Banks, digital wallets, and the future of mobile payments

Today, mobile payments. Actually, digital wallets. This annotation is important because the analysis’ centers around VR Bank HessenLand und Volksbank Mittelhessen introducing their pilot for smartphone-based mobile payment. Due to a payment-commoditization (payment goes from product to feature, see also PayPal and Raisin: payment-commoditization and FinTech-platforms), there is general agreement that mobile payment is to be integrated into another product. Candidates are banking apps, shopping apps, payment apps, and digital wallet. I am pro-digital wallets as they are inherently useful (they are better than analog wallets which are already – very effectively – used for mobile payment), combine the other products’ features and can create better solutions than those (e. g. contain new “things” such as virtual keys or to purchase new things such as parking tickets). Also, I argued that banks’ mobile payment solutions (exclusive for their payment methods) might make sense to them (by shutting out other payment providers they are prioritizing theirs) but not to the customer. As they give customers only a narrow choice of payment methods they turn customers’ payment behavior from paying with a wallet (with multiple payment methods) into paying with payment cards from one specific bank. Additionally, what speaks against such closed

PayPal and Raisin: payment-commoditization and FinTech-platforms

Recently PayPal announced a „strategic investment“ into Germany-based Raisin. Raisin is a savings deposit marketplace for savings interest rates. Whereas PayPal is known to be „the button“ for online payments, it has gone beyond being just a payment provider. In fact, when looking at their goals one could even go so far and question whether they are still a payment provider or rather a FinTech platform focusing on personal finance management. For instance, PayPal’s vision is: to democratize financial services, as we believe that managing and moving money is a right for all people, not just the affluent. Our goal is to increase our relevance for consumers and merchants to manage and move their money anywhere in the world, anytime, on any platform and using any device. [3] In regards to Acorns, the micro-investing service they have integrated into their app, they communicate their goal as: help consumers take better control of their financial lives. Part of this mission is to ensure we’re also helping people build financial wellness. And whereas one could shrug that off as marketing talk their product line-up suggests otherwise, namely that PayPal is indeed becoming a FinTech platform for personal finance management applications beyond payments: Online

NAGA, savedroid, and useful ICOs

byte heroes, HydroMiner, Wysker, and cointed (see here for the first three ) were one of the first DACH-based Initial Coin Offerings (ICOs). Now, with the recent ICOs (or announcements) of The NAGA Group and savedroid, we have a few more. Whereas there is no official definition of an ICO, most would agree that it is a way to raise money. However, it is important that a company should only ICO if there is clear demand for the token. Lack thereof will add unnecessary complexity to the business (with little to no upside benefit), threaten the token’s value and consequently lead to angry users and possible legal issues. Unnecessary complexity due to technical issues, lack of historical data, incompatibility and macroeconomic considerations Cryptotokens are still very early in several regards. Besides technical issues (e. g. scalability) lack of historical data (e. g. risk concerns, best practices, existences of bubbles) they are incompatible with users’ “past experiences” and there are macroeconomic considerations. Cryptotokens’ incompatible with past experiences Compatibility is defined as “the degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters“ [3]. Studies have shown that cultures who considered hot

Verivox, Outbank, and Clark: some disruption, FinTech-stack, and fighting incumbents

In November, the comparison portal Verivox acquired Outbank, a personal finance manager (PFM) who temporarily filed for bankruptcy and aboalarm, a contract cancellation tool (Link to Outbank’s German press release, Link to Verivox’s German press release). A lot can be written about that. For starters, why they made that acquisition. Verivox’s reasons for acquisitions: response to CHECK24, additional marketing channel, and response to FinTechs/InsurTechs Looking at CHECK24’s — their primary competitor — recent moves, probably the most obvious reason is that Verivox made the acquisitions as a response to CHECK24. Furthermore, when considering that Outbank is layered atop Verivox, I am arguing that Outbank might be an additional marketing channel (to TV and search) and thus more important to Verivox than Verivox to Outbank. Finally, through that acquisition, they might, in fact, be responding to FinTechs instead of attacking them. Verivox’s reasons for acquisitions: response to CHECK24 In May, Capital (news in German) reported that CHECK24, one of Verivox’s biggest competitors, will be offering several „FinTech products“. Among them a contract management tool, a multi-banking feature and an expansion of their comparisons into fixed-term deposits. Whereas this was often quoted as an attack on FinTechs (amongst others Clark, WeltSparen, and Outbank),

kwitt, Lendstar, and Cringle: timing, feature vs. product, and activities-based banking

Venmo, MobilePay, Cookies, kwitt, N26’s MoneyBeam, PayPal, Wavy, Lendstar…and now Cringle. All of these services, apps, and companies have in common that they are used for P2P payments. Some of them failed, some of them are very successful, some will be and some won’t. Cringle, the Berlin-based startup, believes that it can be successful and has thus started their second crowdfunding campaign on Companisto (link to campaign). Besides P2P payments, Cringle also wants to offer a B2B payment solution allowing retailers and online shops to accept payments through Cringle. I won’t go into their B2B offering, but it merits to say that the German online payment market is dominated by PayPal, bills, debit and credit cards, and that the mobile payment space is yet to be dominated. Here I will look on their P2P payment solution. P2P payments not compatible with how money is handled in Germany and niche approach to circumvent incompatibility From a fundamental point of view Cringle’s success depends on process innovation. Process innovation can be defined along the following lines: „Process innovation means the implementation of a new or significantly improved production or delivery method (including significant changes in techniques, equipment and/or software)“ [8]. And Cringle is

ING-DiBa, N26, revolut: fairly good incumbents and FinTech re-unbundling

According to Gründerszene, the Berlin-based solarisBank might raise a Series B. Whether this will indeed happen does not matter (the news is actually from October). What matters, however, is solarisBank’s position in the FinTech value chain. solarisBank is a banking platform which owns a banking license and offers financial services such as bank account management, credit card issuing or KYC (know your customer) services. In short, the bottom of the stack, the infrastructure of FinTech companies — as some would say — the boring stuff. In contrast, N26 and revolut are doing the exciting, customer-facing stuff; offering an easy to use, nice looking banking app. From a strategic perspective, however, the „boring“ stuff, is actually the sexy stuff (if banking can be sexy at all). This is not only because solarisBank per se is attractive (in many cases they are the backbone of FinTechs), but also because N26 and revolut are playing in an extremely difficult market. Slow customer acquisition and market saturation Whereas there are several difficult things about banking, the one I am referring to is customer acquisition. For instance, Scalable Capital, a robo advisor partnering with ING-DiBa, shows how difficult customer acquisition can be and, in turn,

GETAWAY a German P2P carsharing start-up that got rejected on Die Höhle der Löwen (DHDL)

In the course of the German start-up show Die Höhle der Löwen (DHDL) GETAWAY, a P2P car sharing startup, pitched but got rejected. GETAWAY wants to enable spontaneous car renting. The investors rejected the start-up because they do not own the appropriate expertise, considered the valuation too high or because they thought that the capital required to get the company started was too high. Most of the money GETAWAY wanted to rise would flow into equipping each registered car with a hardware module that coordinates the sharing (tracking time and fuel, and allowing access to the car through the app). GETAWAY installs this hardware module and if you an early adopter in a certain area you will get it for free. Getting one car ready costs the company between 400€ and 450€. This is a lot of money especially if the startup does not charge for it. Hopefully (for GETAWAY, not users) it is a proprietor system so that no other competitor could build upon their infrastructure. The car’s owner determines the price you pay for a drive and insurance is included in it. The company wants to finance all that by a 33% commission. Edgar Scholler, the CEO of

€300 Million for paydirekt, €500.000 for happybrush

paydirekt might get €300 Million from its founders. It is estimated that paydirekt has already received €100 Million. At the same time, paydirekt’s CEO, Niklas Bartelt, should be replaced (from Süddeutsche). paydirekt was founded by a couple of German banks in 2015 and offers C2C and online B2C payments. Martin Zielke, board chairman of Commerzbank, argued back in 2015 that paydirekt was not founded with the idea of replacing the competition, but rather co-existing with them as — so Zielke — the online payment space has room for more than one company (from Süddeutsche). I agree with Zielke, but it is also a very undifferentiated market where people won’t switch unless given a very good reason. The most significant reason in C2B is network size, i. e. how many shops support the system. This significance of network size implies the vital role of pull marketing; there is little use in convincing people to sign-up for a new service now, so that they can use it later. Instead, people will access an online shop, realize that there is a payment solution they do not have – but need – and thus sign-up for that very service. paydirekt’s push marketing questionable This

Cara, a German PoopTech-startup, received a $2 Million investment for a food diary and tailor-made drugs

Cara is „Your personal food and symptom diary“ with which you can track your stool’s condition, your digestion, mental situation and the food you consume. Based on this information the app provides you recommendations on how to adapt your lifestyle and offers you tailor-made medicine called „Cara Biotics“ against your gut issues. Recently, the company behind the app received a two million dollar investment (link in German). This means that Cara operates in three markets: AI-based drug discovery Health tracking: stool’s condition, you digestion, mental situation and the food you consume Health treatment: recommendations and Cara Biotics Let’s first examine health tracking and treatment. Health tracking For this use case, the Cara app is simply a diary. There are two issues with that. Firstly, switching costs. Users can extremely easy switch between other apps especially as Cara allows you to export your data. However, data is what could lock people into the app, provided that they allocate enough of it. And this is the second issue; habitual usage. For Cara to be of real value users must use it frequently. Convincing people to use it regularly will be very difficult but not impossible.The Hook Model offers an interesting insight into

Sono Motors, a German car startup, crowdfunded €1 Million for the first car financed through the crowed

Recently Sono Motors, a German car startup, announced that they reached their €1 million crowdfunding goal only a few days after the start of the campaigns (on Seedrs and WiWin). The goal of these campaigns, which are still running, is to collect money to start the mass production of their first vehicle, the Sion, in 2019. Before that, Sono Monotors also crowdfunded money for the first prototype of the Sion and reached €549,895 on Indiegogo. The Sion by Sono Motors (Source) That is interesting because it is the first time a car is financed by the crowd and despite it being a car it has raised less money than other less sophisticated projects. The Pebble Smartwatch, for instance, has raised over $20 million. However, once you realize that they are a car coordinator instead of a manufacturer these comparisons make more sense. Sono Motors is neither manufacturing the components nor building the car itself. Nevertheless, the Sion is an interesting concept with some flaws, however. The Sion The Sion is an electrically powered vehicle that has solar panels on all non-glass parts of its body. The battery provides the Sion with a range of 250km. The on-car solar panels which the