Christian Hecker recently got his hands on old bank documents while moving. “Years ago” the local Volksbank had sold him so-called discount certificates for EUR 3,000, ie papers that could be worthless given certain developments in the markets. “In the euro crisis, the money was gone,” said the co-founder of the trading platform Trade Republic at the SZ economic summit. Nobody really told him about the risks and the costs of the product at the time. “Nobody really needs this form of financial advice anymore,” says Hecker.
Investors today wanted simple and inexpensive products, for example savings plans based on Exchange Trade Funds (ETF), i.e. funds that only replicate a stock market index. “Today’s customers want to understand how they invest their money, and that works best with one-dimensional products,” says Hecker, whose Trade Republic platform not only offers savings plans, but also relatively uncomplicated access to the capital market.
Karolina Decker, co-founder of Fintech Finmarie, would also like to change financial advice, but above all with a view to the needs of women. Finmarie – founded in 2017 – offers financial coaching, financial education and investment solutions to help women gain more confidence in their financial decisions. “The women really want to understand the products,” says Decker, who herself worked in the traditional banking business for many years. Many banks and savings banks would have missed explaining their products well. Finmarie would find himself in this gap, albeit less in competition, but more in cooperation with traditional banks. Word has got around that women are an interesting target group for investments. A number of fintechs with a focus on women have recently been founded.
In any case, fintechs, i.e. financial start-ups, have long been established players in the banking market. “Who the big ones and who the little ones are is currently being completely redefined,” says Markus Pertlwieser, who until recently was head of digital at Deutsche Bank and since the beginning of the year has been CEO of the Penta banking app, which specializes in banking services for start-ups and others Small business specializes. “In five to ten years there will be no more distinction made between fintechs and banks,” says Pertlwieser. This is shown, for example, by the valuations of the young companies, which recently, in view of the high level of investor interest, have consistently reached new highs.
Twelve files for applying for a banking license
In fact, the smartphone bank N26, for example, has just received another 700 million euros from investors, despite violent disputes with the financial supervisory authority Bafin over weak anti-money laundering prevention, which is now valued at an enormous 7.8 billion euros. This makes N26 the most valuable German fintech ahead of the Trade Republic trading platform (4.4 billion euros) and is worth almost as much as Commerzbank.
The occupation of the podium at the economic summit also shows that digital business models for capital market products, for women’s banking and for business customers are not temporary phenomena. “A few years ago this podium would certainly have been dominated by the representatives of established banks,” says Pertlwieser.
The triumph of digital business models in the private customer segment is also a harbinger of what will follow in the banking business with corporate and business customers. Neo-banks would also revolutionize this business area in the near future. Neo-banks like Penta encountered a “support gap” that had long been gaping among the traditional providers.
In any case, everyone agreed on one point in particular: Classic banks are often simply too slow and complicated in their decision-making paths and internal processes. Anyone who knows banks from the inside will at some point lack the imagination as to how these new products really “want to scale”, says Hecker. Trade Republic therefore decided at some point in favor of a “radical new start” and its own banking license. Not a very simple application and definitely not a paperless one: Twelve files alone filled the matter. Would he do it again? Rather not.