Viewing digitalization as a chance (2/2)

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Business Cases The financial industry is currently still trying to catch up on their delayed start into the digitalized future. Technology-focussed start-ups approach different points of the value chain, to optimize digital banking processes. On this basis they develop a great number of business cases, all of which follow a similar goal: to simplify the digitalized everyday life of the customer. Disregarding the threat posed by these companies, established banks can view the digitalization as chance - provided that they adapt to the challenges and cooperate with FinTechs. Sutor Bank developed a start-up platform for fintechs, offering solutions and services which are subject to bank-licensing. This makes them an entry point for founders in the financial industry.

Fintech start-up cooperation

The Sutor start-up platform

During the first collaborations with start-ups an initial concept of a start-up platform for fintech foundings evolved. The modular offer includes all services that are subject to bank-licensing, and IT solutions that are needed by the young entrepreneurs to realize their business cases. The modules are divided into three layers:

  1. the technology layer
  2. the service layer
  3. the business layer

The technology layer contains the portfolio-management platform SutorWin and the core-banking system. SutorWin, in connection with their own team of developers, enables the bank to realize founders’ business concepts in a most flexible way. Especially in cooperation with start-ups specialized in the sectors of investment, savings and pension plans, the platform is a unique feature. The service layer summarizes the modules which serve the purpose of interacting with the customer: identification processes (KYC), request routes, request handling, a tenant-capabe customer portal or a call center with financially skilled employees. The modules of the business layer are concerned with the direct interaction between fintechs and Sutor Bank: the development of products according to regulations, the building of sustainable business cases with strong growth potential and the negotiation of long-lasting cooperations. It is planned to further develop the modular structure of the start-up platform and eventually offer it via APIs - provided the technical feasibility. Thereby, platform services can be intergrated easier and faster into the business and IT processes of the start-ups.

Fintech onboarding

The onboarding process for fintechs is not fully standardized, which also seems impossible regarding the variety of start-up concepts. Nevertheless a structured process will have evolved during the time of first contact to the first meeting with the respective executives. As Sutor Bank has built a good reputation among the fintech community, many start-ups contact them autonomously. However the bank’s Business Development is also present at many conferences and constantly scanning for new ideas in order to be able to approach start-ups which have promising business cases.  When contact has been established and one (or sometimes several) discussions have taken place, the Business Development does a first assessment of the business case. If the assessment comes out positive, a meeting is scheduled in which, apart from the executives, also representatives of regulation, legal and technical sectors are present. This way all stakeholders receive the same information from the beginning and it is easy to decide with certainty if a startup can be supported or not. Especially founders who have talked to other banks before find this early involvement strategy to be a completely new experience. After the start-up meeting, a „normal“ project management process begins to further develop the fintech-bank cooperation until it is ready for the market. Experience has shown that the main challenges are indeed in the adjustment of the business case to regulation standards. Technical issues, which tend to pose the biggest threat in other fields, are almost never the reason for fintech startups failing.

Investments and forms of cooperation

The Sutor Bank does not normally invest in start-ups, but equally it does not ask for immediate payment for their services. The goal is to take the risk together with the founders, on the basis of the cooperation and the business case. Practically this means, each group does their „homework“ without being paid by the other during this phase. Money is a matter only when the start-up is successfully placed in the market. According to the respective starting situation, particularly when the start-up is already well-developed and only lacks the bank partial, pure service agreements can be made. Regardless of the type of cooperation, the partnership with the Sutor Bank helps start-ups to collect money from investors: only through cooperation the business cases become viable and, thereby, suitable for investment. Additionally the partnership with a long-established bank creates trust - both of customers and investors.

More than a pure transaction bank

The platform option entails the risk for banks to become pure transaction institutions and therefore disposable. The Sutor bank evades this threat by viewing cooperations as active partnerships and by not acting as a white-label bank. Practically this means that the bank plays an active role in means of communication. For example in marketing, the cooperation is put out as a unique feature of the fintech start-up, or the bank process is marked as such in interaction with the customer.

Examples of cooperation

At the moment, there are three fintechs on the start-up platform: the Riester savings plan vendor, the fixed deposit and call money platform Zinspilot and the fintech service provider FinReach. For the Sutor bank assumed the development of the investment concept, provides the capital guarantee, is the savings plan contractor, provides the customer portal and is responsible for the management of all investment processes. In the cooperation with Zinspilot, Sutor offers a bank account with which the customers are able to use the Zinspilot services and provides transfer accounts, via which the customers’ money can be transferred to foreign accounts. FinReach, a start-up of the Company Builder FinLeap from Berlin, offers fintechs to buy customer onboarding processes as one-stop service solutions. The Sutor Bank takes over those steps in the process, which require a banking license: the verification of the customer identity, the order processing and the administration of portfolios, provided this is a part of the business process.

Digitalization as a chance, not a threat

Digitalization and fintechs as their entrepreneural carrier are often viewed as a threat by banks. But they offered the Sutor bank the chance to open up new business areas. The bank is small enough to react similarly fast to start-ups, has a strong technical backbone and a banking license - which makes it stand out against fintechs. Therefore the Sutor Bank is perfectly prepared to succeed in the digitalized financial world.

Digitalization as a chance (1/2)