, IDnow and Fintura.
Another major player, Deutsche Bank, has opened innovation hubs in London, Berlin and Silicon Valley to try to improve its use of digital technology.
The success of German FinTech can also be demonstrated by one of the most notable players – Number 26. Founded by two Austrians and based in Berlin, Number26 account holders receive a MasterCard payment card. There is no fee for setting up the account and issuing the payment card. The online bank offers worldwide money withdrawal at no additional cost. At the end of last year, the company expanded to six new countries to make its services available to users in France, Greece, Ireland, Italy, Slovakia and Spain as a first step towards offering a borderless banking experience across Europe. The company provides more than 80,000 customers with accounts for cash withdrawals, deposits and overdraft services up to 2,000 euros via a slick smartphone app. What’s interesting about Number 26 is that it counts 6,000 cash outlets, including supermarket chain REWE, or more ATMs than Deutsche Bank and Commerzbank combined.
With regard to a particular market segment, Germany has a thriving and highly developed online payments market. According to a report from German trade agency, Germany Trade & Invest, the e-commerce market in Germany is expected to hit $44.7 billion in 2017 at a CAGR of 21.4%. High Internet penetration (89% of Germans between the ages of 25 and 44 use the Internet), increased smartphone-based purchases (25% of Germans claim to have used their phone for purchases) and the demand for efficient and secure online/mobile payment services is likely to increase. The LTP team has performed a thorough analysis of the online banking and payments market in Germany to provide a concise and comprehensive overview in a single report, which can be downloaded here.
According to E&Y, in the first half of 2015, Berlin FinTech startups collected more venture capital (€1.4bn) then startups in London (€1.1bn). Even though London has a truly prosperous FinTech ecosystem, Germany’s vibrant environment has a great chance of outpacing it as it proved its financial power and attractiveness.
Aside from corporate investments, western angels have also demonstrated an interest in German FinTech startups. Peter Thiel, PayPal Co-founder and first outside investor in Facebook, has invested in Hamburg-based Deposit Solutions GmbH, an open architecture platform for retail deposits in Europe. The recent EUR 6.5-million funding round was led by FinLab AG, a German FinTech investor with participation from Peter Thiel, who backed Deposit Solutions with a million dollars, and other investors which include Stefan Wiskemann, Stefan Glänzer and Christoph Linkwitz.
Let’s look at Germany’s FinTech ecosystem at a more detailed level as there is a wide range of players defining FinTech not only in Germany but also Europe as well.
Germany’s FinTech Ecosystem
The following chart outlines some of the German FinTech ecosystem players that are aiming to push innovation in financial services industry forward to make the world a better place. There are certainly more interesting and promising FinTech companies that may see significant growth and success in the coming future.
As the lines in FinTech become blurred with the growing number of companies entering the space, sometimes, a certain company can be included in several segments. Nonetheless, German FinTech stays extremely diverse and vibrant.
Here are some of the FinTech players operating in Germany:
Centralway Numbrs: Centralway Numbrs is the new bank branch. It is one of the most popular mobile banking applications in Germany. Centralway Numbrs enables users to manage their financial life on the go. Powerful (yet simple) functions provide control over finances without having to visit a bank branch. Centralway Numbrs supports more than 3,500 financial institutions in Germany. Numbrs allows controlling all accounts in one app, seeing a detailed overview of all transactions, sending money conveniently and securely, and control income and spending at all times. The app can be used on Apple Watch as well.
Fidor Bank: Based out of Munich in Germany, Fidor Bank has been offering virtual accounts to customers since 2009. The company boasts of more than 200,000 customers. Fidor Bank is the lone major player in virtual banking to have its own banking license. Thus, it offers special services like peer-to-peer lending, crowdsourcing, and bonus payments for interactions within the community. Fidor has also been actively adopting cryptocurrencies in its banking services. The bank has partnered with Kraken, Ripple Labs and Bitcoin.de in order to showcase itself as a promising and innovative banking partner in the world of digital currencies.
Lendico: Based in Berlin, Lendico is a transparent marketplace for loans. The platform connects borrowers and investors avoiding the excessive costs of traditional banking. The savings are passed right through to the customers. Lendico does a strict quality control of all borrower projects and coordinates all payment transactions on top.
Bitbond: Bitbond is a peer-to-peer bitcoin lending platform. Users can borrow bitcoins or lend bitcoins to other users. Bitbond conducts a credit rating for all borrowers before they can publish projects on its marketplace. The platform counts over 16,000 borrowers and provides loans for up to 100,000 with rates starting at 7.7%. Bitbond leverages bitcoin as a technology and payment network to create the first global market for small-business loans.
Number26 is building the most modern bank account in Europe and the first one that can be managed entirely on a smartphone. The company provides more than 80,000 customers with accounts for cash withdrawals, deposits and overdraft services up to 2,000 euros via a slick smartphone app.
Kreditech delivers a range of custom-tailored financial services to customers across Europe and beyond. The company focuses more on the countries with emerging economies where people have very little or no credit history. Kreditech uses 20,000 data points to assess a person’s suitability as a loan candidate, ranging from single lines in bank account statements to behavioral information such as a person’s interactions with websites and social data as well.
Traxpay offers a platform that facilitates 24/7 B2B payments and transactions in real time. Traxpay’s patent-pending platform uniquely combines secure, flexible, real-time electronic payments with any and all structured and unstructured data related to the transaction.
Spotcap is an innovative online lender for SMEs. The company is headquartered in Berlin, with local offices in Madrid, Amsterdam and Sydney. Spotcap focuses on a business’ recent performance by leveraging state-of-the-art technology instead of historical financials and credit scores.
Auxmoney is an online marketplace that connects credit-worthy borrowers and savvy investors. Operating fully online with no branch network and by using technology to drive down cost and to deliver an amazing experience, auxmoney eliminates the high cost and complexity of traditional banking lending.
Avuba provides payment products and mobile-first bank accounts to market.
Bitbond is a peer-to-peer bitcoin lending platform. Users can borrow bitcoins or lend bitcoins to other users. Bitbond conducts a credit rating for all borrowers before they can publish projects on its marketplace.
Cashboard is a technology and Web platform that enables private investors to invest in a personal tailored and diversified portfolio. It integrates modern asset classes such as crowdinvesting, P2P lending, and social trading with settled investments such as stocks, funds, and ETF into one platform.
Compeon is a finance portal for the SMEs. It provides financing, investments and leasing for companies and self-employed people.
Coyno is a bookkeeping software-as-a-service for bitcoin. They are building the tools for businesses that want to integrate bitcoin into their operations. Coyno UG (haftungsbeschränkt) is based in Berlin.
Elotpay is a social payments and remittance company that aims to provide a social network for payments where users can make payments to friends and family all over the world, and pay on-/offline merchants.
Friendsurance has implemented the concept of online peer-to-peer insurance which combines social networks with well-established insurance companies. Customers can connect to form individual insurance networks, thereby lowering their annual insurance premiums by up to 50%.
Kapilendo is a crowdinvesting platform to provide credit services for property developments.
MoneyFellows gives access to interest-free credit & saving achievements, all fully powered by social networks.
Moneymeets helps German consumers have success with investment and insurance decisions. It solves marketing problems for investment funds, issuers of securities, insurance companies and other producers of financial services.
paij is a mobile payment app for merchants and customers in Germany.
Paymentor is a search and comparison site for payment service providers. Online shops can compare fees and features of relevant payment gateways in Europe and directly request a proposal. Paymentor creates transparency in payments and connects merchants and payment providers of all kind.
Qnips provides a mobile wallet with full POS integration.
SavingGlobal is an online retail deposit brokerage platform. It enables customers to conveniently access term deposit products from partner banks across Europe and secure better interest rates.
Smava is a Germany-based online comparison site for personal loans on which each participant can obtain a loan online with the best terms from a wide selection.
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