Interview with Philipp Sandner on the FinTechGermany Award 2019
“Regulation is probably still one of the biggest challenges for young FinTechs in Germany,” says Philipp Sandner, Head of the Frankfurt School Blockchain Center. In a Frankfurt Main Finance interview, he discusses how the FinTechGermany Award can support young FinTechs to overcome regulatory challenges.
What is especially important to you when judging applicants for the FinTechGermany Award?
The primary focus is on their business model. With regards to FinTechs, the degree to which the idea is innovative is of utmost importance. The implementation of the business model, its cost-effectiveness and especially the integration of new technologies, such as Blockchain and Artificial Intelligence, are decisive factors for whether a FinTech can survive on the market. Among other things, the Frankfurt School Blockchain Center advises and assists young, highly innovative companies using these new technologies to implement and commercialize their products. We firmly believe that Blockchain technology will have a significant impact on the financial industry, and of course on the prospects of success of FinTechs that are applying for the FinTechGermany Award.
What are the biggest challenges for FinTechs in Germany? How can start-up companies better supported? What can platforms like the FinTechGermany Award do to help?
Regulation is probably still one of the biggest challenges for young FinTechs in Germany. Due to the interaction with the financial market, BaFin often requires FinTechs to adhere to strict regulations. However, due to cost pressure and a lack of staff, it is more difficult for start-ups to meet those requirements than for large financial institutions. Hence, it is crucial to provide young entrepreneurs with know-how and to show them ways in which, for example, they can adapt their business model so that the need to meet BaFin’s standards is reduced or even rendered obsolete. Platforms like the FinTechGermany Award foster that knowledge transfer.
How will the German FinTech ecosystem evolve in 2019? In the next 5 years?
Within the next year, a continued or even extended application of Bafin regulation to FinTechs might lead to a market consolidation and force some FinTechs to retreat from the market. Despite the potential for consolidation, I believe FinTechs will continue to have greater significance – unlike banks or other large financial institutions they can more readily and agilely make use of innovation and new technologies. Banks need to be prepared for serious competition from smaller companies, weakening their monopolistic position. Therefore, banks should be encouraged to work more closely with FinTechs in order to foster innovation and keep pace with new technologies. Thus, it can be expected that large financial institutions will increasingly cooperate with FinTechs in the upcoming years. In the meantime, topics such as Artificial Intelligence, Machine Learning, and Crypto Assets will be of crucial importance and likely to determine whether a business model can survive on the market.
How can Frankfurt become one of the leading Fintech hubs in Germany or Europe?
First of all, places must be created where young companies can creatively test their ideas and obtain needed advice. Such platforms not only provide for the exchange of information, but also allows them to get in contact with potential investors and partners. Unfortunately, there are far too few opportunities in the Financial Centre Frankfurt. This infrastructure is much better established in other European countries and the rest of the world. In Germany, enough funding to provide for a sufficient number of facilities for young companies needs to be granted by the federal government and federal states. At the same time, knowledge transfer is indispensable. Many decision makers are not yet prepared for the imminent paradigm shift that is to come in the financial industry. This is unfortunate as it threatens their business model and hinders the utilisation of increased financial strength to further innovation in partnership with FinTechs. The Frankfurt School Blockchain Center contributes to the transfer of knowledge and regularly organizes seminars, events and large-scale conferences to focus on new developments and raise awareness of issues like blockchain.