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The merger of two fintechs specialised in the savings market could be an example of the next phase of fintech industry development.
As fintechs grow, merging with rivals could provide the best opportunity to cut costs, increase commissions and attract investments.
Last week, German savings and investment fintechs Raisin and Deposit Solutions agreed to come together to fuel European and US expansion.
Berlin-based Raisin has a business to consumer model which links consumers to financial services firms for savings and investments. Deposit Solutions, based in Hamburg, connects large businesses to banks through its business to business deposits marketplace. It uses open banking technology to enable it to offer customers competitive savings products.
Together, the two former rivals will have 400 financial service customers on its marketplaces, 500 staff and €20bn in deposits.
“We have been working on this merger for a long time,” said Tim Sievers, CEO and founder of Deposit Solutions. “With joint forces, we are going to increase our market coverage in Europe, build a significant presence in the US and pursue our mission to establish Open Banking as the industry standard in the global deposits business.”
“Deposit Solutions and Raisin have brought important innovations to a market that has been underserved for decades. Together we can achieve even more,” he added. “By uniting Deposit Solutions and Raisin, we’re transforming two German innovation leaders into a European champion with global ambitions.”
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Tamaz Georgadze, CEO and co-founder of Raisin, said the new company is “breaking down barriers and reinforcing our long-time vision for a single transparent market for savings and investment products”.
Sievers and Georgadze will be co-CEOs at the newly named Raisin DS.
Germany-based fintech entrepreneur Matthias Kroener expects more fintech competitors to come together to enable further growth. “Some of the concepts in fintech create a winner-takes-all environment, so they need to scale as much as possible to preempt the market,” he said. “By merging with a competitor you can increase revenues and increase commission, because you will no longer compete.”
He added that mergers of fintechs will also inevitably attract more funding.
One disadvantage, though, according to Kroener, could be technology becoming redundant, although he added that this is a minor issue in comparison with the opportunities for growth
Confidence in the fintech scene is clear, and the industry is still attracting huge investment. Only last week, payments giant Visa announced the acquisition of Tink, bringing the Swedish fintech’s open banking capabilities to its European business and consumer customers.
Thousands of financial services firms in Europe use Tink to give customers access to open banking services, such as account aggregation and financial management tools, through its application programming interface.