Back in Business – CRIFBÜRGEL’s new online portal ensures financial transparency in the crisis

Well-founded information about business partners or suppliers is even more important in times of crisis than in good economic times. With this in mind, CRIFBÜRGEL has developed Back in Business, an online portal that enables companies in Germany to let the market know that they are back in business. Companies that rebuild and strengthen their business relationships with customers, suppliers, dealers and importers are thus supported in showing financial transparency.

Companies benefit from the Back in Business initiative on several levels. First of all, the portal offers them a simple and free opportunity to provide their business partners and suppliers with an up-to-date picture of their economic performance and thus to document their activities with regard to future-oriented entrepreneurship.

As part of the Back in Business network, companies also benefit from exclusive access to webinars and services.

Further information can be found here.


Text by CRIFBÜRGEL

Europe lacks uniform rules – Marc Roberts in interview with Franz Công Bùi (Börsen-Zeitung)

The European Fintech Association (EFA) was founded in Brussels on 16 June. As a lobby group representing the interests of European FinTechs, it aims to advance topics on the digital financial agenda in the EU. Marc Roberts, Chairman of the EFA Board, discusses the association’s orientation, goals and potential in an interview.


The chairman of the newly founded European Fintech Association on the lobby group’s plans for financial start-ups.

  • Mr Roberts, the recently founded European Fintech Association is to become the mouthpiece of European FinTechs. Now eleven of the 21 founding members are from Germany, and the six-member board includes three German start-ups. Isn’t that an imbalance right from the start?

German FinTechs are still overrepresented in the association. We are in the process of balancing this out and acquiring FinTechs throughout Europe. Some will join in the near future. The initiative began in Germany, mainly as a result of a co-operation between Raisin, N26, Transferwise and Finleap. However, we try to create space within the board for a European perspective.

  • Among the founding members are four UK-FinTechs. In light of Brexit, what do they hope to gain from participating in an association that operates primarily in the European Union?

In the case of the British FinTechs, there are, of course, some restricted to the domestic market. Still, there are also many, including our members, who want to continue operating in the European market. What is essential is that they have an interest in European issues. The focus is not on Brexit issues, but on services within the EU. And for British FinTechs operating in Europe, the same questions continue to arise.

  • What requirements must members meet?

There are ultimately three prerequisites. First, it must be a European FinTech. This does not mean that it must have been established in Europe. It must have a genuine interest in focusing its activities in Europe and want to promote policy issues here. And it must operate across borders. In addition, it must have a tech background; in other words, it must provide technology-based services.

  • Your lobbying work for FinTechs will be based on the digital finance strategy of the EU Commission. Where is there a need for action?

A key point is that digital financial services bring real benefits for customers, businesses and also for regulators. For example, by making services particularly transparent, saving costs or reflecting product innovation. Current regulation is still very much tailored towards manual, rather analogue processes. This is particularly evident in the identification of customers. It does not take into account the advantages of digital services – when opening business processes, but also in many other regulations that protect the consumer. Ultimately, this is still based on the fact that a lot of paper is made available to the customer. In digital processes, this cannot be meaningfully depicted. Of course, consumer protection is essential, but one should still evaluate what is really useful in a digital process.

  • Could you illustrate this more clearly using the example of identification?

In this field, European regulation does provide uniform identification methods. It depends on whichever methods the respective Member State allows, which varies between each state. Basically, most Member States assume that a customer is identified face to face. This can be in a bank branch or in Germany, for example, through video identification or Postident procedures. These are not optimal processes for digital providers because the customer has to go out of the online offer and do something completely different. The normal course of business is interrupted and must then be restarted. Here, standardisation with a Europe-wide identification method would be desirable.

  • Where do you still see an acute need for action?

Some regulations make cross-border services considerably more complicated; for example, IBAN discrimination. In practice, this means, by way of example, that a French electricity bill can only be paid with difficulty from a German account. Accordingly, to operate on the French market, a German FinTech must have a branch in France just to obtain a French IBAN. In addition, there are special regulations in consumer protection, which mean that the interest rate has to be displayed differently for straightforward and transparent products such as overnight and fixed-term deposits. Each country has to develop its concept of how to do this – with taxes, without taxes and so on.

  • Fragmented regulations are often criticised when it comes to money laundering. What are your ideas here?

As already described, we have to deal on the one hand with varying regulatory specifications for digital identification. In addition, there is an area that is extremely important for co-operations, the so-called reliance on third parties. If a FinTech product is integrated into a bank, for example, the bank naturally does not want the customer to have to be identified again, since they are an existing customer. It should be possible to use the existing identification again for the integration of the new product. This is admittedly permitted within the European Union, including the provisions of the European Money Laundering Directive. But then there is so-called gold plating.

  • What do you mean?

Gold plating means that one has national regulations that have additional requirements for this reliance on third parties. For example, a time limit where the first identification must not be older than two years, or the requirement of a written contract or that the first step must have been a face-to-face identification. The new services under PSD2, i.e. payment initiation and account information services, are also subject to very different regulations as to whether these providers are obligated under money laundering law or not. The rules vary from one Member State to another, in particular the obligations that apply to these providers. In other words, you must always look at the regulations applicable to the service in question in the country in question.

  • How could this be solved?

The matter is primarily one of standardisation at the European level, which is a relatively lengthy process. It must first be decided, discussed with the Member States and ministries, and finally implemented. At the same time, however, certain areas could be regulated relatively quickly. One example would be to adapt the guidelines of the European Banking Authority (EBA) to allow certain areas to be regarded as low-risk and not subject to the corresponding obligations. There are also opportunities below the level of legislation to introduce significant simplifications for certain business models.

  • Some FinTechs would like to have a sandbox like in the UK. Is this also a direction for you?

Sandboxes are an exciting topic and an especially great opportunity for newer FinTechs or start-ups to get in touch with the regulator. What’s more, from our point of view, is the exchange on a European level between regulators on new business models. Often each country has to deal with each business model anew, and you always start from scratch. There is no cross-border exchange. We believe a kind of FinTech hub at the European level would be practical. This is also a point which we discuss with the European Commission.

  • Do you also see a need for change in the area of data protection?

Views on data protection, which is a concern for all our members, vary depending on the Member State. At the same time, GDPR provides uniform regulation at the European level, which is already a relatively far-reaching harmonisation. However, there are additional regulations at the national level, which are more or less strict. France, for example, is very strict compared with other countries. This is also the case in Germany. Especially in the financial sector, data protection plays a critical role. At the same time, however, we believe that the data protection issue should not be misused to discredit certain new developments.

  • What do you mean?

For example, in the area of opening up account interfaces within the framework of PSD2, we believe that this data protection issue has already been brought to the forefront in order to protect certain business models. As a consequence, regulation emerged that does not help anyone, especially not customers, and certainly not FinTechs.

  • It is often criticised that we do not have European Champions. How can Europe remain competitive? Where do you see disadvantages compared to other regions?

It is often said: If you cross the border by car, you have to obey the traffic regulations in the other country. The picture is a bit skewed when it comes to cross-border financial services. Because when you drive across the border, you don’t have to convert your car. But if, for example, you want to establish a platform across the border in another European country, then that is a project of six to eight months. You have to adapt the documentation and also the product, as well as design the conditions so that they comply with local law. There is no uniform regulation which would allow you to reach customers throughout Europe and use the full capacity of the market.

  • Are there any other obstacles?

It is much more difficult for companies to recruit talent in Europe because of the difficulties of employee participation in option schemes, especially from a tax perspective. This is a problem that needs to be tackled. It is bad for innovation in Europe if you cannot recruit the best talent, even though offering incentives could be a possibility. I understand the logic behind this, but a European stock option scheme is needed. The existing employee stock option schemes only ever work in one country according to the law of that country. If you have an employee who would rather live in Barcelona, then you have to set up a new programme. And of course, it is already challenging to set up an entirely new programme to acquire someone just because he wants to work elsewhere in Europe.

  • How do you assess the current situation for FinTechs in Germany and Europe affected by Corona?

The pandemic, of course, has a considerable influence on FinTechs. There is always a need for financing for rapidly growing companies, and we can see that the situation has not improved in the financing rounds as a result of this Covid-19 crisis. It hasn’t become impossible to get financing rounds underway, even large financing rounds, but the starting position is different from before the crisis. The same applies to recruiting.

  • In what way?

There is now a hiring freeze for the time being. It is complicated to train new employees with remote procedures. And of course, FinTechs also reduced staff. At the same time, it can be seen that most FinTechs are well-positioned. Firstly, through their business model, because digital services can basically still be offered. Secondly, the employees have had fewer problems with the necessary changes, because many of the services or working methods are very agile and Internet and cloud-driven. Overall, it must be said that FinTechs have proven at this stage that their product offerings are relevant.

 

Source: Börsen-Zeitung, July 7, 2020, Franz Công Bùi, © All rights reserved

Data pool against money laundering before it starts

Major banks agree on standards – supervision gives BFS Finance the green light

Major German banks agreed on standards for a data pool for the prevention of money laundering, which is to go into operation by year’s end. Behind the initiative is Bertelsmann subsidiary BFS Finance, which so far operates as a factoring company and will be regulated by the financial supervisory authority BaFin. According to managing director Paul-Gerhard Haase, it has succeeded in doing what major German banks had long tried to do but failed in 2018: establishing a platform that collects, enriches and passes on customer data from institutions to combat money laundering.

According to information published by the Börsen-Zeitung, at least Deutsche Bank, Commerzbank, DZ Bank, Helaba and LBBW have agreed on a common standard for corporate data required in connection with Know your Customer (KYC) regulations, i.e. for the identification of new customers. “It is imperative that all three banking pillars are equally represented,” Haase said in an interview with the Börsen-Zeitung.

BFS Finance will collect and enrich data from companies for the banks participating in its Customer Information Network Intelligence (Cinfoni) platform. This network intends to prevent banks from incurring penalties or reputation loss stemming from involvement with dubious business partners and violating money laundering regulations, for example.

Saves time and money

Using Cinfoni, companies must only enter their KYC-relevant data once in the portal, then it is available in a standardized form to all participating banks, saving money and time. “Corporate customers want a single point of contact,” explains Haase. “That is the bundling effect we can achieve.” But the Cinfoni network should not be limited to Germany. Now that German supervisory authorities have already approved it, BFS Finance is in talks with supervisors in other European countries, Haase reports.

 

Source: Börsen-Zeitung, June 27, 2020, Tobias Fischer, © All rights reserved

New, innovative conference for digital finance

The first Frankfurt Digital Finance Conference brings together decision-makers and innovators from the financial industry – companies, start-ups, politicians, investors, regulatory authorities and academics – on a neutral platform in Frankfurt am Main. We spoke with the conference organizers, Corinna Egerer and Max Hunzinger, about FinTech trends, the Frankfurt location and the added value of the event.

Which services in the field of FinTech are currently of particular interest?

“Alongside with the usual suspects – such as Artificial Intelligence applications, Blockchain solutions and Payment –  Digital Identities are in focus. Open Banking is also still a hot topic to cover the chances that derive from the PSD2 Directive. IT security is and remains a vital challenge. And last but not least services that enable better customer experience – B:B and B:C – are crucial for success. All these and more topics will be discussed at Frankfurt Digital Finance.”

What can events like the Frankfurt Digital Finance Conference do for the various members of the FinTech community?

“Events like Frankfurt Digital finance connect people who have similar interests but come from different companies, institutions and backgrounds: to learn from others’ experiences, to get to know each other, to network and eventually start joint projects, all this can be reached with such a conference. “Better Together” is the motto of Frankfurt Digital Finance. Participants from incumbents and entrants, from academia, from investors and politics all meet on a level playing field. Not least a “Corporate Challenge” will take place at Frankfurt Digital Finance where teams from different companies develop ideas and concepts to better connect corporates and startups, to create value together.”

Why did you choose the Frankfurt Financial Centre as the location for this conference?

“Frankfurt as an ecosystem with incumbents and entrants can develop into a leading digital finance hub in Europe. Here we do not only have the industry expertise but also trusted personal networks and the ability of a financing chain providing the necessary resources for all stages from startups to institutions. This fact we have to communicate better  – Frankfurt Digital Finance shall support here.”

Further information about the event and registration options are available on the website frankfurt-digital-finance.de.

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