Advanced Analytics and Artificial Intelligence will gain in importance

In our interview Christopher Schmitz, Partner and FinTech specialist at Ernst & Young (EY), evaluates the characterises 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

Lucie Haß Interview zum FinTechGermany Award 2019

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.

Financial Centre Frankfurt, World Alliance of International Financial Centres,

World Alliance of International Financial Centers (WAIFC) launched

On October 1st, 2018, eleven global Financial Centres have launched the World Alliance of International Financial Centers (WAIFC). The new international non-profit association, registered in Brussels, was first proposed by the Financial Centres Frankfurt (Germany), Moscow (Russia) and Paris (France) in December 2016. By 2018, 7 Financial Centres have joined to establish the WAIFC with the aim to facilitate cooperation, exchange best practices across Financial Centres and to foster greater exchange with Public Authorities at the international level.

Who are the founding members of WAIFC?

The WAIFC is comprised of the following founding members:

What are the objectives of the Word Alliance of International Financial Centres?

In an era of breakthrough technologies and rapid social change, Financial Centres are key to sustaining economic growth. Thus, the objective of the Word Alliance of International Financial Centres is to create a transparent network that facilitates cooperation and sharing of best practices to further the understanding of the importance of international financial centers for national and international economies as well as social development.

Moreover, the WAIFC will be project-driven, focusing on the following areas:

  • Data on Financial Centres
  • Contribution of Financial Centres to Green investment & infrastructure
  • New FinTech developments
  • The role of Financial Centres in the financing of the economy

How will the WAIFC be governed?

The newly established World Alliance of International Financial Centres will be headquartered in the Financial Centre Frankfurt. The first General Assembly will be held around December 2018, with the participation of the founding members and additional Financial Centres. The WAIFC’s Board of Directors is composed of the following senior leaders from the founding members:

  • Abdullah Al Salmi, The Capital Markets Authority Oman
  • Arnaud de Bresson, Paris EUROPLACE
  • Said Ibrahimi, Casablanca Finance City
  • Kairat Kelimbetov, Astana International Financial Centre
  • Frederic de Laminne, Belgian Finance Club
  • Jennifer Reynolds, Toronto Finance International
  • Young Ho Park, Busan International Financial City Promotion Center
  • Philippe Richard, Abu Dhabi Global Market
  • Tom Theobald, Luxembourg for Finance
  • Hubertus Vaeth, Frankfurt Main Finance
  • Alexander Voloshin, Analytical Centre Forum Moscow

Arnaud de Bresson, Paris EUROPLACE is the first elected Chairman of the body. Frederic de Laminne, Belgian Finance Club, will take on the role of the Treasurer and Jochen Biedermann, Frankfurt Main Finance, will act as the Managing Director of the newly founded association.

Find more information here.

Leading FinTechs honoured at the 2018 FinTechGermany Awards with the Golden Garage

For the fourth time, the Golden Garage was awarded to outstanding FinTech companies on Thursday, June 14, 2018, at the FinTechGermany Award ceremony. The leading investor-driven award for FinTech entrepreneurs, organized by Börsen-Zeitung, Business Angels FrankfurtRhineMain, Frankfurt Main Finance and TechFluence, honours start-ups in six different categories for their accomplishments. Awamo was able to convince the jury of its success in the category Seed-/Early Stage while Optiopay won the category Late Stage. N26 was awarded best FinTech in the Growth Stage. Revolut stood out as „Best foreign FinTech on the German market.” Additionally, the special prize for the best PropTech was given to Exporo. Element Insurance was honoured in the special category Insurtech. The Longlist, consisting of applicants and nominees, featured more than 150 companies.

“FinTechs are of utmost importance to the long-term attractiveness and high economic performance of the Financial Centre Frankfurt,” emphasises Dr. Lutz Raettig, President of Frankfurt Main Finance.

“We are pleased that the FinTechGermany Award provides a platform for start-ups and promotes the financing chain in the region throughout the entire start-up process – from the seed stage to pre-IPO,” states Andreas Lukic, Chairman of Business Angels Frankfurt RheinMain.

“The award ceremony has become a well-established event in the Financial Centre Frankfurt,” says Dr. Jens Zinke, Managing Director of Börsen-Zeitung. “The German FinTech industry continues to grow. We are still at an early stage with regards to the digitalisation of the financial sector,” explains Michael Mellinghoff, Managing Director at TechFluence Consult and Senior Advisor as well as Mentor at FinTech Forum Frankfurt.

The jury’s three most important judgement criteria were financial viability, scalability and exit-potential. They evaluated the business concept, competitive advantages, positioning, financial planning and management. The Seed-/Early-Stage comprises of FinTechs, which either generated their first revenue or had none yet. Companies with a cumulative turnover of at least six figures were able to qualify for the category Late Stage. The category Growth Stage requires companies to have a seven-figure or higher revenue and international expansion to qualify. The special awards recognize important FinTech industry sectors, which are becoming increasingly significant. In addition, the best foreign market participant is being honoured.

Frankfurt Startup Ecosystem Report

Release of the Frankfurt Startup Ecosystem Report

Universities and corporations hold key levers in driving Frankfurt from a startup to a scaleup ecosystem. With a strong startup culture, fast growth in funding, and a globally-leading Fintech cluster, Frankfurt can create billions in economic value. Read more

Global Startup Ecosystem Report: Frankfurt’s Startup Ecosystem conquers Top 10

Frankfurt, Hesse, April 17, 2018 – Released at the Global Entrepreneurship Congress in Istanbul, the Global Startup Ecosystem Report 2018 features insights from over 10,000 founders across 45 cities, and shows what it takes to build a dynamic startup ecosystem. For the second time since 2017, Frankfurt is one of the top 45 cities for which detailed data was collected. The Frankfurt startup ecosystem has received special recognition worldwide for the creation of a FinTech cluster and is presented several times as a future hub of the new tech era.

“The Frankfurt region combines a solid (digital) infrastructure, the right kind of talent, globally acknowledged research & teaching and a decade-long experience of established companies. The Masterplan for the FinTech and Startup region Frankfurt Rhein-Main, developed by TechQuartier, defines specific measures to foster the creation of tomorrows ideas, businesses and innovation. Together with partners from the worlds of industry, science and politics, the State Government of Hessen fully supports the implementation of the Masterplan.“ Tarek Al-Wazir Hessian Minister of Economics, Energy, Transport and Regional Development.

Global Startup Ecosystem Report. Quelle: TechQuartier Frankfurt

Quelle: TechQuartier Frankfurt

According to the authors of the report, one of the keys to Frankfurt’s success is its clear focus on FinTech. “Frankfurt has the highest (together with another ecosystem) concentration of start-ups in a particular subsector in the almost 100 ecosystems worldwide,” the report states. In addition, more than 50% of local VC investments were invested in Fintech start-ups between 2012 and 2017.

“Frankfurt has a relatively high number of startups in the B2B sector. For the FinTech sector, this results in the proximity to regulators and banks for partnerships. The Frankfurt ecosystem offers the best conditions for starting and growing a FinTech business with access to experienced workforce and investors. We see FinTechs as partners to innovate our business and not as competitors” says Swen Moellmann, Head of Digital Strategy & Innovation at ING-DiBa.

This large concentration of financial expertise, banks and FinTech start-ups and the close cooperation between the start-ups leads to 7th place worldwide in the “sense of community” indicator.

“In the last two years, the start-up scene in Frankfurt and the Rhine-Main region has developed rapidly. A key factor here is the excellent interaction of the players in the Frankfurt financial centre. We will continue to do so and thus make even better use of the region’s potential,” says Thomas Groß, Deputy Chairman of the Board of Managing Directors of Helaba.

While the Global Startup Ecosystem Report gives an overview of how Frankfurt compares with other ecosystems worldwide, a more detailed study is also in progress. This will focus in particular on high-growth start-ups (or scale-ups) and compare Frankfurt with other leading ecosystems in Asia and North America. The results of this study will be presented at a press conference at TechQuartier on June 12 2018.

Source: TechQuartier

Find the full Global Startup Ecosystem Report here.