Frankfurt The small office in Manhattan is empty, the five New York employees work from home, they communicate with customers by phone and video – starting the US business in the middle of the corona crisis sounds like bad timing.
But for the Berlin financial start-up Raisin, which operates an investment platform in Germany under the Weltsparen brand, the current market situation could even be helpful. Corona, on the other hand, slowed down the expansion plans of some other fintechs.
Raisin co-founder Tamaz Georgadze may not hear the word “crisis profiteer”, but he speaks in an interview with the Handelsblatt: “Many US financial institutions currently have a rapidly growing refinancing need and are becoming increasingly interested in customer deposits. With our technology, we can help them to offer suitable products in a timely manner. ”This would enable the financial institutions to meet the demand for credit and get the necessary capital comparatively cheaply.
In the United States, Raisin does not set up its own end customer platform, but rather sells banking software with which financial institutions can offer individual fixed-term deposit products. Raisin acquired the know-how at the beginning of the year with the takeover of the Spanish-American technology company Choice Financial Services – which now operates as Raisin Technology and, in addition to the New York team, has seven employees in Madrid.
“We are currently implementing the technology for our first customer, and the offer should start in the third quarter,” says Georgadze. “Other partners have already agreed. Our internal goal is to connect five banks this year. ”He must not reveal names yet.
Expansion despite Corona
Raisin benefits from the fact that even before the corona pandemic started, it had built up its team in New York and made contacts with banking partners. Other German start-ups weren’t ready yet.
As of April, a group of employees of the insurance start-up Wefox actually wanted to take part in the “German Accelerator” in New York, a program that helps start-ups to enter new markets. The majority of the program now takes place via the Internet, but Wefox is not included. “Our expansion is postponed until the crisis is over,” said a Wefox spokesman. They want to concentrate on the core markets and reduce investments.
According to Christian Busch, managing director of the Accelerator program in New York, most start-ups want to continue expanding despite the corona crisis. “However, a few companies have slowed down their expansion plans or are waiting to see what happens,” he says.
Nevertheless, the accelerator will support at least 25 German companies by the end of the year in preparing and starting their “US expansion journey”. “In my opinion, the American market is now even more important than before,” says Busch.
On the one hand, the US could possibly overcome the recession faster than Europe, on the other hand it was “with 350 million homogeneous potential customers it is still the largest market in the world”.
Busch estimates that at least 75 percent of its start-up program could be moved online. Establishing contacts also works via video activation as long as a mentor from the team presents the start-up to the potential partner.
Online networking events are a bigger challenge. There are also technical solutions for this, “but the traditional nature of an event, dinner or conference cannot yet replace the video conference seamlessly,” says Busch.
Some of what you have learned should also help start-ups do business in their home market. Andreas Hofmann, managing director of the Silicon Valley program, assumes that “we will definitely work a lot more for a while longer, so that customer acquisition via video or telephone conference will also become more normal”. The mentors would work with the start-ups to address them via the Internet, “because the same applies digitally: the best pitch wins!”
Delays in online platform Savebetter
Raisin competitor Deposit Solutions prepared its market entry in the United States without a start-up program. The Hamburg-based fintech had already disclosed its US plans at the end of 2018, and it is building an online platform under the name Savebetter.com, through which end customers can take out overnight and fixed-term deposit products.
“The first funds have been moved via the platform since last week,” says founder and managing director Tim Sievers. Initially, only employees were active to test the processes. “This will be followed by a Friends-and-Family phase, for which interested parties can already register on our website by email.”
It is progressing, but there have already been delays because of the pandemic. The ten employees in New York would work well in the home office, but the banks were differently prepared for it.
“In addition, sales have been more difficult in recent weeks, although the need for additional customer deposits is growing at many institutes,” says Sievers. It is not yet clear when Savebetter will be opened to a wide audience.
“We wait until the situation has calmed down, because currently the average US savers have other concerns, so marketing would not be worth it,” said the founder. The bottom line is that the corona crisis is delaying three to six months.
Compared to the situation of start-ups in other industries, this is “more of a luxury problem,” says Sievers. The deposit business in the German home market was stable after a brief decline in early March, and Deposit Solutions did not have to fire any employees due to the crisis or send them on short-time work.
Georgadze reports something similar about the business of world savings: the customer demand is stable, the deposit requirements of the banks in Europe are still high, and the employees are still on board and not affected by short-time work.
On the other hand, sales of smartphone bank N26 have decreased because customers are spending less money because of the pandemic – and part of the transaction income is thus lost. The young bank from Berlin started its US business last July. While it sent 150 employees on short-time work in Europe because of the corona crisis, nine out of 90 employees were made redundant in the USA – there is no short-time model there.
However, N26 continues to attach great importance to the American market. Most recently, N26 had reported 250,000 customers there. The number comes from January – meanwhile it has been “significantly exceeded”, says an N26 spokesman. “The United States remains one of our most important core markets worldwide.”
Therefore, part of the recently acquired investor capital should also be used for the further expansion of the US business. Marketing also wants to continue investing both in the USA and in the major European markets.
More: That could be the crisis winners and losers among the fintechs.