1. Research
  2. Products & Topics
  3. Periodicals
  4. Further research articles
October 1, 2015
Analyst:
Presentation: German FinTechs and traditional banks: Friend or Foe? Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research Deutsche Bank German FinTechs and traditional banks: Friend or Foe? Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research 1 —“Non-bank, technology-driven providers of financial services, built on digitalised, web- and data based processes”* —FinTech company characteristics —Start-up —Established (non-bank) firms with large network (e.g. internet platform, telecom company, large retailer) —FinTech business strategies —New service (e.g. crowdfunding) or existing market (e.g. payments) —End-to-end service or part of a value chain —Front-end or back-end service —Relationship with incumbents: competition or cooperation *Source: Deutsche Bank Research FinTechs Definition and categories Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 2 Agenda 2 1 FinTech versus „Fin“ ? FinTechs in Germany Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research —Technology and the Internet have a radically increasing role in financial services —Investments into FinTech startups quadrupled in 2014 —USD 12 bn FinTech investment in 2014, up from USD 1.8 bn in 2010 —Significant mergers and acquisitions activity by established FinTech businesses FinTechs are on the rise! 3 0 2 4 6 8 10 12 14 10 11 12 13 14 USD bn. Sources: CB Insights, Deutsche Bank Research Global FinTech Investment Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research —US FinTech investment spearheads globally with a volume of almost USD 10 bn in 2014 —Despite the uptick in recent years, Europe lags behind in FinTech investment. —In 2014: —USD 623 m. investment in the UK and Ireland —USD 345 m. investment in Nordic regions —USD 85 m. investment in Germany US FinTech investment spearheads 4 0 2 4 6 8 10 US UK & Ireland Nordic Region Netherlands Germany USD bn. in 2014 Sources: Accenture, Deutsche Bank Research Investment in FinTech by region Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research —139 FinTech-firms with their headquarters in Germany in 2014 —In terms of number of FinTechs Berlin is the leading city in Germany —Almost half of the FinTechs are located in Berlin —The financial centre of Germany; Frankfurt hosts only 11 FinTechs Berlin is the German FinTech centre 5 0 10 20 30 40 50 Berlin München Hamburg Frankfurt am Main Sources: LSP Digital, Deutsche Bank Research *there are 47 FinTechs in other cities in Germany. Number of FinTechs in Germany* Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 —FinTechs are a new breed of alternative lenders —Around one fourth of FinTech startups in Germany does direct lending —Another 17% does crowdinvesting —FinTechs offer online based payment services —27% of FinTech startups are alternative payment providers —Other FinTechs active in: —Insurance, ID verification, Online Shopping & Gastronomy Lending and Payment FinTechs have the largest share among FinTechs 6 Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research —Small role of FinTech start-ups for real economy “for now” —German FinTechs employ around 2,000 employees in total —On average 11 employees per FinTech Increasing number of projects funded via FinTechs, yet so far they have a small role for the real economy 7 0 200 400 600 800 1000 1200 2011 2012 2013 2014 Number of projects successfully funded via German crowdfunding platforms Sources: Für-Gründer.de Crowd Funding Monitor, Deutsche Bank Research Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 8 Agenda 2 1 FinTech versus „Fin“ ? FinTechs in Germany Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research —56% of German banks cooperate with Fintechs for their digital strategy —Of these, 80% are satisfied with their cooperation Banks and Fintechs are interconnected 9 80 10 10 Satisfied Indifferent Not satisfied Sources: Die Welt, Deutsche Bank Research German banks cooperate with FinTechs % of banks that cooperate with FinTechs Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research 10 FinTechs vs. “Fins” ? Use of technology —Banks (incumbents) pioneered IT for financial services —Paper-based work substituted by electronic/automated processes —Interaction with clients via physical and digital channels —FinTechs —Competitive edge by consequent use of digital business models, lower cost —Use innovative IT for financial intermediation and transaction services —Spot unserved client needs —More competition: innovation, services, pricing 0 10 20 30 40 50 60 2009 2010 2011 2012 2013 2014 Germany Euro area Sources: Eurostat, Deutsche Bank Research Online banking: established service Persons using online banking as % of 25-64 year olds who used the internet in previous 3 months Sources: Eurostat, Deutsche Bank Research Online banking: established service Persons using online banking as % of 25-64 year olds who used the internet in previous 3 months Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research 11 FinTechs versus “Fins” ? How much finance, how much regulation? —FinTech business volume very small compared to incumbent providers (even in payment services) – so far —Will FinTechs be able to scale up their business? —Attractiveness to mass market (retail and business clients)? —Processing capabilities —Customer service —Regulation: how much regulatory arbitrage? —Up to date, many FinTechs are not supervised like established financial service providers —Can FinTechs sustain their business models if regulators impose existing financial regulations on them (“same risk- same regulation”)? —Competition on —Expertise in financial risk management —Funding cost: funding loans by deposits only allowed with banking licence Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Research Can FinTechs be an alternative? Spotlight on corporate funding and payments 12 -30 0 30 60 -15 0 15 30 06 07 08 09 10 11 12 13 14 Bond issuance Bank loan EUR bn, Net bond issuance (left), EUR bn, Bank loan flows (right) Sources: ECB, Deutsche Bank Research Corporate funding in Germany EUR bn, Net bond issuance (left), EUR bn, Bank loan flows (right) Sources: ECB, Deutsche Bank Research Corporate funding in Germany 0% 10% 20% 30% 40% 50% 60% 70% 80% 0 10 20 30 40 50 60 70 80 2006 2007 2008 2009 2010 2011 2012 2013 Bank and card payment transactions E-money payments Growth rate e-money payments Cashless payments in euro area Number of transactions in billions (left), growth of e-money payments in % yoy (right) Sources:ECB, Deutsche Bank Research Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 Orçun Kaya, Ph.D. Deutsche Bank Research Banking, Financial Markets, Regulation Taunusanlage 12 D-60325 Frankfurt/Main Phone: +49 69 910-31732 E-mail: orcun.kaya@db.com Internet: www.dbresearch.com Contact 13 Heike Mai Deutsche Bank Research Banking, Financial Markets, Regulation Taunusanlage 12 D-60325 Frankfurt/Main Phone: +49 69 910-31444 E-mail: heike.mai@db.com Internet: www.dbresearch.com Research Deutsche Bank Heike Mai and Orcun Kaya, Ph.D. Fintech,01.10.2015 14 © Copyright 2015. Deutsche Bank AG, Deutsche Bank Research, 60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, licensed to carry on banking business and to provide financial services under the supervision of the European Central Bank (ECB) and the German Federal Financial Supervisory Authority (BaFin). In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG, London Branch, a member of the London Stock Exchange, authorized by UK’s Prudential Regulation Authority (PRA) and subject to limited regulation by the UK’s Financial Conduct Authority (FCA) (under number 150018) and by the PRA. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Disclaimer
1.3.7