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Bi-Monthly April 2024

United We Thrive:
Why Collaboration is Finance's Future

For over a decade since 2008, innovation within established financial institutions has come to a grinding halt. The financial services industry had been at the forefront of innovation, constantly being among the first to adapt new technologies to offer services such as phone banking, call centre services, mobile banking, and electronic payment processing. Following the shock, financial organisations were now occupied with sailing through the turmoil and staying compliant with the tsunami of new government-imposed rules and regulations.

While the financial industry was in the worst crisis it had ever seen, technological innovation was transforming other industries at an unprecedented pace. In 2008 and beyond, we saw the rise of the iPhone, Facebook, Airbnb, Amazon and Alibaba, among others. This gap allowed fintechs like N26, Raisin, and Scalable to emerge and capitalise on new customer expectations. Fuelled by seemingly infinite venture funds, fintechs leveraged their agility and customer-centric approach to achieve remarkable growth rates and valuations.

However, in the post-pandemic world, fintechs have encountered strong headwinds while banks have been narrowing the gap in the innovation race. Valuations have come back down to earth, the cost of capital has increased substantially, and many solutions have been uncovered as interesting but not transformative. The astonishing growth has attracted a lot of attention from customers and investors, but also intensified regulatory scrutiny. A case in point is the Wirecard scandal, where recent discoveries around Wirecard’s COO Jan Marsalek using his position to facilitate violent clandestine operations for Russia remind us how important regulation is, and also how painful (and embarrassing) the fall of Germany’s largest fintech at the time was. The time has passed when supervisory bodies turned a blind eye to newcomers. Fintechs find it increasingly difficult to expand in this restrictive environment. Interestingly, managing regulatory requirements is an area where traditional financial service providers have excelled over the past 15 years to stay operational.

Collaboration as the New Frontier

As the fintech industry grapples with the challenges of maturity and as banks and insurers look to accelerate their product development and market entry timelines, the stage is set for deeper cross-generational collaboration and alignment. Fintechs can gain access to low-cost distribution, capital, and regulatory compliance expertise, while banks and insurers can tap into the innovative potential fintechs offer.

The industry has already seen numerous success stories. For example, Deutsche Bank collaborates with over 30 fintechs and startups through its API programme, with the 'Finanzguru' app being a standout innovation. This app deploys AI to offer highly personalised saving tips, provided the bank's customers agree to share their transaction data. In our previous article, we explored how Generative AI can empower banks and insurers to combat the new wave of financial fraud. Ico-Lux, the winner of last year’s Fintech Germany Awards, partnered with major German health insurers to develop an AI-driven service that proactively detects fraudulent receipts before they are processed for payment.

Raisin, a German fintech unicorn, went so far as to acquire a smaller Frankfurt-based bank. This move not only secured the necessary licences for Raisin but also ensured regulatory compliance, simultaneously introducing process innovations and new technologies to the traditional banking institution.

The financial ecosystem is on the cusp of a renaissance, where the combined forces of old and new will lead to the development of new business models and ensure ever-growing customer expectations are met. As with every partnership, communication is key, which proves difficult when two different generations are involved. Especially in Germany, where the fintech industry is fragmented across several cities with Berlin being by far the largest, it is imperative that we create an environment that fosters collaboration, knowledge sharing and development of the ecosystem overall.

Architects of Change: Steering Fintech Towards the Future

The success factors behind a thriving fintech are no secret but need to be managed well with a clear strategic vision. Ecosystem builders play a pivotal role in this process, offering guidance to fintech companies throughout their lifecycle. Ecosystem builders support fintechs from the early development phase - sometimes starting in a founder's basement - all the way to a successful exit, whether through acquisition or an IPO.

A thriving fintech ecosystem hinges on four pillars: knowledge, capital, market access, and regulation. Knowledge involves recruiting global talent and providing local talent with development and knowledge exchange opportunities. Capital is essential for scaling operations, necessitating investor-friendly environments. Market access includes building relationships between fintechs, potential clients, and marketing experts. Lastly, navigating regulatory landscapes is crucial, as seen in Tokyo's challenges with transparency in licensing. Successful ecosystem builders not only guide through these areas but also advocate for the ecosystem's collective interests.

Berlin: Embracing Change and Forging Ahead

Berlin’s unique history has been both a blessing and a curse. During the divide, major companies relocated to cities in Western Germany, drawn by political stability and economic opportunities, which left the city in a state of economic despair. Despite the challenges, Berliners had to learn how to make a place feel like home, leading to the creation of a unique vibe and a vibrant techno scene. After reunification, the city's appeal and affordability attracted young, talented individuals from Germany and across Europe. This influx of talent, in turn, attracted companies, solidifying Berlin's status as the leading fintech hub on the European continent.

However, in the post-pandemic landscape, Berlin is facing new challenges, with housing prices comparable to other German cities, depleted talent pools, and a stricter regulatory environment. Now is the perfect time to consolidate our efforts to reinforce Berlin as a fintech hub. The Berlin Finance Initiative (BFI), Investitionsbank Berlin (IBB), Berlin Partner for Business and Technology, the Senate, and several key industry players have joined forces to provide Berlin with the ecosystem builder it deserves: The House of Finance & Tech. We will be announcing further details soon - stay tuned and follow our LinkedIn page to ensure you don't miss any updates. If you want to actively participate, get in touch at

Author: Günther Petelin, Senior Advisor BFI

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