FinTech Financial Centre Frankfurt

The Financial Centre Frankfurt has great chances to become the European Capital of Financial Technologies

A European consortium of universities and FinTechs is working to promote knowledge-sharing between banks, FinTechs, regulators, and financial supervisors on the risk management of financial technologies. Since 2019, the financial technology company Firamis GmbH has been part of this consortium. In an interview, Dr. Jochen Papenbrock, CEO and founder of Firamis, discusses the role of Artificial Intelligence (AI) in managing risks of financial technologies and its significance for the Financial Centre Frankfurt.

Dr. Jochen Papenbrock, CEO and founder of Firamis Gmbh

Dr. Jochen Papenbrock, CEO and founder of Firamis GmbH

What are the risks of FinTech’s increasing importance for the financial sector?

We understand the term FinTech to comprise of much more than start-ups using financial technologies such as Big Data Analytics, AI, and Blockchain. Traditional banks and insurers use new financial technologies as well and might face similar challenges as start-ups do, especially with regards to risk management. In addition, banks and FinTech start-ups are increasingly cooperating – more outsourcing relationships are emerging as a result of the continuous break-up of value chains. At the same time, many banks are invested in start-ups. As systems, data, and processes become increasingly intertwined, banks are equally affected by the risks of financial technologies. Therefore, we are currently observing a growing need for discussion between the industry, regulators, and supervisory authorities.

Against this background, Fintech Risk Management and model/data governance are of particular importance. While traditional banks most certainly have gained more experience in regulatory and supervisory practice, it is new territory for many FinTech start-ups.

Can you explain this in more detail?

Complex, non-transparent, and biased models and data pose a problem to new financial technologies. Several supervisory bodies have decided to reject black box models – i.e. non-transparent machine learning approaches such as multi-layered artificial neural networks (deep learning) – in production-critical processes.

We are currently working on these and other topics as part of a larger EU project on Fintech Risk Management. The exchange of knowledge between banks, FinTechs and regulators takes place throughout Europe over a period of two years. Standards are being developed that ensure the use of financial technologies in secure financial products and enable FinTech business models in Europe to be scaled as efficiently as possible. Our Fintech-AI-B2B-start-up Firamis is part of the consortium and member of the Executive Board. We are working to build an EU Research Sandbox and establish requirements for a Trustworthy AI. The EU also runs several programs on related topics.

Furthermore, the increasing use of financial technology may create systematic risks. If several FinTechs use the same technology, they will react quite similarly to certain market phases. In addition, the risks of a domino effect are rising due to the increased interconnectedness of value chains. The supervisory focus will continue to shift from individual companies to the entire value chain.

What regulatory framework is needed to keep risks under control?

We believe that risks can be managed by focusing on model validation as well as the entire model risk management process and data/model governance. Black box models will have a hard time with more intensive regulatory reviews by national and international supervisory authorities. On the other hand, the use of financial technologies will continue to increase due to competitive pressure. So the question of which modification of the technology is needed to meet the requirements remains.

Are there solutions to make these approaches more accessible and understandable for regulators and supervisors?

XAI (Explainable AI or Interpretable AI) is one of those approaches. New approaches, technologies, and data visualization are used to make the models more explainable. XAI is also one of the core competencies of our start-up Firamis, and we are currently expanding our resources in response to those developments. AI thus is implemented to, for example, explain black box models automatically. This is especially important for customers who want to know, for example, why they received a certain credit score or why they are assigned a certain risk profile by their Robo Advisor and how they can improve.

The question of how these regulatory controls should be implemented in practice is exciting. Several models are conceivable, ranging from independent control by supervisors to outsourcing to third parties. We will observe a certain degree of standardisation and also something like a technical inspection for financial algorithms.

What does the dynamic development of AI / Machine Learning mean for the FinTech industry in Frankfurt?

Current developments in financial technologies show that Financial Centres compete with each other. The game is changing due to disruption. The Financial Centre Frankfurt has great chances to become the European capital of financial technologies. (Central) banks, technology companies, FinTech ecosystems, supervisors, and regulators are already presented. AI may hold more potential for the Financial Centre Frankfurt than Brexit and Blockchain do.

So there’s still a lot to do. In 2017, we launched the annual Summit on AI, Big Data and Network Analysis in Financial Services with other partners. In addition, we founded the association  AI in Financial Services e.V., in which anyone can become a member who is interested in advancing AI.

FinTechGermany Award 2019

FinTechGermany Award “Golden Garage” honours outstanding FinTech companies in the Financial Centre Frankfurt

With the leading investor award for start-ups, the Financial Centre Frankfurt honours outstanding FinTech companies in six different categories. The jury’s vote went to AUTHADA GmbH in the Seed/Early Stage category and to Barzahlen – Cash Payment Solutions GmbH in the Late Stage Category, while solarisBank AG received the prize for the best FinTech in the Growth Stage category. TransferWise Ltd. was voted the Best Foreign FinTech on the German market. The special prize for the best PropTech was awarded to Exporo AG, while Wefox Germany GmbH was honoured in the special InsurTech category.

The organisers, Börsen-Zeitung (WM Group), Business Angels Frankfurt RheinMain, Frankfurt Main Finance and TechFluence, have now presented the FinTechGermany Award to high-potential FinTech companies for the fifth time. “Our ‘Golden Garage’ award offers young entrepreneurs, in particular, the opportunity to enter into dialogue with FinTech insiders and financial centre representatives and expand their network. We are pleased to be able to offer this platform for the fifth time,” says Dr. Jens Zinke, Managing Director of the Börsen-Zeitung. Andreas Lukic, Chairman of Business Angels Frankfurt RheinMain comments: “We award the prize to the best FinTech, InsurTech and PropTech companies, whose innovative business models and new technologies create value and transform the financial sector. At the same time, the Financial Centre Frankfurt offers the entire financing chain for start-ups – from their foundation and time of growth until they become established.” Hubertus Väth, Managing Director of Frankfurt Main Finance says: “Cooperation between FinTechs and the established players in the financial centre is the key to future success. The FinTechGermany Award creates the platform to make this possible.” And Michael Mellinghoff, Managing Director at TechFluence UK, adds: “In awarding this prize, we above all support start-ups with promising FinTech concepts, while at the same time increasing their visibility on the German market.”

The focus of the sixteen-strong jury was on the companies’ financial viability, scalability and exit capability. Among other things, they evaluated the business concept, competitive advantages, positioning, financial plan and management. The “Seed/Early Stage” category comprises FinTechs with no or only initial revenues, and with no or only a basic prototype. Companies with at least cumulative six-digit revenues were able to apply for the “Late Stage” category. The prerequisites for an award in the “Growth Stage” category were a more than seven-digit turnover and international expansion. Günter Rothenberger, the founder of Günter Rothenberger Industries GmbH and inventor of the R-System, donated the six perpetual trophies in the form of gold-plated water pump pliers mounted on American oak.

Andreas Plies, managing director of AUTHADA GmbH, stated: “The prize is not just for us alone, but for the entire company. It’s nice to have your work recognised.” Ulrike Czekay, Head of PR & Marketing at Barzahlen – Cash Payment Solution GmbH, aims to begin with the payment infrastructure and “dispel customers’ fear of digitisation and offer new possibilities.” Jörg Diewald, Chief Commercial Officer at solarisBank AG, announced, “Our Sales division is growing, and we are desperately looking for new employees to meet our customer needs.” Thomas Adamski, European PR Manager at TransferWise Ltd, was delighted with his trophy, “Our foremost concern is to help people and enable them to drastically reduce the cost of foreign bank transfers. Especially in such a large and active market as FinTech, I am immensely grateful that the scene is very open to new alternatives. I am delighted to be here and get to know all the nice people from the different areas.” Botho von Hülsen, Senior Manager at Exporo AG, commented that “A lot of construction is taking place in Germany, and fund packages can also be purchased from us in the form of products consisting of existing properties.  Our digitalisation rollout is initially planned for France and the Netherlands, as the economic performance of these countries can be easily assessed.” John Shewell, Head of Group Marketing & Communications at Wefox Germany GmbH, felt honoured by the golden garage trophy and expressed that “It is a privilege to be here tonight. At the same time, it is also an honour for all tech start-ups to have the opportunity to transform the financial industry. We want to make insurance easy and convenient for our customers.”

 

Interview with Andreas Lukic about the 2019 FinTechGermany Award

Andreas Lukic, CEO of ValueNet-Capital-Partners GmbH

Andreas Lukic, CEO of ValueNet-Capital-Partners GmbH

In an interview with Frankfurt Main Finance, Andreas Lukic, CEO of ValueNet-Capital-Partners GmbH and jury coordinator of the FinTechGermany Award (FTGA), explains how the award has evolved in recent years and why the “Golden Garage” should be awarded monthly.

What inspired you to establish the FinTechGermany Awards as an annual event?

In the ’90s and around the turn of the millennium, I worked in the USA and England. Upon my return, I noticed that the start-up ecosystem in the Rhine-Main region was rather small. Moreover, there was a lack of private investor networks or other initiatives bringing start-ups, investors, and clients together. Thus, I decided to join a small Business Angel Club in 2002 and became chairman of the Business Angels Frankfurt Rhein-Main in 2006. By now, we review about 900 start-ups a year and invest in about 20 to 30 – furthering the start-up ecosystem is an important factor.

With the end of the financial crisis, interest in founders grew substantially. Initiatives such as the FinTech Dialogue forum – which later initiated the TechQuartier and the FinTechGermany Award the “Golden Garage” – were formed. The award allows us to draw attention to the internationally renowned Financial Centre Frankfurt as an attractive location for founders. We cannot say “We are the coolest, the most creative and have been on the market the longest.” However, what we can say is “We are a Financial Centre – with capital and financial market competence” and we have been for more than 100 years. Furthermore, the investor-driven award demonstrates that we can evaluate to what extent start-ups are financially viable, scalable and likely to provide feasible exit options.

How has the event evolved over the years?

Approximately 180 start-ups are nominated for the FTGA every year. However, interested start-ups can also hand in applications. With about 200 participating companies, start-ups from every market segment are represented. Today, we are established enough to award the Golden Garage, with this year’s ceremony taking place in the Eurotheum. An open jury session also took place as part of the Finanzplatztag.

Which challenges were FinTechs facing in Germany during the early days of the FinTechGermany Award?

First of all, FinTechs are nothing new, but the growing public awareness is. Back in 2005, we would not have been able to initiate such an award – all the necessary resources were not accessible in one place.  However, by now it is standard practice in the financial sector to use new technologies and FinTechs are well-established.

Whereas a few years ago start-ups needed to explore new ideas and enter untapped market segments to position themselves, start-ups nowadays need to successfully become established. They have to penetrate the market to a much greater extent and be able to handle customers, competition, and profit equally well. While fewer start-ups are founded these days, we find a lot of FinTechs that are “partially or fully financed”. That is what has changed.

You have kept track of the progress previously winning companies have made to this day. Have the founders and their companies gained increased attention from investors after winning the FinTechGermany Award?

Yes, founders and entrepreneurs receive greater attention from the public after the award. The attention grows proportionally with the increasing importance of the FinTechGermany Awards.

FinTechgermany Award 2018

FinTechgermany Award 2018

A start-up – whether at the Seed/Early Stage, Late Stage or Growth Stage – always needs unique selling points. Everyone makes a lot of noise. Thus, every competition, every price and every chance of access to partners and networks is an essential aspect for a start-up. However, this effect also works the other way around: The Financial Centre and the players draw benefits from it – by forming a cooperation or increasing their number of clients.

With regards to investors: We must show that Frankfurt is worth locating to. Not just because of the networking opportunities but also because of the start-ups. Actually, we need something like the FintechGermany Awards to happen every month (laughs).

The name “Golden Garage” refers to the early beginnings of technology pioneers such as Bill Gates, Steve Jobs and Larry Page. Are those career paths we can still observe today?  Or are FinTechs already moving away from garages and bedrooms to FinTech hubs and offices around the world?

The garage symbolizes the unconventional founding of which Hewlett-Packard is a prototype. There even is a museum in Silicon Valley called “the old garage”. And yes, this original founding continues to occur.

Three characteristics define a start-up hub:

1. Founding Landscape

When looking at Silicon Valley, it becomes evident that only a few founders were born there.

Hence, there is no “founding gene” that one region has or has not got. It is upon us to establish an attractive start-up landscape. This a consistent factor and the Rhine-Main region has caught up significantly over the past few years.

2. Educational Landscape

This includes universities, but also cultural institutions such as museums. The educational landscape in the Rhine-Main region has a strong focus on start-ups and their founders.

3. Finance Chain
A financing landscape must be created in which start-ups are able to get access to all forms of investments – from 1,000 to 10,00 to 100,000 Euros. That is why I always emphasize the investor-driven award and the jury’s capital market competence. Financing is our future topic. A golden garage is characterized by the fact that it a place where I can get settled while also getting my company financed. When looking at Facebook and Co.: at some point, someone gave them between one hundred and five hundred thousand dollars. At the same time, that business angel had an idea of where the start-up was heading. In the FinTech sector, we are on the right track today.

 

Andreas Lukic is the founder and managing director of ValueNet-Capital-Partners GmbH, a private equity and consulting company founded in 2000. The company focuses on investing, financing and M&A transactions in management buyouts/buy-ins as well as company successions, occasionally invests in growth-oriented companies from the corporate, SME and start-up sectors and supports their corporate development. Mr. Lukic is a member of several advisory boards, CEO of Business-Angels FrankfurtRheinMain e.V. and has been an active business angel since 1999. In addition, he supports renowned and ambitious artists as part of Schirn Zeitgenossen, Frankfurt. Please find more information on Andreas Lukic here.

The FintechGermany Award is the ideal platform for knowledge sharing

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.

Advanced Analytics and Artificial Intelligence will gain in importance

In our interview Christopher Schmitz, Partner and FinTech specialist at Ernst & Young (EY), evaluates the characteristics of the Rhine-Main FinTech ecosystem and explains why, in the near future, we can expect to see even closer cooperation between emerging FinTechs and established companies like banks, insurers and asset managers.

The investment volume in FinTech start-ups, measured by average deal size, has grown over the past years. Do you think this development will continue?

We estimate the trend of growing deal sizes will continue. Several of the FinTechs founded in Germany in recent years have been able to achieve success on the market side in the B2C or B2B segment. Investors who are operating globally have detected German FinTechs as profitable business cases. Based on these extensive investment rounds FinTechs have been able to grow and expand their businesses internationally. Parallel to this success, the valuations of several FinTechs have risen enormously – most recently to around €2 billion for the most successful start-ups. Therefore, average deal size will continue to grow.

The Rhine-Main FinTech ecosystem focuses on “Enabling Processes & Technology” and “InvesTechs”. Besides this, what else exactly makes the Rhine-Main FinTech ecosystem unique?

Compared to other German FinTech hubs, the Rhine-Main FinTech ecosystem is characterised by a strong focus on B2B business models, a very grown-up start-up network and the proximity to and the active exchange with potential investors and clients. A significant proportion of the founders in the ecosystem benefits from many years of experience in banks, insurance companies or asset managers and use this experience to tailor their business models to the specific problems of their clients. B2B business models for example require significantly less capital in the seed and growth stage compared to B2C business models because customer acquisition is not carried out via the classic online media with correspondingly high marketing expenditure, but through direct customer relations. While this makes the B2B sales cycle considerably longer and more complicated, B2B service providers often achieve a faster break-even. The proximity to regulators, customers and the structure of the ecosystem as well as the good international network enable a rapid evolution to the range of services offered.

What is your outlook for 2019? Which FinTech trends are you particularly interested in and which trends should we prepare for?

We will observe even closer cooperation between emerging start-ups and established companies. Because of their legacy infrastructure and the growing innovation speed, banks, insurers and asset managers won’t be able to ignore emerging financial technologies. However, purely disruptive approaches can only be found in a few successful start-ups. Cooperation will take centre stage. Open banking and the API/platform-economy will become central fields for the future positioning of established players as well as new players entering the market. The beginning convergence of value creation across industry boundaries in emerging marketplaces like mobility, digital health, smart cities or smart home requires a rethink in the financial services industry. Advanced analytics and artificial intelligence will become even more important in this context, and FinTechs will drive much of the customer-centric innovation as a partner and service provider to the financial services industry.

From the garage to the Financial Centre Frankfurt

Accelerator Frankfurt was founded in 2016 by Ram Shoham and Maria Pennanen, based on their first-hand experience working for corporates that struggled to form partnerships with start-ups. Their unique go-to-market program accelerates B2B software startups in the fields of Fintech, Regtech, Cybersecurity, Insuretech, Proptech and Blockchain. The startups receive mentorship from experienced entrepreneurs and investors, consulting and professional services, in addition to a co-working space. “We wanted to set up this program as an interface for corporates and startups,” says Ram Shoham, co-founder of Accelerator Frankfurt. The program focuses on FinTech because of their professional backgrounds and Frankfurt’s draw as a financial centre, but also accepts startups in Cybersecurity, Blockchain, RegTech and more. Accelerator Frankfurt also powers the Blockchain Labs, which help corporates get access and education to blockchain technologies.

We asked Ram Shoham in an exclusive Interview: What does the path from the Garage to the Financial Centre Frankfurt look like?

Accelerator Frankfurt in 2 sentences: What makes the success of Accelerator Frankfurt GmbH?

We are the gateway to Germany’s financial sector for start-ups. We help advanced stage start-ups, who have paying customers and products break into the German market through our three-month, sales-focused acceleration program.

What impresses you the most when talking to young founders?

We have accelerated thirty startups since 2016 and screened thousands of founders before accepting anyone to the program. The founders we work with, all have one thing in common: Passion. We only select founders who love what they do. Running a startup is very stressful and intense. You must love what you do if want to achieve great things.

What is the typical path from the garage to the Financial Centre Frankfurt? Is there a single path? What hurdles must start-ups master?

There is not one typical path. Some start-ups are disruptive, some are complementary. We primarily focus on Business-to-Business (B2B) solutions. This means that for our start-ups to succeed, partnerships with the banks must be formed. For this, one needs perseverance because the sales cycles can be quite lengthy, but the rewards also quite great.

Frankfurt has become a FinTech hub, above all due to its proximity to established banks. How would you describe the current FinTech ecosystem in Frankfurt?

When we first established Accelerator Frankfurt, there was hardly a start-up ecosystem in the city. We were the first accelerator in Frankfurt and certainly the first to attract international start-ups to the city. Nowadays, we are delighted to see the network effect this has had on the city. There is certainly more vibe, more complementary programs and hopefully, in the near future, more Venture Capital funds investing in Frankfurt’s start-ups.

What future challenges face the Frankfurt FinTech ecosystem? And what opportunities arise from this?

The main challenge for Frankfurt is banks becoming more open to new innovations. FinTechs are gaining traction in the financial world, especially blockchain solutions. Still, there remains huge potential for banks to work alongside these innovative start-ups.

Do you have a favourite start-up? 😉

I do not have favourite start-ups. I have favourite entrepreneurs, and those are the people who inspire me every day. So far, the biggest lesson in my career is that hard work puts you, where good luck can find you. There is some element of being in the right place at the right time.

Why is Frankfurt the ideal location for (FinTech) start-ups?

Over 240 banks. Good airport. Rich environment. Good universities and talent.

 

 

About Ram Shoham

Ram Shoham is to Fintechs what George Martin was to the Beatles. He is the Founder of Accelerator Frankfurt with 16 years of international corporate experience in finance and general management before becoming an entrepreneur. Ram is also the Founder of the Blockchain Labs, which is focused on building an ecosystem for promoting blockchain technologies and education in this sector.

 

Photo: Jonas Ratermann

FinTechs need to highlight their unique selling points

What challenges will young FinTechs be facing in the future and how can the FinTechGermany Award help in overcoming them? Lucie Haß, Managing Director at Helaba Digital and jury member of the FinTechGermany Award 2019, discusses these questions in an interview with Frankfurt Main Finance.

Lucie Haß, Managing Director at Helaba Digital and jury member of the FinTechGermany Award 2019; © Stefan Krutsch Photographie

What is especially important to you when judging applicants for the FinTechGermany Award?

Does the start-up idea solve a real problem? Is it scalable? Those questions are always the first ones coming to my mind when assessing FinTechs. Furthermore, I take into consideration whether we know the founders and trust them with implementing their idea and overcoming any obstacles that may arise.

What are the biggest challenges for FinTechs in Germany? How can start-up companies be supported more? What can platforms like the FinTechGermany Award do to help?

By now, the B2C FinTech market is filled with digital finance solutions. This makes it rather difficult to succeed in a highly competitive market and highlight USPs. However, the range of solutions that are offered is much smaller in the B2B sector. The biggest challenge here is to find partners who recognize the potential of the solution and are willing to implement it in their own company. The resistance is clearly noticeable, when B2B FinTech solutions are focusing on core processes of banks rather than just “scratching” the surface. To overcome this, you need power and partners who believe in you. Platforms such as the FinTechGermany Award help to highlight FinTechs, bring them together with companies and thus overcome the first hurdles of cooperation.

How will the German FinTech ecosystem evolve in 2019? In the next 5 years?

I expect more progress to occur in the B2B FinTech market. In addition, we can observe that German Venture Capitals and companies are increasingly investing in start-ups. However, we still observe a lack of cooperation between FinTechs and companies. I do hope that in the upcoming years, companies and banks will recognize the potential of start-ups even more, part with their reservations and engage in cooperation.

How can Frankfurt become one of the leading Fintech hubs in Germany or Europe?

There are very different approaches to this. In cooperation with the State of Hesse, the TechQuartier – of which we are a sponsor – has developed an action plan, which covers the entire spectrum of measures needed to build an ecosystem. Furthermore, banks play an essential part: The more they are open to innovations, the more likely start-ups are to settle nearby. Financial expertise and capital are both concentrated in the Financial Centre Frankfurt. Thus, we must promote the attractiveness of the city and existing cooperation to appeal to German and international founders. I believe this works best when we draw attention to the many advantages the city has to offer.

Tomorrow’s financial industry will be digital

Tarek Al-Wazir, Hessian Minister of Economics, Energy, Transport and Housing

Frankfurt Main Finance asked Tarek Al-Wazir, Hessian Minister of Economics, Energy, Transport and Housing, three questions on the subject of FinTechs. During the interview, we learned, among other things, about the FinTech highlights awaiting us in 2019.

FinTech – Why is this topic important to you personally? And why is it important for the region?

The Financial Centre Frankfurt is not just an economic factor for the Rhine-Main region. As the fourth largest economy in the world, Germany needs a corresponding banking centre. For the same reason, Frankfurt needs innovative FinTechs – short for financial technology companies. Tomorrow’s financial industry will be digital; FinTechs are becoming established on the market, compete with traditional service providers and create completely new fields of business. For Frankfurt to remain competitive in the race for innovation, we need to offer highly qualified specialists an attractive working environment and future-oriented employment opportunities. And I’m convinced that the innovative power of FinTechs will also benefit other industries.

Which FinTech highlights do you expect us to see in 2019?

One of our goals is to position Frankfurt as a well-established FinTech location. In the upcoming months, several events will contribute to this: the Global Insurtech Roadshow (GIR 2019) with its partner country Israel in March, the ExecFintech in April, now returning to Frankfurt after having taken place in Berlin for the past two years, and the Growth Con in May. The artificial intelligence (AI) hub will continue to become established and launch its first financial programmes. Companies will set up headquarters, rounds of financing will take place. I’m certain there will be many reasons to report on Frankfurt’s success as a top FinTech location.

It is planned for the Frankfurt Rhine-Main region to be developed into the leading FinTech hub in continental Europe and an internationally recognised technology region within five years. What is still needed to create THE PERFECT start-up climate so that the master plan can succeed?

There will not be THE perfect start-up climate for everyone – neither here nor in Silicon Valley. The requirements are simply too diverse for that. We consequently need to start by building on our own strengths, which are FinTechs, cybersecurity and AI. Our master plan for the Frankfurt-Rhine-Main start-up region will lead the way. The Industry, academia and politics want to join forces to turn good ideas into marketable and successful products. Central measures have already been implemented or initiated. The TechObserver platform is online, the TechQuartier FinTech Accelerator programme is up and running. However, we still have a lot of work to do. We will continue to put great effort into the development of the region, but I’m still very happy about every contribution made by others.

“We should highlight the strengths of the location”, Matthias Hübner, Partner at Oliver Wyman in Frankfurt, in an interview on the FinTechGermany Award 2019

Matthias Hübner, partner at Oliver Wyman, is a jury member for the FinTechGermany Award 2019, the leading investor-driven FinTech Award in Germany. Amongst other things, we asked Matthias Hübner what he pays special attention to when judging FinTech applicants.

What is especially important to you when judging applicants for the FinTechGermany Award?

I find two aspects to be crucial: First of all, a need for a product should be clearly identifiable, which means that the product should offer a solution to an actual problem facing customers. Secondly, it must be innovative. Unfortunately, we have recently seen many copycat products that lack a clear differentiation from existing ones. In my opinion, most of them will not stand a chance in becoming established in the long run.

What are the biggest challenges for FinTechs in Germany? How can start-up companies be supported more? What can platforms like the FinTechGermany Award do to help?

The scalability (i.e. reaching the critical and long-term profitable size) is what most start-ups struggle with – and this doesn’t only apply to the FinTech sector. This is something the FinTech Germany Award helps with: It enables companies to get in contact with potential investors for financing of growth and award winners get a chance to increase their brand awareness.

How will the German FinTech ecosystem evolve in 2019?

With regards to the Fintech ecosystem, Germany still has room for improvement but is developing dynamically and catching up with other countries. This trend should continue in 2019, especially since some of the early FinTechs now have more sophisticated business models and are thus, increasingly growing out of their niche.

How can Frankfurt become one of the leading Fintech hubs in Germany or Europe?

I think that the decentralized structure in Germany is not very helpful in establishing a leading international FinTech hub. However, we should move away from the traditional “Frankfurt vs. Berlin” discussion and instead highlight the strengths of both locations. Frankfurt has the advantage that it offers companies proximity to leading partners such as banks or the stock exchange and has a well-established infrastructure of consulting services. Those are essential aspects for FinTechs with a focus on B2B.

Fintech Interview with Compendor

„A shift of business consciousness is required”

Elmo Olieslagers | Compendor GmbH

Elmo Olieslagers | Compendor GmbH

RegTech (short for Regulatory Technologies) aims at providing time-efficient, configurable and reliable regulatory solutions for businesses. A few years ago, complex Excel spreadsheets were needed to process compliance-related issues. Today, young and emerging RegTech companies offer software solutions addressing regulatory requirements in a simple and efficient manner and support and document their implementation. Following the implementation of MiFID II / MiFIR regulations, RegTech companies gained considerable attention in the financial community. One of these companies is the Frankfurt Main Finance member Compendor. Elmo Olieslagers, founding partner of Compendor, shares his insight into the world of an upcoming RegTech company in an exclusive interview!

What led to the founding of Compendor? Were there any specific triggers that led to the launching of the company?

MiFID II / MiFIR became effective on January 3rd, 2018 and being comprised of 7,000 pages, the legislative framework is not always easy to apprehend.

In order to implement MiFID II / MiFIR a client required a structured, detailed and pragmatic gap analysis. At the time, law firms offered gap analyses in – often not structured and still complex – Excel spreadsheets. In other words, it was not always clear to clients what the specific requirements were that needed to be fulfilled unless they hired law consultants. This was one reason why one client asked us to come up with a solution. Our solution combines the knowledge and expertise of lawyers, bankers, and compliance specialists into an online application. Using structured decision trees as a basis, we established an innovative way of mastering regulatory changes by Financial Institutions.

In the meantime, we service clients around the most important regulations concerning Investor Protection and GDPR for banks.

Where does Compendor fit into the RegTech eco system?

To answer that, let us take into account the typical actors and typical solutions along the lines of a generic Regulatory Response Process.

The Regulatory Response Process typically consists out of three steps:

  1. “Signaling” of a regulatory requirement and a first quick scan for impact
  2. “Implementing” a detailed gap analysis and corresponding solutions
  3. “Monitoring” for compliance on a continuous and detailed basis

Various German banking associations and law firms already provide “Signaling” solutions. We provide the solution for “Implementing & Monitoring” regulatory compliance. The main difference is that a more detailed level is required to conduct high-quality compliance monitoring.

Why should an asset manager/banks consider using your solution?

We see that many asset managers and smaller banks do not have the capacity nor the knowledge to keep up with all the new regulations. And even if they succeed in dedicating (available and trained) resources to a certain legislation, this is often concentrated within one or only a few employees. This results in concerns regarding continuity. How do you deal with key-people leaving or being unavailable for a longer time?

Our solutions can help organizations with addressing these issues. By using our RegTech solutions, knowledge is secured and less resources are needed to cope with the regulatory burden.

Compendor in 3 sentences. What makes Compendors Compliance Monitoring Solutions so successful?

  1. Knowledge is secured. Both with regards to the regulation as well as to the interpretations made during the implementation process (full audit trail)
  2. Always up-to-date with the latest status of regulations
  3. Resource (and cost) friendly, by using technology rather than human resources

What are currently the biggest challenges for RegTechs in the financial industry?

To fully capture the benefits RegTech can bring, a shift of business consciousness is required.

Management should:

  • Accept that regulation is a hygiene factor, not a strategic differentiator
  • Ensure that legal and compliance departments accept technology as an opportunity
  • Embed industry best practice solutions instead of in-house developments which often are cost and time intensive and do not incorporate industry-wide knowledge
  • Adopt a unified, value-chain based approach, instead of fragmented autonomy of business lines and entities

Why is Frankfurt the ideal location for (FinTech) start-ups?

Frankfurt is becoming more important in the European financial landscape. More Banks and other financial institutions settle in Frankfurt, resulting in a huge demand for financial and regulatory expertise. This scarcity of financial/regulatory resources functions as a catalyst for alternatives like FinTech/RegTech.