Fintech Initiative

Deutsche Bank's Fertility Dance

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Deutsche Bank's new partnership with an Axel Springer unit is meant to bring new life to Berlin's vibrant startup scene.
  • Why it matters

    Why it matters

    Deutsche Bank is upping its involvement in financial and insurance startups, joining with Berlin startup accelerator ASPnP to invest in the best new firms in the field.

  • Facts

    Facts

    • In a break with its previous approach, Deutsche Bank will directly invest in newly-founded tech companies, particularly financial and insurance-related startups.
    • Last year German banks represented just 4 percent of investment in German fintech startups. But in recent months, they have substantially increased their startup investments.
    • American financial giants Citi and Goldman Sachs each hold stakes in 24 fintechs, while Deutsche Bank’s German rival Commerzbank has invested in 12.
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    Audio

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The building in Berlin’s alternative Kreuzberg district is not the kind of place you’d expect to see managers from Deutsche Bank. But the graffiti-sprayed 1970s office block is home to Axel Springer Plug and Play, or ASPnP, one of the leading “accelerators” in Berlin’s thriving startup scene.

A collaboration between German publisher Axel Springer and California’s Plug and Play Tech Center, ASPnP picks promising startups, finances them for 100 days, then chooses the best to continue to support. Now Deutsche Bank is joining the venture.

The cooperation was announced Monday. Deutsche Bank will sit on the ASPnP selection committee, picking the hottest technology startups to enter the program, including new firms in banking and insurance. The companies chosen will be offered finance and development help. For Deutsche Bank, that means offering know-how and access to the bank’s customer base.

“At the moment there are a lot of fintechs and insurtechs among the new startups,” Jörg Rheinboldt, the ASPnP chief executive, told Handelsblatt.

That makes Deutsche Bank a welcome partner. It can offer shrewd assessment of which new ideas are important to the banking industry.

For its part, Deutsche Bank wants “even earlier and more systematic access to the great pool of new digital ideas,” said Markus Pertlwieser, a chief digital officer in Deutsche’s retail and corporate client business.

“Deutsche Bank wants even earlier and more systematic access to the great pool of new digital ideas.”

Markus Pertlwieser, chief digital officer, Deutsche Bank retail and corporate clients

For Deutsche Bank, this is a strategic shift. For the first time, the bank is looking at investing directly in startups. Thus far, it has focused on established companies. And there’s another difference: previously, Deutsche only offered cooperation to fintechs — finance-oriented tech startups. Now it wants to put money in them.

“We have decided to invest in new firms too,” Mr. Pertlwieser said.

Deutsche is not the first German bank to take this step. Commerzbank already has a stake in 12 fintechs, the Sparkassen — Germany’s network of savings banks — have four, while private bank Hauck & Aufhäuser has two.

Hypo-Vereinsbank has invested €45 million in fintech companies so far this year, around $50.2 million. A spokesman for the Munich-based bank confirmed it was looking to “invest significantly more in this area.”

But early-phase investments are less common. Commerzbank is already involved, and publicly-owned NordLB bank has an accelerator for startups it jointly runs with Dieter von Holtzbrinck, the owner of Handelsblatt. The company, DvH Ventures, has four companies in its portfolio.

“Currently, banks only represent 4 percent of investment in fintechs,” said Peter Barkow, founder of the management consultancy bearing his name. Outside Germany, banks are much more involved.

Citibank and Goldman Sachs each have stakes in 24 startups. But things are changing fast. “Since last year, there has been a noticeable uptick in German banks putting money into fintechs,” Mr. Barkow said.

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Competition is a motivation behind Deutsche Bank’s new joint venture. “Competition for the best ideas and people in fintech and insurtech is going to get more and more fierce,” Mr. Pertlwieser explained. “So it is important to identify great ideas early on. To do that, it is very useful to cooperate with well-known names in the startup scene, like Axel Springer Plug & Play.”

So far, ASPnP has supported and promoted more than 1,500 startups.

Insurtech — insurance-oriented tech startups — is what really excites Mr. Pertlwieser. “Insurtech is a really big theme for us,” he said.

“Since last year, there has been a noticeable uptick in German banks putting money into fintechs.”

Peter Barkow, Founder and Managing Director, Barkow Consulting

The bank has been working for some time on digital solutions that bring together very different banking products. “The next logical step for us is to integrate insurance products too. We’ve been discussing this issue intensively and are having conversations with possible partners,” he added.

Deutsche Bank won’t say exactly how much money they are putting into the new digital cooperation. As yet, there is no separate budget. Early financing for fintech startups usually involves sums of less than a million euros. This can be met from the bank’s overall annual digital budget of €750 million, Mr. Pertlwieser said.

And money is all that Deutsche can bring to the table: “Collaboration and access to our customer base are the most valuable things we can offer a new fintech or insurtech startup,” he said.

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Mr. Rheinboldt, the ASPnP CEO, agreed: “It is an enormous help to young companies if you can open doors for them in larger firms.” That means they can test and develop ideas under real-world conditions. And when they approach venture capitalists for more funding, it does no harm at all to have Deutsche Bank and Axel Springer as references.

Over the next weeks, Deutsche Bank and ASPnP will decide which startups will get to join the adventure. The search for candidates began on Friday: in January, between seven and 15 new founders will set up shop in ASPnP’s Kreuzberg offices for 100 days. The best of these will be invited for another 100 days at Deutsche Bank’s new digital factory in Sossenheim near Frankfurt.

Yasmin Osman is a financial editor with Handelsblatt’s banking team in Frankfurt. To contact the author: osman@handelsblatt.com.

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