Does Google have a FinTech group

Fintech overview for Germany

What about fintech in Germany?

Crowdfunding, mobile payment, digital banks: Germany can also do fintech. But let's not kid ourselves: we are late bloomers. Fintech describes the change in financial services with the help of technology (to define fintech). This segment is still in its infancy in this country. In our opinion, there are several reasons for this:

  • On the one hand, Germany is considered to be "overbanked“: Where enough banks and financial service providers offer customers products, some with decades or centuries of tradition, it is difficult for young companies.
  • Especially since Germans love their cash and tend towards technology skeptical are. Studies keep suggesting this, see for example here or here. Compared to Girocard, mobile payment - and even paying by credit card - plays a subordinate role.
  • The backward one Financial regulation in Germany (and Europe) hinders innovative products. More on this below.

So when it comes to fintech, we have some catching up to do on some fronts. At the moment, innovations are not being tried out in our lazy Germans, but rather in smaller markets with as large target groups as possible - and then exported to us.

Fintech overview: what is the market like?

There are many industry giants: well-financed and much-discussed companies such as Kreditech, Scalable Capital, Weltsparen or IDnow. Outside of the fintech scene, however, only a few companies are currently known. These are mainly those who invest a lot of money in advertising, such as the crowdlending platform Auymoney, the payment service provider Paydirekt or the digital bank N26.

How big the German fintech market is overall depends on the source and the different numbers and approaches. Some examples:

  • A general overview of the active companies: André M. Bajorat's team regularly updates a good graphic on, for which German fintech products are divided into different categories such as banking, payment or factoring.
  • Investment volume as an indicator of growth: How much money have investors put into German fintech companies? The statistics of the management consultancy Barkow Consulting give a good insight into the development of the fintech market, especially with a view to innovative, scalable business models of start-ups. The KPMG consultancy delivers a comparable survey every quarter with the “Pulse of Fintech”.

  • The fintech study by comdirect, which was last published at the end of 2018, provides a good insight into the industry and, above all, the most active locations. This, in turn, was created on the basis of figures by Barkow Consulting and shows how the industry is changing: On the one hand, there are fewer start-ups in the fintech sector, so collect money Less Start-ups more Venture capital, which in our interpretation also speaks for the maturation of the industry.
  • For this overview, among other things, we are guided by the fintech study published by the Federal Ministry of Finance in November 2016. It appears to us to be the largest, most comprehensive and most reliable of the current fintech surveys in Germany. The study assumes around 350 active companies in the German fintech market as of 2016. For their assessment of the development of the segment, the authors rely on investments, but also on transaction volumes. After all, they see the German fintech market in a European comparison directly behind Great Britain - and mind you in front a Brexit. However, according to the study, the market share of fintech is still very low despite high growth rates.


Digitization in banks

The term fintech is made up of the initial syllables of Financial services and technology together. Fintech is the industry in which financial services are changed with technology. Fintechs are the companies that do that. Fintechs are often startups, but not always.

Our fintech definition already says: It's not just start-ups that are drivers of innovation in the financial sector. In this sense, the digitization efforts of banks should also be mentioned here. Basically, the wave of direct banks that were founded around the year 2000 was already the first wave of fintechs. Institutes from these ranks have no branches, but are only active online.

Some, like comdirect or DKB, have remained agile, while others have stayed at the same level as they were back then. If innovations come from the banking sector, it is more likely from these progressive direct banks, which have already started with completely digital processes and would not have to start from scratch for new digital products. The latter banks find it much more difficult to embrace the changes brought about by technology, especially because of their paper-based processes that have been established over decades or even centuries. In these institutes the costs of maintaining the existing system (keyword “run the bank” vs. “change the bank”) are very high.

However, nowadays the transitions between banks and fintechs are often fluid. Fidor, for example, describes itself as a fintech booth with a banking license. And then there is the start-up N26, which started with a Wirecard banking license and has had its own banking license since 2016. Obviously, a license from the old world does not turn a fintech into an old economy giant. These companies can remain agile - and that is exactly what many of the big players lack in order to participate in digitization.

The banks benefit from the fact that many fintechs have a B2B business model. Their products are designed from the outset for cooperation rather than competition. Our finletter columnist Tobias Baumgarten even believes the bank always wins. According to him, fintechs have put pressure to innovate in the banking sector and do not have to worry about the young wild ones who have not yet succeeded in retaining users sustainably and in sufficient numbers. He sees the danger for Germany's traditional financial economy more in the tech giants such as Google, Apple, Facebook and Co., who are miles ahead of them when it comes to technology. As co-authors of this white paper on the future of the local financial sector, we are also outlining several scenarios - in addition to the tech giants' entry into banking, it is also about platform banking and specialization.

Forecast for Fintech in Germany

What's next for Fintech in Germany? From our own experience we can say one thing: since the finletter was launched - i.e. since winter 2014/2015 - the topic has become more and more present in the German media. Initially, it was mainly the specialist media with a focus on finance and digital, but now broader business media and daily newspapers also report on fintech. But the media presence and many Twitter and Facebook discussions about products like N26 or topics like crowdlending say nothing about the actual development.

At this point we are also referring to the above-mentioned fintech investigation by the Ministry of Finance. The authors try to make well-founded forecasts of how fintech will develop in Germany. Even in the most pessimistic scenario, they assume that the fintech market will expand many times over. Specifically, the study looks at the market volume in different segments such as asset management or factoring. For the area of ​​donation and reward-based crowdfunding, for example, the market could in the best case grow from 36 million to 9 billion market volume. Such scenarios abound in the study. In any case, it gives reason to hope for a flourishing fintech future in Germany as well - even if it may come later than in other countries. However, the authors address a sore point on which the development of the fintech industry will largely depend: regulation.

Fintech regulation in Germany

The German financial market is traditionally very strictly regulated. There were times when that was good and right: When it comes to financial products, there are huge differences in knowledge. The makers know more than the sellers, and they in turn know more than the buyers of financial products. To protect against the latter in particular, financial products in Germany have to overcome a number of hurdles. These control mechanisms are usually reactive: there was a problem, the regulatory system reacted to it with measures. For start-ups that want to disrupt the market, this bulky set of rules is an obstacle today. Of course, this comes in handy for anyone who already has a banking license. They use the regulation as a protective mechanism against the growing competition. No wonder that the digitization of the financial market in Germany is so far behind the media industry.

For some time now, the principle of the “regulatory sandpit” has been discussed in fintech circles. What is meant are exemptions for innovative fintech products that could not be tested close to the market and under realistic circumstances if they had to adhere to the normal rules. The German financial regulator Bafin has so far rejected such a sandpit. Many other countries, including the UK and Singapore, already have such exemptions.

What is certain is that the current regulations are delaying the unstoppable digitization and progress - and thus ultimately damaging the market economy. There is also the EU problem: all member states have their own financial market regulations, so that companies have to adapt their business model when expanding into each new market. That makes it difficult for start-ups whose business model is intended to be global and only scales - and therefore works - if the product can be offered in as many countries as possible. Regulation is therefore also a locational disadvantage for Europe.

These are the German fintech cities

Germany's most important fintech players, whether innovative banks or young companies, have settled in less than a handful of cities. A study by Barkow Consulting on behalf of comdirect saw Berlin in the lead in 2016 - at least when it came to start-ups. In Berlin So there are more of these up-and-coming youngsters than in Frankfurt, Hamburg and Munich together, it is said there. The other really important fintech locations: Frankfurt as the former financial stronghold of the state, Hamburg as the location of innovative traditional banks and Munich as the insurance and potential insurtech capital.

Frankfurt is undoubtedly one of the most important financial hubs in Europe, but is only slowly lagging behind when it comes to fintech. Measured against the favorable conditions, there are only a few start-ups and the state of Hesse did not know how to exploit Frankfurt's advantages over other cities for a long time. Hamburg On the other hand, it doesn't immediately come to mind when you think of financial services. Traditional institutes with innovation know-how such as the Sutorbank are located here. Last but not least, we at finletter put the city on the radar with Fintech Week Hamburg, which will take place for the third time in October 2018 and bring together industry participants from all over Germany. And then there would be Munichwhere insurance companies are big and with them the topic of digitization also plays a role in this industry. The high cost of living in the Bavarian capital is an obstacle for start-ups, but some well-financed companies like Scalable Capital are making a name for themselves here.

We have written down detailed insights into the fintech world in these four cities:
- Berlin
- Frankfurt
- Hamburg
- Munich

This is how you keep the fintech overview

Links and ways to stay up to date.

  • Subscribe to the finletter.With our weekly e-mail newsletter you will receive the most important news from the (German) fintech industry free of charge in your inbox every Friday morning. And if you have English-speaking colleagues who are interested in the German fintech scene, simply recommend our English-speaking finletters to others.
  • Visit events.The finletter event calendar keeps you up to date on which conferences and network meetings around fintech, insurtech, blockchain, etc. are taking place in Germany and neighboring countries.
  • Come to Fintech Week. In November 2019, innovations in the fintech industry will be on the agenda again for a week at around 30 different events with a total of up to 1,500 visitors. You can find out more at