FinTech Money Map: Frankfurt is catching up to the FinTech revolution

The number of start-ups settling in Frankfurt has more than doubled over 2014. As a result, the banking capital on the Main can now boast the largest growth in Germany.

Although for many years almost all FinTechs preferred Berlin as a location, Frankfurt is now catching up, as the Portal Internet World Business reports. Experts see Frankfurt’s increased commitment and support for the start-up companies as the main reason. “Frankfurt invests a great deal, not only from the public purse but above all from the private sector as well,” says Remigiusz Smolinski, for example, an innovation expert at the Commerzbank subsidiary Comdirect. Peter Barkow, whose consulting firm draws up and maintains the FinTech Money Map database, adds: “The banking sector has long been very sluggish.” That’s the reason why almost all FinTechs have been going to Berlin for a number of years, he points out. “The start-up ecosystem has only recently crystallised in Frankfurt.”

The state-supported TechQuartier hub in Frankfurt is meanwhile regarded as a central point of contact and focal access point for the FinTech Scene.

Who says what to which security?

Fintech 2.0: The young financial services company Catana Capital GmbH relies on innovative investment on the basis of Big Data and Artificial Intelligence.

For the first time, a company has taken the risk of, and also succeeded in, mapping the entire value-added chain of a truly automated asset management – from the collection of data and evaluation to the automated order execution – and then creating a robust, risk-optimised asset management approach. For this promising business model, Catana Capital GmbH received the FintechGermany Award in the category Seed/Early Stage conferred by Business Angels Frankfurt/Rhine-Main, Frankfurt Main Finance and the WM Group in April 2017. “There are indeed competitors who also offer or use parts of the value-added chain of an automated asset management, but not the entire process,” says Bastian Lechner, Managing Director and founder of Catana. “We are therefore delighted that the jury at the FintechGermany Awards has recognised this potential and its innovative character.”

Optimal processing of information

The start-up is a licensed financial services institution under Section 32 of the German Banking Act (KWG), was founded in August 2015, and is the world’s first asset manager that relies entirely on Big Data and Artificial Intelligence. “This kind of data usage is the basis for the fact that, in comparison with the competitors, information can be much more effectively identified, or that information can be incorporated in the investment process that may possibly be completely hidden to other providers,” as Bastian Lechner explains the young company’s approach. He goes on to draw a preliminary conclusion: “Catana’s trading strategy is superior to traditional forms of investment through the combination and real-time evaluation of millions of opinions and news items and through its being embedded in an integrated, holistic process.”

The system keeps learning

According to Lechner, information derived from the Internet from six different countries is automatically collected, filtered, weighted and compared with historical price patterns as the basis for every investment decision. Via voice and text recognition, several hundred thousand pieces of capital market-relevant news are evaluated in real-time per day – that corresponds to around two terabytes of data per month or seven information messages per second – and nearly 30,000 securities are covered, including currencies and commodities. The key question to categorise the signal in terms of direction and strength is: who says what to which security? The system assigns to every security a preliminary positive or negative signal based on the collected information. However, before a final trading signal is generated, the Artificial Intelligence system analyses how a security has performed in the past after a similar assessment, i.e. after such a positive or negative signal. “The system therefore checks what the signal has meant for the security. The decisions taken and their results inform the future investment recommendations – so the system keeps learning,” Lechner explains. “In this manner, buy and sell recommendations for German large-cap stocks and index futures are generated in a purely data-based process.”

Exploiting growth opportunities

As Lechner points out, the origins of the Fintech 2.0 company Catana Capital hail from two directions: technology and the need for change in what is still a very traditional asset management climate. “Many asset managers assume that the use of Big Data could help improve investment decisions and returns. But although Big Data and Artificial Intelligence are a huge market with very big growth prospects, there are still practically no investment strategies at the moment that are implemented on the basis of an evaluation of Big Data information and the findings derived from Artificial Intelligence,” the expert notes. Catana Capital GmbH took this as an inducement to develop a new kind of asset management concept based on such analyses in combination with a rigorous risk management. “Two founders of Catana Capital have been working for almost ten years now on financial market forecasting using large quantities of data. We are collaborating in these activities with Stockpulse GmbH in Bonn, which acts as a research and development partner for Catana,” informs Lechner.

Frankfurt offers attractive conditions

Catana Capital GmbH has chosen Frankfurt am Main as its headquarters. “The Frankfurt financial centre offers attractive working and living conditions. At the same time, it also boasts an excellent infrastructure and enables a close integration with traditional suppliers,” as Lechner explains the reasons behind the decision. He is also convinced that the current developments in the wake of the Brexit will further enhance the status of the financial centre. In his view, additional advantages are provided by the various funding programmes at the city or state level as well as the existence of an active and constantly evolving FinTech community with ideal networking opportunities.

According to Lechner, young start-ups have particular potential when their product or service is really completely new or when it is better and/or cheaper than similar products. A large market and customer demand should exist at the same time, he adds. “It’s also decisive that the team has a complementary line-up. Apart from team strength in entrepreneurial aspects, a certain mental toughness is additionally important so as not to lose sight of one’s positive belief in the success of the company during any temporary phases of defeat or failure and to further pursue one’s goals with courage and spirit,” is the final piece of advice Lechner would like to share.

Potential for further growth of the German start-up scene

The German start-up scene has developed considerably over recent years. However, in international comparison with Israel, the United Kingdom and California, there is still room for improvement regarding entrepreneurial spirit and framework conditions. This is the result of an EY study on the attractiveness of start-up ecosystems, which has been conducted in cooperation with Deutsche Börse. There is especially enough upside potential for the regulatory and tax frameworks. Simultaneously, the authors praise the potential for future growth and progress, as well as the economic framework conditions in Germany. Germany and particularly the Frankfurt/Rhine-Main region scores with good infrastructure and moderate real estate prices.

The promotion of the financial sector’s digitalisation at the Financial Centre Frankfurt was especially positively mentioned. A total of seven incubators in the Rhine-Main region (FinTech Hub from Deutsche Börse, Unibator from Goethe University, Accelerator Frankfurt, Main Incubator, FinTech Headquarter, Digitalfabrik from Deutschee Bank, Tech Quartier, FinTech Lab VABN) promote the development of still-young FinTechs and their business ideas. As an incentive for the improvement of the FinTech scene in Germany, the study suggests the expansion of co-working desks. Here again, Frankfurt sets a good example: The incubator Tech Quartier, for instance, offers working space for FinTechs of any size. Business Angels FrankfurtRheinMain – Germany’s largest organisation with around 100 business angels – brings together start-ups and business angels.

The study also highly praises the “Digital Hub Initiative” by the Federal Government. Within the scope of this initiative aimed at strengthening Germany as the leading industrial nation, the Federal Government honoured the Financial Centre Frankfurt as Digital Hub for FinTechs and Financial Services. Thus, the Financial Centre Frankfurt offers a wide range of emerging FinTechs.

FinTech ecosystem

Welcome to Frankfurt – Germany’s leading FinTech ecosystem

Hessen Trade and Invest has, in cooperation with Frankfurt Main Finance and Wirtschafts- und Infrastrukturbank Hessen, published a new brochure highlighting the many qualities of the FinTech ecosystem in the Frankfurt Rhein-Main region. Hessen Minister of Economics, Energy, Transport and Regional Development, Tarek Al-Wazir states in the brochure, “The digital transition taking place in the financial industry represents an opportunity that we are ideally equipped to capitalize on. The Rhine-Main region is a financial center as well as an ICT industry hot spot. This combination offers enormous potential in today’s world where digital technologies are giving rise to the creation of entirely new business models. And it is precisely this potential that we are now in the process of mobilizing.”

The brochure offers a concrete outline of why Frankfurt and Hessen offers the perfect conditions for international investors and FinTech start-ups. The Financial Centre Frankfurt offers FinTech companies a unique set of location specific advantages. In addition to the numerous supervisory authorities and regulatory agencies, the greater Frankfurt area is home to outstanding expertise in the ever-important are of IT security. In November 2016, the German federal government designated the Financial Centre Frankfurt the digital hub for FinTech and financial services as part of their greater digital hubs initiative.

Frankfurt am Main is already home to great FinTech success stories. One such example is 360T, an electronic FX trading venue that was acquired by Deutsche Börse Group in 2015 for 725 million euros. Another success story is Frankfurt based robo-advisor Vaamo. Born out of the Goethe University’s Unibator, Vaamo quickly became a partner in the B2B segment, working with the likes of N26, Santander and 1822direkt.

Future success stories in the FinTech space are currently being written in Frankfurt’s many incubators and accelerators. As part of the Digital Hub initiative, Frankfurt’s Tech Quartier was named the German FinTech Hub. Tech Quartier offers a varying array of working spaces for start-ups of all sizes. The FinTech brochure maps out the locations of Frankfurt’s incubators and accelerators, like the Deutsche Börse FinTech Hub or Accelerator Frankfurt, illustrating the dynamic FinTech ecosystem and cluster. This dynamic ecosystem is enriched by a numerous events series occurring almost weekly as well as awards for entrepreneurs, like the FinTechGermany Award where the top FinTechs are honored with a Golden Garage.

To learn more about Germany’s leading FinTech ecosystem in the heart of Europe, download the brochure from Hessen Trade and Invest here.

 

Frankfurt FinTech Report #5 – Frankfurt FinTech goes global!

South Korea, Hong Kong, Norway and Holland – in the first quarter of 2017 Frankfurt Main Finance was very busy developing its relationships around the world. In January, a Frankfurt FinTech delegation visited FinTech events in Busan and Hong Kong. In February, Frankfurt Main Finance made its first ties with the Norwegian FinTech scene and further solidified its relationship with Holland FinTech.

FMF delegation visit to South Korea and Hong Kong in January

Under the leadership of Dr. Lutz Raettig, President of Frankfurt Main Finance (FMF), a German FinTech delegation, organized by FMF, traveled to South Korea and Hong Kong from January 11 to 19. FMF Members Techfluence, Frankfurt School of Finance & Management and Peermatch also had representatives on the delegation.

In Seoul, the delegation took participated in the Korea-Germany Global Fintech & Blockchain Symposium at the Korean National Assembly. The delegation also met again with Chairman Kim Jung-Hoon, the Chairman of the Policy Committee of the Korean Parliament. After visiting Dayli Financial Group, one of Korea’s leading FinTech companies, the delegation continued its visit in Busan.

FMF signed a first agreement on a comprehensive partnership with the city of Busan in 2013, followed by a further agreement on FinTech in January 2016. At the Korea-Germany Fintech Roundtable, German and Korean FinTech companies presented themselves and took part in a lively debate on the future of FinTech in Korea and Germany.

In Hong Kong, the delegation participated in the Asian Financial Forum (AFF), the largest finance conference in Asia. In cooperation with the FrankfurtRheinMain GmbH and Hessen Trade & Invest, FMF was an exhibitor at the AFF and explained the advantages of Frankfurt as Continental Europe’s leading financial center and a premier location for Asian financial institutions.

At the FinTech O2O International Fintech Pitch Evening in Cyberport, the state-owned tech center in Hong Kong with more than 30,000 sq. meters of space for FinTechs and other tech companies, the delegation took a deep dive into the Hong Kong FinTech community for the first time. The FinTech O2O was part of the startmeup.HK week, organized by the Hong Kong government in collaboration with Invest.HK to promote the local start-up scene. At the AFF Deal Flow the next day, FinTech companies met potential investors. After further meetings with FinTech companies, the Hong Kong Monetary Authority, Cyberport and Metta, the Next Money FinTech Finals 2017 was the highlight of the trip for most delegates. The Next Money FinTech Finals are among the top 10 FinTech events worldwide.

Korean-German Blockchain Cooperation

At the Korea-Germany Global Fintech & Blockchain Symposium held in Seoul on January 12, 2017, a Memorandum of Understanding was signed between the Global FinTech Research Institute in Seoul, the Korean Society of Blockchain and FMF. This Memorandum of Understanding will pave the way to a more intensive cooperation between Korea and Germany on Blockchain. More than 30 members of a Korean-German Blockchain Working Group will meet for the first time on April 7, 2017.

Visit of a Norwegian FinTech Delegation

Since last year, FMF and the Royal Norwegian Embassy in Berlin have closely collaborated on FinTech matters. On February 1, 2017, a Norwegian delegation with representatives of Innovation Norway, the Norwegian Tech Industry Association, the Embassy, ​​the Foreign Ministry and the Tøyen Startup Village Frankfurt visited the Financial Centre Frankfurt. At an event in Deutsche Börse’s FinTech Hub on Sandweg, the delegation met representatives of Frankfurt FinTech companies. Both sides are keen to continue the exchange during the year with further events.

Money2020 Pre-Event in Frankfurt

In close partnership with Holland FinTech, FMF successfully organized two FinTech matchmaking events last November in Amsterdam and Frankfurt. A further meeting took place in Frankfurt in the new Tech Quarter on February 8, 2017, supported by ING DiBa. It featured the European roadshow of Money 20/20. After welcome speeches from all the partners involved, a panel with renowned industry experts discussed the implications of the forthcoming PSD2 directive.

If you are interested in participating in similar activities and events, please contact Dr. Jochen Biedermann.

Frankfurt FinTech Report #4

Joint Deutsche Bundesbank and Deutsche Börse blockchain prototype

Deutsche Bundesbank and Deutsche Börse jointly presented a functional prototype for the blockchain technology-based settlement of securities. The innovative prototype is designed to provide the technical functionality for the settlement of securities in delivery-versus-payment mode for centrally-issued digital coins, as well as the pure transfer of either digital coins or digital securities alone. In addition, it is capable of settling basic corporate actions such as coupon payments on securities and the redemption of maturing securities.

The Deutsche Bundesbank and Deutsche Börse plan to develop the prototype further over the next few months, and this product will then be used to analyse the technical performance and the scalability of this kind of blockchain-based application.

“Along with the Deutsche Bundesbank we are innovatively and creatively addressing potentially radical technological opportunities for the financial sector. We will continue to do our utmost to leverage blockchain’s efficiency potential and to better understand and minimise the associated risks of this technology,” added Carsten Kengeter, CEO of Deutsche Börse AG.

DVFA Offers Fit & Proper Training for FinTechs

DVFA has introduced a new training course, designed specifically for FinTechs. The “Fit & Proper” training aims to provide employees and managers in FinTech companies with sufficient experience and competence in the eyes of regulators. Topics covered include Financial Markets, Regulation, Governance and Controlling, and Strategic Management. The course is completely digital, lasts about 25 hours and will kick-off on January 27, 2017. Following the completion of the course work and a 90-minute exam, participants will receive a Certificate in Financial Markets Competence.

Frankfurt’s Tech Quartier Opens

On November 17, the Frankfurt FinTech community celebrated the opening of its new FinTech hub, Tech Quartier, which will soon be home to some of the area’s most innovative start-ups. The current space in the Pollux high-rise has 120 workplaces and an expansion onto a second floor is already planned. At the official opening, Tech Quartier’s Managing Director Dr. Sebastian Schäfer explained, “For the first time, Frankfurt now offers foreign FinTechs and Start-ups an attractive place to start their business in Germany and prepare for their entry to the European market.” The opening of Tech Quartier marks the culmination of nearly a year’s work from the Hessen Ministry for Economics and the FinTech Dialogue Forum, which was initiated by Frankfurt Main Finance. Financial support for Tech Quartier has come from a broad base of large banks and consulting firms. Platinum Sponsors include Commerzbank, Deutsche Bank, Deutsche Börse, DZ Bank, Helaba and ING-DiBa. Gold Sponsors are Sparda-Bank Hessen, Allen & Overy, EY, KPMG and PWC.

FinTech Matchmaking

FinTech Matchmaking with Holland FinTech

After a successful round in Amsterdam, Holland FinTech and Frankfurt Main Finance joined forces again in Frankfurt for their second FinTech Matchmaking event. Both the Netherlands and Frankfurt boast a vibrant FinTech scene which makes for an ideal partnership in this international exchange between close neighbors. One of the main challenges for young start-ups is gaining exposure and expanding outside of their domestic markets. The successful Matchmaking event did not only facilitate exchange between participating entrepreneurs but also provided them with an introduction to potential cooperation partners and investors.

On November 25, 2016, more than eighty participants met at the Frankfurt offices of ING-DiBa, who also sponsored the event, to hear pitches from eighteen Dutch and German FinTechs. “Innovations arise when the best and most creative come together and learn from each other. That is why we are happy to support the event and look forward to the exchange,” says Željko Kaurin, Board Member at ING-DiBa. Also supporting the FinTech Matchmaking event was Hessen Trade & Invest. In between the two pitch sessions, the group was also given a tour of Frankfurt’s newly opened FinTech hub, Tech Quartier, and met with the hub’s director Dr. Sebastian Schäfer. The Tech Quartier is an important development for the FinTech ecosystem in Frankfurt and hopes to draw more FinTechs from abroad to the Financial Centre.

Pitching for the Frankfurt robo-advisor Vaamo, Co-Founder and Co-CEO Oliver Vins was quick to recognize the importance of these events for the local FinTech ecosystem. He explained after the event that, “it is always great to see the possibilities Frankfurt has to offer for FinTech companies as well as making international contacts. This is one of the many reasons why Frankfurt is such an ideal location for FinTechs.” Vins is happy to see Frankfurt’s ecosystem increasingly strengthening and attracting more cooperation with other countries. “Events like this help to steadily advance this exchange and always provide engaging contributions. We’re really happy to see more and more of these type of events being organized and to be able to take part as well.”

Based on the overwhelmingly positive feedback from all involved, Frankfurt Main Finance and Holland FinTech already have plans to continue the event series in 2017. Frankfurt Main Finance has a strong focus on creating partnerships and cooperating with other financial centres and joint FinTech events have begun to play a major role in these. To this end, Dr. Lutz Raettig, President of Frankfurt Main Finance, stated, “Many German FinTech companies have successfully established their business models in Germany and are ready to take steps to expand internationally. Through our partnerships with leading financial centres around the world, we are able to support these efforts and work to position the Financial Centre Frankfurt as an attractive destination for foreign FinTech companies. Fintech Matchmaking events like these are a great platform for these young start-ups.”

Participating FinTechs


Golden Garage

Top FinTech Companies honored with Golden Garage

Promoting the Frankfurt FinTech ecosystem would not be complete without recognizing some of the top FinTech start-ups for their accomplishments. On November 17, 2016, Frankfurt Main Finance, Business Angels FrankfurtRheinMain and WM Gruppe held the annual FinTechGermany Awards ceremony to present FinTech companies with a Golden Garage. Companies competed in four categories: Early/Seed Stage, Late Stage, Growth Stage and New entrant into Germany. The jury’s three most important judgement criteria were financial viability, scalability and exit-potential.

Guests filled the ground floor of the Pollux building which would host the inauguration of the Frankfurt FinTech Hub, Tech Quartier, later that evening. Certainly a symbolic location for the conferral of these awards, as the opening of Tech Quartier marks the culmination of months of work by Frankfurt Main Finance and other actors in the Financial Centre to promote Frankfurt’s FinTech ecosystem. Before the room would be consumed by the pomp and circumstance of state ministers and foreign delegates, it was transformed into a Golden Garage. This new concept should harken back to famous founders, like Jobs, Gates and Page, who worked tirelessly in their garages developing technologies that would later change the world. Rounding out the effect were golden tools across the tables and stage, where the awards – called Golden Garages- rested upon a pulpit of golden tires. Only the founders with the most promising and innovative business models would take home a Golden Garage, a symbol that should act as a signal to investors of the value and potential of these start-ups.

The top sponsor of this year’s FinTechGermany Awards was Deutsche Börse. Executive Board Member, Hauke Stars, explained, “We want to contribute to Frankfurt becoming the leading location for FinTech in Germany. To this end, it is critical that all involved work together to build up a community that is attractive to FinTechs and allows all actors to profit from one another.” Frankfurt has indeed developed a significant FinTech ecosystem and is now home to more than 50 FinTechs and several FinTech hubs, incubators and accelerators as well as a mass of regular events. Stars continued on the importance of these efforts and the Golden Garage, “The FinTechGermany Award helps to spotlight these efforts.” Other sponsors of the awards included EY, Baker McKenzie and the IHK Frankfurt.

The event began with opening words from Frankfurt Main Finance’s President, Dr. Lutz Raettig, who explained the importance of digitalization for the financial sector and economy. Commenting on the Financial Centre Frankfurt as a destination for FinTech Start-ups, Dr. Raetting stated that, “Simply put, we have a start-up ecosystem in Frankfurt and a great infrastructure which is practically second to none. Furthermore, we have what many cities do not, which is especially important for the FinTech sector, and that is the ability to test and experiment with new applications, because the end-users are in Frankfurt.”

Dr. Jens Zinke, Managing Director of Börsen-Zeitung, took the stage as master of ceremonies to introduce presenters as well as the Golden Garage winners. In his opening remarks, he discussed the growing importance of FinTech. According to Zinke, the first mention of FinTech in the Börsen-Zeitung was in 2014. He continued to state that FinTech is now a reality of everyday life and that, “in the past twelve months, there have been over 300 articles published about FinTech in the Börsen-Zeitung, or more than one per day.” This increasing relevance of FinTech underscores the importance of the FinTechGermany Awards and the support of the Financial Centre for the FinTech ecosystem.

The Golden Garage winnners for each category are:

Being honored with a Golden Garage is surely a milestone for these young companies, as is the opening of the Tech Quartier for the Frankfurt FinTech ecosystem. In his remarks, Andreas Lukic, Chairman of Business Angels FrankfurtRheinMain, discussed the importance of his work with Business Angels in supporting these young companies. “There is a large financing gap from several million to a few hundred thousand. We wanted to close this gap through our work with the dialogue forum. This prize is one of our best marketing instruments for this.” The FinTechGermany Awards play a critical role in attracting investors’ attention and helping to increase the flow of funding to the region and Germany. Without the necessary funding and support, start-ups would stagnate, not be able to scale, and the brilliant ideas of these innovative entrepreneurs could never be realized.

FinTechGermany Awards honor top FinTech, InsurTech and RegTech Start-ups

On November 17, 2016, Business Angels FrankfurtRheinMain, Frankfurt Main Finance, and for the first time WM Gruppe (Börsen-Zeitung) will present the FinTechGermany Awards. The renowned prize for entrepreneurs will honor the most promising FinTech, InsurTech, and RegTech companies from the following categories:

  • Seed-/Early Stage
  • Late Stage
  • Growth Stage
  • Foreign new entrant to Germany

The first three categories are not exclusively limited to German FinTech companies.

The FinTechGermany Awards ceremony will take place in conjunction with the grand opening of the Tech Quartier, Frankfurt’s newest FinTech Centre on November 17, 2016 at 17:30. The main sponsor of the award is Deutsche Börse. Additional sponsors include EY, Baker & McKenzie and the IHK Frankfurt am Main.

The jury, comprised of the Financial Centre’s top actors and FinTech supporters, will award the prizes to the FinTech, InsurTech and RegTech companies whose business models show the most promise for the future success and to add long term value to the marketplace. The three most important criteria are financial viability, scalability, and exit-potential. The yearly presentation of the FinTechGermany Awards aims to promote the Financial Centre’s FinTech ecosystem and especially the flow of funding into the region. The founder’s prize also provides the start-ups with more access and visibility to investors, whether it be involvement at their founding, IPO or sale, or simply providing feedback on their intrinsic value.

Hauke Stars, Member of the Executive Board at Deutsche Börse , responsible for Cash Market, Pre-IPO & Growth Financing, explained, “We want to contribute to Frankfurt becoming the leading location for FinTech in Germany. To this end, it is critical that all involved work together to build up a community that is attractive to FinTechs and allows all actors to profit from one another. The FinTechGermany Award helps to spotlight these efforts.”

With regards to the Frankfurt FinTech hub, jury member and President of Frankfurt Main Finance, Dr. Lutz Raettig welcomes the awards, stating, “The prize perfectly complements the FinTech landscape in the Financial Centre Frankfurt. The new FinTech Centre will also benefit Frankfurt’s appeal to German and international investors. Regulators and practitioners will also see this as an advantage. Frankfurt is a global Financial Centre which presents entrepreneurs with the optimal conditions for developing their FinTech company.”

The head of the jury and Executive Chairman of the Business Angels FrankfurtRheinMain, Andreas Lukic, believes that holding the award ceremony in conjunction with the opening of the Frankfurt FinTech Centre sends a clear message. He explained, “This is the ideal environment for our activities. Through the awards, we can facilitate the somewhat difficult access to institutional capital and grants, as well as mobilizing private capital for these FinTech companies.”

The jury consists of:

    • Andreas Lukic, Executive Chairman, BA-FRM e.V., Investor/Entrepreneur, Frankfurt, Jury-Chairman & Award Coordinator
    • Franz Cong Bui, Chief Online Editor, Börsen-Zeitung, Frankfurt, Sector Expert
    • Dr. Marc Gille-Sepehri, SVP Product Management, FIS-Fidelity National Information Services Inc., Entrepreneur, New York City/Frankfurt, Finance and IT Expert
    • Eric Leupold, Head of Department Pre-IPO & Capital Markets, Deutsche Börse AG, Eschborn
    • Dr. Manuel Lorenz, Partner, Baker & McKenzie, Frankfurt, RegTech and Regulation Expert
    • Michael Mellinghoff, TechFluence, London & FinTech Forum Frankfurt, Fintech-Community-Insider
    • Simon Nörtersheuser, Co-CEO, Policen Direkt GmbH, Frankfurt, InsurTech Expert
    • Dr. Lutz Raettig, President Frankfurt Main Finance, Frankfurt, Capital Markets Expert
    • Christopher Schmitz, Partner EMEIA Financial Services, EY-Ernst & Young GmbH, Eschborn
    • Alfred Schorno, Global Head of Sales/Managing Director, 360T Group, Business Angel, Frankfurt, FinTech Expert

InsurTech continues to gain influence in Germany

German InsurTech start-ups continue to grow and attract more funding. A newly released study from EY shows InsurTech as a new rising star in the FinTech community. InsurTechs are financial technology start-ups that attempt to change the insurance industry and how customers access insurance products through digitalization. While other segments of the FinTech scene have been growing for several years now, InsurTech is still in its infancy.

According to the study, only four unicorns focus on the insurance industry and InsurTech only attracted $4.63 billion in funding globally between 2008 and 2015. In Germany, InsurTechs raised €53.52 million between 2012 and Q1 2016, most of this occurring in 2015. EY cites the surge in funding in 2015 as an indicator that the InsurTech segment will become more impactful in the coming years. Noteworthy representatives of German InsurTech are Friendsurance, Finanzchef24, Clark, Knip and Schutzklick who have all achieved series B funding as early as 2015. In addition, their funding accounts for €47.45 million or 88% of all disclosed funding to German InsurTechs. Drivers accelerating the expansion of InsurTech are connectivity and data, the consequences of the financial crisis with the resulting pressures on interest rates, and customer dissatisfaction with interest rates.

Commenting on the study, Dr. Lutz Raettig, President of Frankfurt Main Finance e.V., stated, “The growth in FinTech and InsurTech investment in Germany is a reassuring development. These entrepreneurs reimagine the financial industry and create technologies that will add value and efficiency not only for end consumers but also for established actors. Financial institutions are smart to recognize the importance of these start-ups. Frankfurt Main Finance is heavily invested in the development of Frankfurt’s FinTech ecosystem and has promoted the creation of FinTech hubs in the region. Sponsoring competitions like the FinTechGermany Awards should help to draw attention to these young and successful companies.”

The study further explains that InsurTechs in Germany and abroad have not been able to develop stand-alone business models, partially due to regulatory factors. However, the InsurTech market is still in its relative infancy leaving any ceiling still undefined. Many business models existing abroad have yet to be replicated in Germany. EY identified three areas they expect new business to grow from: Big Data and analytics, data driven products, and back office-supporting functionalities.

To this end, Christoph Schmitz, Partner at EY and one of the study’s authors, explained, “The insurance industry will be permanently transformed by digitalization and the changes for these companies will only accelerate in the future. Therefore, it is critical that they concentrate on digital business models and further develop their own in-house capacities. In-house Innovation Labs and Accelerator Programs will provide a platform for innovative and flexible testing of new business models.”

Concrete challenges for incumbents are already present and are expected to grow in the future. The study outlines the need of insurers to intensify their digitalization efforts and develop corresponding capabilities in-house. Most of all, the study urges insurers to make sure they do not lose their customer relationships. The study concludes, “Although the ‘monopoly’ of underwriting and risk ownership will stay with insurers for the time being, an ongoing inability to develop customer-centric products and services will sooner or later deprive insurers of their most value-adding services.”

The study is available for download on the EY Website.