Matthias Kröner set up one of the first digital banks back in 2009 when he formed Fidor.
Fidor was launched in Germany before spreading elsewhere including the UK. It quickly gained momentum, through its disruptive tech driven business model, before being acquired by BCPE in July 2016.
I first wrote about Fido bank and Kröener in 2015, which you can read here.
Kröner left the company after 10 years when BCPE put Fidor up for sale by in November last year.
So what now?
Debt processing fintech Receeve is his latest venture, where he sits as an investor and advisor to the company, which solves a huge problem that all banks have.
A massive amount of money is lost to banks as a result of customers defaulting on loans. This reduces the returns for banks and in turn has to be factored in to future prices, which makes products more expensive and less competitive.
“At the end of last year Receeve approached me but as the CEO at Fidor at the time I felt I was in conflict,” Kröner told me. “But when I knew I was ready I picked up the phone and said to the guys ‘let’s move on.”
The company’s tech addresses the problem that companies face when they make loans. Some customers can’t pay them back and banks are really inefficient in trying to get money back. So much so that it is cheaper not to bother but rather sell the job of getting it back to an agency that specialises in it.
“Receeve is attacking one of the biggest problems in ecommerce and particularly for banks,” said Kröner. He should know as he has run a bank for the last decade.
He said the strength that the bank has is coming up with the funds but they are not very good at dealing with defaults efficiently.
For example if someone defaults the bank will write to them and try and get some of the money back. Then the default term will be in contact and try to agree new terms. Or if a customer is fully defaulting they will sell the debt to a collection company for a small amount.
“It is a lot of paperwork, a lot of administration and pretty old school for the majority of banks and they lose out massively,” added Kröner.
He said one of the attractive propositions of Receeve is in helps banks increase their returns without additional marketing spending or more loans, but by making what you have more efficient
Receeve puts tech in the middle of the process, said Kröner. It uses data science, machine learning as well as digital message to modernise the archaic processes to recover money used by most banks.
He said banks might have two members of staff armed with Excel spreadsheets looking at whether people are in default, and without even contacting them sell the debt in 60 days. “Once you sell off the loan you realise the losses because you never get anymore back.”
He said it is too expensive for a bank to go through the process of contacting the customer and trying to recover the money.
So Receeve changes this. The tech in the middle includes a strong data model and machine learning. “You have so many early indicators about a customer’s life that a bank could intact a customer with new terms before it becomes a problem.”
Receeve also modernizes how the bank will communicate with defaulting customers with letters replaced by regular digital messaging which puts the bank much closer to the customer
“The aim is to reduce the number of customers you sell to a collection company,” said Kröner. “It is more empathy at the end of the day,”
If a bank sells the debt a once valuable customer, who might have good reason to be in default, will be gone forever. “If you put a customer in the hands of a hostile company they are not going to ever come back to you as a customer,” added Kröner.