Direct banking

Fintechs Join Forces to Compete

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Fintechs are nibbling steadily away at traditional banks' core businesses. Source: Fotolia

Fintechs in Germany are forming new alliances to compete against banks, in move to flex their own muscles in the budding market for IT-enabled banking and financial services.

Recent examples include N26 and Solarisbank. Smartphone bank N26 is collaborating with Auxmoney, Germany’s largest lending marketplace, while Solarisbank is helping refinance another large lending marketplace, Lendico, which was acquired in July by British hedge fund Arrowgrass from Rocket Internet. N26 and Solarisbank are currently the only two fintechs in Germany with full banking licenses.

The partnerships mark a new level of maturity in the sector and signal a move beyond the previous business model of collaboration. By joining forces, fintechs can offer more extensive services and appeal to significantly more customers, according to Friederike Stradtmann of Accenture Strategy.

Fintechs in general engage in highly diversified activities, attacking the supply chain of traditional banks in nearly all areas from lending and payment transactions to factoring and investment advice. Payment service provider PayPal is prime example of how successful this approach can be.

The partnerships mark a new level of maturity in the sector.

More than 500 fintechs are cooperating in Germany with a wide range of strategies. Their first wave of attack was on the banks’ retail business. Nearly 90 percent of retail banks now fear losing market share to these new players, according to a study by PwC consultants. The second wave is now on the commercial business of major banks. The consulting firm SSC estimates that they could lose up to 10 percent of their gross revenues, at a time when many already face tremendous pressure. According management consultant Roland Berger, German banks saw revenues from commercial customers decline from €35 billion ($41 billion) in 2011 to €30 billion last year.

Under the partnership, Solarisbank will provide a double-digit sum to help refinance the Lendico lending marketplace. The former Rocket Internet startup, established in the spring of 2016, intends to use some of the €250 million it secured in funding, and will take over some of the loans for small and mid-sized companies generated by Lendico on its platform. “With Lendico, we are backing a fintech operating in an area that is extremely appealing to us,” Solarisbank management board member Marko Wenthin told Handelsblatt. Clemens Paschke, a founding member and managing director of Lendico, said  the partnership will have a signaling effect in the fintech sector.”

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Valentin Stalf, CEO and co-founder of N26, is open for collaboration. Source: Getty Images

N26 and Auxmoney, founded four and 10 years ago respectively, expect to see the same effect. N26 founder Valentin Stalf referred to the partnership with Auxmoney as “another step in our strategy to fully digitalize traditional banking products.” Part of the strategy involves not developing all products internally. “We are cooperating with the most innovative fintechs and the best traditional providers to make them accessible to our customers,” he said.

Although N26 previously issued loans, the partnership with Auxmoney enables the fintech to expand its choice of products and also appeal to the self-employed, freelancers and students. Auxmoney has already issued loans for a total volume of more than €500 million. Under the partnership, customers will be able to digitally conclude loans issued in the background by Auxmoney “with only a few clicks,” said Mr. Stalf.  Loan amounts are limited to €25,000 on N26 and €50,000 on Auxmoney. Raffael Johnen, Auxmoney’s chief executive, sees the partnership as a trend. “Fintechs are linking their choice of products across product lines, so that they can reach more people with even better products.”

Although the fintechs are still little fish in the big lending pond, they have “enormous potential,” said Lendico’s Mr. Paschke. His company has issued loans totaling more than €100 million, with a current monthly lending volume of about €5 million. The average Lendico customer is a company with €2.6 million in revenues, borrows €120,000 and has five to 10 employees. Lendico has a credit limit of €250,000 for customers in Germany.

“Small and mid-sized companies don’t receive as much support from classic banks as they should,” said Solidarisbank’s Mr. Wenthin, who previously worked for Deutsche Bank. “Together with Lendico, we want to perfectly serve the needs of these companies.”

For N26, there have been some hiccups along the way. A year ago, it had to close the accounts of about 500 customers because they were withdrawing money too frequently. N26 has no ATMs of its own. This makes cash withdrawals expensive because the bank has to pay for them itself. It subsequently introduced fees for frequent cash withdrawals.


Frank Drost and Katharina Schneider cover banks for Handelsblatt. To contact the authors: and

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