When Brands Become

The development of embedded as evidenced by the German e-commerce industry Content

3 Foreword

4 Executive summary

5 What is embedded finance? The development and function of embedded finance The origins of embedded finance The current development What is the impact of embedded finance? Why is embedded finance relevant today?

10 Key dimensions of embedded finance Identification/KYC Account From user account to account Payments Cards The growing importance of virtual credit cards Credit Digital Assets The potential of embedded finance

24 Industry development and potential Embedded Finance at the industry level

27 Deep dive: e-commerce in E-commerce in Germany – an overview The digitalization of retail in Germany Embedded finance in e-commerce The conversion potential in German e-commerce The e-commerce matrix Conversion potential based on trust indicators Conversion potential based on the direct survey Using an account Using a Using a credit product Conversion potential – conclusion Market potential of embedded finance in Germany

41 What’s next?

Content 2 Foreword

Traditional banks are having a tough time. Years of These brands have recognized that by enriching low interest rates have squeezed margins to a sliver their products with they are able and Basel IV has dampened their maneuverability – to benefit from higher customer stickiness, more or so they say. But what if external factors are not touchpoints and additional revenue streams. Further, the key driver in their decline. What if, in fact, their if these players can augment the wealth of user data centuries-old business model needs to be rede- at their fingertips – data they already harness when signed? What if the next account you open or the assessing spending behavior – they can offer their next you take out won’t come from your bank, customers tailored financial solutions at a quality but from your favorite e-commerce shop? And what that is indistinguishable from that of a personal if I told you, that this has already been going on for financial advisor. some years, with the biggest wave yet ahead of us?

Any company can become a fintech Embedded finance: financial services seamlessly synced with life In Germany alone, there are over 100 million checking accounts. We expect that in the next years half of The idea of embedded finance, also often referred financial services in Germany will be provided by to as contextual banking, is to “embed“ financial non-bank brands and challenger banks. That would services directly into the products of other non- be more than 50 million accounts up for grabs. This bank providers. This way, the financial service is figure multiplies as you look beyond Germany to the available precisely at the time and place it’s needed. wider European landscape. Specialized providers are enabling this by integrating services such as bank accounts, payment cards and With an opportunity of this magnitude, the ques- lending services seamlessly into the offerings of the tion is not if, but when, brands will become the new likes of Apple, , or Walmart. banks. We are only at the start of the journey for embedded finance, but time is running out for big brands if they want to win first-mover advantages.

Dr. Roland Folz Chief Executive Officer, Solarisbank AG

Foreword 3 Executive summary

Embedded finance describes the integration of This study examines the conversion potential of financial services into non-bank products and embedded finance on the basis of the e-commerce business processes. As digitalization continues sector in Germany. By analyzing 21 leading e- to advance, embedded finance is becoming in- commerce providers in Germany, it can be shown creasingly relevant to the market. that that the interaction rate with the customer, as well as the customer‘s satisfaction, allow an approxi- Compared to other sectors, retail is particularly mation of the conversion potential of e-commerce predisposed for the integration of financial services: customers adopting embedded financial services. The rapidly growing sector is highly digitized and al- The 21 e-commerce providers chosen cover the ready reaches around three quarters of the German central retail segments of fashion, electronics & population today – with all signs pointing upwards. media, hobby & DIY, furniture & household as well as groceries & toiletries. Streamlining the user journey to match customer needs; enforcing a continuous digitalization; Along these parameters, the method can be applied establishing a network of partners to strengthen to all other providers in the e-commerce sector. customer loyalty - for many companies with a B2C focus, these developments have been well under- In addition, this procedure can be replicated to es- way for years and offer the opportunity to make a timate the conversion potential in other industries, move into financial services. simply by adapting the respective industry-specific indicators.

In order to prove the conversion potential for the e-commerce sector in Germany in terms of con- crete values, a survey with a representative sample was conducted to directly determine the usage of the 21 e-commerce providers and the willingness to obtain financial services from these brands.

The survey shows that a total of 61 percent of respondents are willing to use financial services provided by the brands analyzed. The results reveal that the conversion potential for embedded finance in Germany is already very high and, in view of the particularly high approval rates among younger respondents, is still growing. The analysis thus directly confirms earlier studies from the USA for the German market for the first time.

Executive summary 4 What is embedded finance?

„Banking is necessary, banks are not.“

This is how Bill Gates summed up his view of the development of the financial industry back in 1994. 27 years later, financial services are still generally handled by banks. More recently, however, Gates‘ forecast seems to be material- izing – banks have long since ceased to be the sole providers of banking services. Fueled by the massive wave of digitalization, embedded finance - also known synonymously as contex- tual finance and contextual banking – is spur- ring on a shift to „banking without banks”.

What is embedded finance? 5 The development and function of embedded finance

Embedded Finance is the integration of financial The current development services into products and business process- es of non-banks. It describes the cross-industry – convergence of financial services in products from companies not originally from the financial sector. In a digital world, offering These include retailers, mobility providers and, embedded finance has be- crucially, big technology companies. There is a simple economic rationale behind this: providers come much easier for a wide who „embed“ financial services into their products variety of companies. This deepen the value creation in their original sphere of business – and are able to penetrate new mar- opens up the possibility for kets. other sectors who may not have originally considered The origins of embedded finance the option. While integrated financial services are gaining – momentum in many industries today due to deep- er digitalization, it is by no means a new concept. Companies do not have to hand over the customer The idea behind embedded finance dates back relationship to a bank, but can maintain direct cus- nearly 100 years. In 1926, the Ford Credit Bank tomer contact throughout the entire value chain. was the first „automotive bank“ to be founded in They integrate the financial service seamlessly into Germany. Today, almost all major car manufactur- their customer journey, as opposed to ushering the ers worldwide have banks as part of their corpo- user back and forth between different user inter- rate structure: for most people, the car was and faces. The check-out process of an online store, for is a purchase that requires financing. Against this example, is designed in such a way that customers background, it is worthwhile for the Original Equip- do not have to leave the site. The payment process ment Manufacturers (OEMs) to offer this financing is fully integrated, and processing takes place in the themselves. background.

What is embedded finance? 6 The provision of financial services requires a li- What is the impact of cense. So called “Banking-as-a-Service” providers embedded finance? therefore serve as the basis for embedded finance. Businesses partner with banks that contribute the – corresponding license. Today, a large number of providers covering different product ranges have In principle, an embedded established themselves in this segment. Along finance offering is applicable with the banking license, they offer suitable solu- tions ranging from parts of the infrastructure to the to any business that sells a entire technology and product platform. From the service or product. perspective of the end customer, the brands always remain in the forefront, while the Banking-as-a- – Service provider remains in the background. A transaction is not complete until the product is This can already be observed in the retail sector, paid for. If businesses succeed in keeping the finan- for example. Many retailers now offer installment cial processing in their own hands and integrating it or (zero-percent) financing themselves, en- seamlessly, there are opportunities to strengthen the abled by a in the background. connection with the buyer beyond the mere payment This type of interaction drives the disintermediation process. Businesses can boost the customer value, of the banking sector in general and the customer‘s for example, by increasing the average shopping cart respective principal bank in particular. As a result, value through zero-percent financing, or by offering the distribution channels for financial products are a bonus program linked to the company‘s branded transforming. credit card.

Simultaneously, the revenue streams of traditional For non-banks, embedded finance creates new banks are coming under increasing pressure. This revenue opportunities at low marginal cost. This trend is further reinforced by the introduction of applies not only to new customers, but equally to the PSD2 directive. ‘PSD2’ as it is known in the existing customer relationships. Customer loyalty industry, aims to level the playing field for market and repeated purchases are encouraged. At the participants. The directive promotes the develop- same time, it is precisely these characteristics – ment of innovative online payment options and loyalty and frequent contact with the provider – that channels, while improving security act as an incentive for customers to adopt integrat- consumer protection. ed financial services to ease their customer journey.

What is embedded finance? 7 Why is embedded finance relevant today?

The evolution of banking has been a hot topic recently, this is changing at an increasing pace. for years. , i.e. the open access to Neobanks are gaining ground in the retail mar- customer and transaction data, is liberating the ket. A customer-centric approach is meeting the financial industry and enabling the integration of changing demands of digitally savvy customers. financial services into larger ecosystems. Banking- The favorable conditions offered by neobanks as-a-Service is a component that translates this compared with many long-established institutions opportunity into a concrete, customer-centric encourage customers to switch or set up second or use case. third accounts. And last but not least, the providers are betting on large and growing ecosystems: by Open banking had been hailed for its disruptive integrating with a user-centric partner network, potential for years, but with little evidence to neobanks can exploit platform effects and show for it in the retail market. However, more strengthen their customer loyalty.

Top 500 global banks, payment providers and fintechs* Share of market capitalization, in %

100

80

60

40

20

0 2010 2012 2014 2016 2018 2020

* Estimated value used for private fintechs Fintechs Payment providers Banks Source: The Economist

What is embedded finance? 8 For a long time, established financial institutions banks are at a distinct disadvantage, as their com- were able to counter such developments with plex IT legacy cannot compete in the short term with a key advantage: a massive trust advantage. In the capabilities of the technology-focused neobanks hardly any other industries does trust carry more and technology providers pushing into the market. importance than in the financial industry. The public‘s trust in banks presents a significant hurdle This further opens the door for embedded finance for new providers in the financial sector. However, offerings for many brands. After all, they possess what was once a defensible moat has begun to the trust and loyalty that is required to convince their be bridged: Trust in banks has waned; the conse- customers of their own financial services. quences of the 2008/09 financial crisis in particular have caused a sustained loss of confidence.

In addition, many customers are taking a different approach to traditional financial services. The former basis of trust for banks, namely personal interaction offered through a vast branch net- work, is no longer in demand. Instead, the focus has shifted entirely to the service itself. For years, banks have been closing branches in response to cost pressure, falling demand and the offerings of direct banks and neobanks. In doing so, they are inadvertently entering into direct competition with the online providers. In this arena, many established

Bank branches in Germany

40,276 39,799 38,336 38,225 37,292 36,005 33,914 31,949 29,670 28,384

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Deutsche Bundesbank

What is embedded fi nance? 9 Key dimensions of embedded finance

For businesses, offering financial services is an attractive tool to develop their customer relation- Financial Services ship. They can deepen customer relationships, simplify transactions via the seamless integra- tion of financial processing, andtap into new lines of business. For this to succeed, regulatory Identification (KYC) requirements must be met.

User account

Key dimensions of embedded finance 10 Identification/KYC

A core component of the regulatory requirements for A significant further development is the video iden- the processing of financial services (at least for the tification, which enables KYC procedures on mobile German market) is the identification of the customer devices. This way, customers can identify themselves through the so-called Know Your Customer principle from any location, as there is no need to go to the (KYC). In this process, information about the user’s post office or branch. The downside is that the video financial circumstances is collected according to the identification is not infinitely scalable, relying on call type of financial service requested. The complex- center agents to perform the identification. This can ity of this process increases as you move beyond result in longer wait times with rising identification re- mere payments to direct debits, loans, insurance or quests which could lead to increasing bounce rates. investments. This process plays a central part in the The customer themselves, on the other hand, can customer relationship: it must meet the regulatory carry out the identification at any time and from any requirements without compromising on a fast and location, as there is no need to go to the post office or frictionless user experience, or else the customer bank and check the identification there. may abandon the process. Another option is the Bankident method: If the Thus, the KYC process is a balancing act of customer already owns a verified , they simplicity and security can carry out a microtransaction from this reference account, receive an SMS TAN, and use it to create ▪ Retailers and relevant brands in a sector want to a qualified electronic signature. This identification make their offers as attractive as possible for process does not require any human interaction, and customers. is therefore infinitely scalable and entirely indepen- dent of opening hours, allowing for a seamless user ▪ At the same time, they need to comply with experience. regulatory requirements and minimize the possi- bility of fraud. A future possibility is sketched out by the idea of KYC sharing, wherein financial service providers This can be achieved via different approaches. share their customers‘ KYC data directly with each other so that the customer does not have to identify Some procedures rely on personal identification, themselves over and over again for each application. for example at the post office or a branch – a process that is not particularly attractive in To offer an embedded financial service, the chosen terms of user experience. KYC approach will consequently play a central role. The deepening digitalization of many areas of life has increased customer expectations for ease of use while also creating new opportunities for the friction- less integration of this process into the transaction.

Key dimensions of embedded finance 11 Account

The account is at the core of the financial world. In addition, there is the possibility of linking further All payment, credit and even crypto services can be services like bonus or loyalty programs with cash- processed via the account. The account is thus also back rewards directly to the account, further subsi- the center of all embedded finance solutions – it is dizing the core business. both the first step into the financial services offer- ing, as well as the basis for the entire ecosystem of further financial products. Businesses that have guided their users through the KYC process to open an account are in a strong position to layer further financial services on top of it. This leads to a lock-in effect, since switching to another provider would necessitate opening an account again. At the same time, the business strengthens their core offering by reinforcing the connection to the user and broaden- ing the basis for touchpoints. Credit

Card

Bank account

Digital assets

Payments

Key dimensions of embedded fi nance 12 Use Case: Banking From user account to bank account

In cooperation with a German financial institu- By offering financial services, businesses are tion, the German Telefonica subsidiary o2 offers evolving what was previously just a user account its customers the “o2 Banking” service, a current into a „fully comprehensive“ bank account. By account with add-ons such as a debit or credit linking user and behavioral data with payment data, card. The account can be controlled via the so- customers can be offered finely tailored (financial) called “o2 Money app”, in which customers are services that match their personal requirements able to manage and control their via and circumstances much more closely. This cre- . Similarly, the and Google ates an offer for customers in which core and Pay payment services can be integrated with financial products stand side by side. Since they al- the banking account. Further, customers using ready have existing customer relationships through o2 Banking can participate in an interest bonus their core products, these businesses have far program. lower customer acquisition costs for their financial service offerings compared to traditional banks. Prime examples for this include the automotive banks in Germany, such as Volkswagen Financial Services, but also Google Pay and Uber.

Average customer acquisition costs in US$

315 303 213 98 80 10 7 Telephone Banking / Real Estate Transport E-commerce Retail Travel services Insurance

Source: Proof Technologies

Key dimensions of embedded finance 13 For providers of financial services, it is thus essential Use Case: Uber that the account is anchored as the basis for fur- ther services. From the customer’s perspective, on Mobility service providers Lyft and Uber are the other hand, the account is by and large a mere offering their own bank accounts to their drivers commodity product. The potential for differentiation with the aim of connecting drivers with their is low and competition boils down to cost efficiency billing system as quickly and easily as possible, and brand strength. The integration of financial reducing the transaction costs for both parties. services into the Starbucks app, for example, For more than a third of its drivers In Mexico, allows customers to conveniently and quickly pay who previously did not have access to financial for their coffee with one click. Starbucks, in turn, services, Uber is offering debit cards coupled saves transaction costs, increases its customer with their respective Uber accounts. loyalty and receives additional information about its customers and their habits. Uber also uses instant payment methods for about 70 percent of its payments. As long as the funds remain on the credit card, which Uber issues in the U.S. in partnership with Visa and GoBank, the card is free to use. In addition, both Uber and Lyft have a worldwide cashback program that pays back about one percent for every payment made with the credit card at participating partners, next to further discounts at selected partners.

Key dimensions of embedded fi nance 14 Payments

With payment processes increasingly being integrat- directly by the respective application. This seamless ed directly into digital user experiences, traditional integration of payment transactions into the user financial service providers are losing touch points experience takes place without any interruptions and with their end customers. For instance, consumers with a minimal number of clicks. Uber or Free Now no longer need to have cash on hand or access their are good examples of early adopters of this in the bank account when paying for a cab ride or a meal mobility sector. delivery. Instead, the payment is initiated digitally

Most popular online payment services in Germany 2020 “Which online payment services have you used in the last 12 months?”, in %, multiple answers possible

6 3 14 Apple Pay BillPay 8 4 Paydirekt Skrill

22 13 Amazon Pay Google Pay

95 42 PayPal Klarna

Source: Statista Global Consumer Survey

Key dimensions of embedded finance 15 Use Case: Major US technology groups such as Apple and Google also offer integrated financial services. At the end of October 2020, the South Korean Apple launched its Apple Pay digital wallet back electronics company Samsung launched its in 2014 - initially only in the USA. Google followed Samsung Pay service in Germany. Samsung suit a short time later with Google Pay. Both apps is supported by Solarisbank, which provides a function as wallets. Ultimately, payment cards – virtual debit credit card as a payment method both purely virtual or traditional physical cards – are and a free account for settlement. A „buy now, connected to them as a means of payment. How- pay later“ option called “Splitpay” is also inte- ever, these do not necessarily have to be the cards grated: For purchases over 100 euros, the cus- offered by the technology companies themselves. tomer can choose to pay the amount in install- After initial registration, the consumer makes con- ments, instead of paying the full purchase price tactless payments with his smartphone via Near immediately. Payments with Samsung Pay can Field Communication (NFC). be made via various devices such as cell phones or the Galaxy Watch.

Online payment methods in Germany “Which of the following payment methods have you already used when paying online?”, in %

PayPal 85

Invoice 77

Direct debit 57

Credit Card 53

Prepayment 45

Instant bank transfer 42

Amazon Pay 23

Financing / Installment Payment 16

Cash on delivery 15

paydirekt 12

giropay 10

Apple Pay / Google Pay 6

Source: ibi research

Key dimensions of embedded finance 16 Cards

Another payment trend is the integration of Use Case: Lufthansa (virtual) payment cards. These serve as a supple- ment to the account and are an important means The German airline Lufthansa offers credit cards of establishing and maintaining an ongoing con- to its customers through its „Miles and More“ bo- nection with the brand. The customer carries the nus program that not only has a payment function card with them at all times and interacts with the with the option to collect bonus points, but also brand every time they make a payment. includes travel cancellation and travel interruption insurance, comprehensive rental car insurance Bonus programs for shoppers have already been and international travel health insurance as stand- on the market for many years. Once these are ard in the Gold variant. Other packages, such as linked to a payment card with loyalty programs insurance against loss of baggage or travel acci- however, they become far easier to use from the dent insurance, can also be added as an option. customer‘s point of view. There are many examples of this on the German market alone. Lufthansa, for example, offers a credit card linked to insurance products through its frequent flyer program „Miles and More”. Deutsche Bahn offers a similar model with its BahnCard credit card. in retail “Have you ever made a contactless payment at a Directly coupled to the option of offering a bank retail store?”, in % account as a central service hub is the possibility Yes, by tapping a of extending the service suite via (virtual) debit 44 and credit cards at favorable conditions. 66

Yes, by tapping a credit card The sports watch manufacturer Garmin has already 20 integrated a payment option in some of its models. 25 Likewise, digital payment via Swatch Pay is even Yes, with the smartphone possible with some semi-analog watches from 6 the manufacturer Swatch. In Germany, the major 11 customer loyalty program Payback has already been on the market since 2016 with its Payback Yes, with a wearable 1 Pay service. 2

No, never 45 25 2019

Source: Visa 2020

Key dimensions of embedded finance 17 The growing importance Use Case: Amazon of virtual credit cards Amazon, the world‘s largest online retailer, uses its credit card to incentivize its users to Specifically for online payments, more and more buy from its own online shop, rather than from providers are offering virtual credit cards. Users competitors. When paying for purchases with receive digital access via password and user name the company‘s own credit card, customers as well as credit card number and validity – but receive points, which in turn can be used as (typically) no physical card. While a KYC process is credit for purchases at Amazon. required for the application, virtual credit cards can function according to the prepaid principle, which Premium members of Amazon Prime receive supposedly offers users greater when the credit card free of charge, so there is an making online purchases. additional monetary incentive to extend mem- bership status.

Key dimensions of embedded finance 18 Use Case: Apple Card

The American tech company Apple has been active in the field of embedded finance since 2014 with its Apple Pay payment system. Initially, the company offered a wallet in which the payment options of other providers could be stored. The company‘s own Apple credit card – the Apple Card – was then launched on the US market in 2019. The Apple credit card comes in a virtual format that allows contact- less payment with the iPhone or the Apple Watch as well as in the form of a physical credit card that can be used wherever contactless payment is not possible.

Apple‘s bonus program is designed to reward customers more for payments with the digital credit card than with the physical one.

According to Apple, the bonus is credited to the customer immediately and can be used for all purchases, even outside of Apple. The bo- nus is highest however when the Apple credit card is used for purchases at Apple or select partner companies. In this case, the so-called Daily Cash is 3 percent of the payment value.

The Apple Card works similarly to an ordinary revolving credit card, which means that it charges interest on the amounts that are not repaid directly. The Apple Card has so far only been on the market in the USA.

Key dimensions of embedded finance 19 Credit

Integrated lending has a broad range of applica- tions – if you consider the automotive banks that have been active in Germany for almost 100 years, it is something like the mother of embedded finance. oday, almost all major automotive manu- facturers offer integrated credit solutions through their own banks. In the automotive sector, the sheer size of the transactions is the primary driver for this need.

Through a similar mechanism, Lending-as-a- Service is also increasingly being used. For the majority of consumers, the most expensive purchase of their life is that of a property - the number of properties financed at least in part by a loan is close to 100 percent, and loan amounts in recent years have risen significantly in the wake of the property boom. The market is huge – and the opportunity for integrated financial services is vast. A further realm that has so far been of im- portance primarily in the U.S., but increasingly in Europe as well, is the integration of student loans.

In other segments, the motivation of users to finance a purchase is sometimes different – but therefore no less relevant for the integrated offering.

So-called „buy now, pay later“ (BNPL) models are currently experiencing a breakthrough in many retail sectors. They enable customers to pay for purchases, particularly larger ones, in several small installments over an extended period of time. This is where the distinction between payment and credit becomes blurred. When a shopper opts for a BNPL option instead of paying with their credit card, they are (implicitly) taking out a loan.

Key dimensions of embedded finance 20 Use Case: Shopify Shopify, for example, has not only been able to reduce transaction costs for its customers by In addition to enabling their customers to set integrating the financial processing of purchases up their own online shop, Shopify also offers made via the platform, but has also been able to the payment processing for the goods sold open up an additional source of revenue for the in the shop. Sellers can offer their respective company itself. customers various payment methods directly in their online store, such as payment on account The transition from the original payment or by credit card. Installment credits or BNPL process to credit occurs seamlessly. options are also possible. Such BNPL offers are best practice examples of This integration of applications for the financial how non-financial e-commerce companies can processing of purchases made via the platform embed financial services into their customer jour- has enabled Shopify customers not only to ney. On the one hand, the customer gets greater reduce transaction costs for their respective financial flexibility. On the other, the merchant can customers, but also to open up an addition- boost their conversion rate, increase the average al source of revenue for themselves. In 2019 value of the shopping cart, and generate addition- alone, Shopify generated nearly $400 million al interest income. in revenue from its payment capabilities. In the third quarter of 2020, Shopify will reach a vol- ume in payment transactions of around 14 bil- lion US dollars. Shopify earns between 2.4 and 2.9 percent on each transaction, plus a base fee of between $0.25 and $0.35 per transaction.

The business also extends additional credit to qualified merchants on its platform with a 12-month term. The frictionless credit process is handled entirely via the Shopify account.

Key dimensions of embedded fi nance 21 Digital Assets

Digital assets such as cryptocurrencies are currently Use Case: Facebook particularly suitable for scenarios in which many users transfer small amounts among themselves. Facebook caused a public stir with the announce- This is especially true for gaming, social media ment of its own cryptocurrency Libra. Since then, and streaming platforms with many millions of the currency has adopted the new name Diem. users. Going forward, they will benefit significantly The currency is accessible via the company‘s from the advantages of blockchain technology and own wallet Novi. With the establishment of an carry out free transactions in real time without banks own currency, Diem and Novi are on the path of as additional intermediaries. For businesses, this a very deep integration of financial services. The represents an opportunity to increase the rate of currency will not only be usable for Facebook‘s interaction with their customers and learn valuable homegrown solutions, but will also be accepted by data about their customers‘ preferences and pur- partner companies. The currency has been subject chasing intentions. to criticism from politicians and regulators due to exchange rate and liquidity risks, among other This is one of the reasons Facebook has been factors. Facebook‘s ability to use Diem to further developing its own , the so-called expand its already considerable market power and Diem – originally launched as Libra. However, such prevent competition is also viewed critically. digital currencies will also lend themselves for the processing of larger transactions. For example, the carmaker Tesla recently announced a $1.5 billion investment in Bitcoin – coupled with the announce- ment that it intends to accept Bitcoin as a means of payment from its customers.

The same applies to the crypto-as-a-service sector. Businesses such as Paypal, Robinhood and Revolut are integrating the aforementioned services, including crypto trading and crypto custody, directly into their product offering. In the German market, there are already regulatory frameworks in place that require digital asset custodians to obtain a respective license.

Key dimensions of embedded finance 22 The potential of embedded finance

Venture capital investor Andreessen Horowitz Development of embedded finance, estimates that software companies alone can at forecast least double, and in some cases quintuple, their In billions of euros revenues by integrating financial products into their CAGR „software as a service“ applications. 2020 2025 in %

Wealth Lightyear Capital estimates that the embedded 0 2.6 - finance market will grow from its current level Management of around €22.5 billion to approximately €230 bil- Consumer loans 1.4 15.7 62 lion globally by 2025. This corresponds to average annual growth of almost 60 percent. The invest- ment firm Bain Capital also estimates that the total Insurance 5 70.7 62 attainable revenue from embedded finance in the U.S. alone will be around € 3.6 trillion by 2030. Payment services 16.1 140.8 54

Three trends in consumer behavior are driving this Soruce: Lightyear Capital growth in embedded finance:

▪ A shift in purchasing behavior toward online The technology company Tribe Payments has shopping, which has been accelerated by the determined the following in a survey of 125 fintech corona pandemic. managers: Nearly a quarter of respondents expect businesses outside the financial sector – particu- ▪ An increasing receptiveness to use financial larly large tech companies – to compete on equal products even from businesses that are footing with banks through the use of embedded not part of the traditional financial sector – finance. A further 28 percent even assume that especially for simple services such as payment they will dominate the financial sector, but will have processing. to cooperate with financial institutes in the process due to high regulatory requirements. Almost three ▪ The growing willingness to share out of four respondents consider machine learn- with businesses. ing to be the most significant trend in this context, followed by the and automation processes, as these trends significantly facilitate the use of in non-financial companies and enable economies of scale..

Key dimensions of embedded finance 23 Industry development and potential

Today, embedded financial services already appear in many businesses across different industries.

Whether embedded finance is likely to be implement- ed in any given industry cannot be roundly predicted. Sectors differ in their structure; the way their custom- er relationships have grown historically and regulatory issues must also be considered. A precise analysis at the company level therefore ought to be carried out on a sector-specific basis.Nonetheless, there are also indicators at the macro level of an industry that can be used to approximate the conversion potential for embedded finance.

Industry development and potential 24 Embedded Finance METHODOLOGY: at the industry level The digitization (y-axis) of the industries is taken The industry matrix shows a selection of industries from the economic index DIGITAL, which Kantar arranged according to their level of digitalization and TNS conducts on behalf of the German Federal the degree to which they use services from custom- Ministry of Economic Affairs. Specifically, the 2022 er experience (CX) consultancies. projections from the 2017 survey were incorporated into the matrix, as these reflected future expecta- The matrix thus covers two key indicators that favor tions. A comparison with other digitization indices the integration of financial services: at the industry level confirms the results.

▪ The more deeply an industry is digitalized, the The value for CX consulting (x-axis) was formed easier it is to seamlessly integrate fi nancial using the Digital Experience Services study services into operations. (Lünendonk, 2020). A survey of service providers in the field of CX and the industries in which they are ▪ Customer centricity plays a role insofar as the active shows how focused various industries are integration of payment processing and other on this topic area. The values plotted in the matrix services should improve the customer experi- show the proportion of industries in which CX con- ence - businesses and industries that place sultants and solution providers are “very strongly” greater emphasis on CX have a greater incen- or “strongly” active. tive to focus on embedded fi nance.

Based on the macro analysis: three stand out in the overview of selected industries as having high potential for embedded finance: Information and communications technology (ICT), financial and insurance service providers, and retail.

Industry development and potential 25 CX-Consulting

90

Retail

Mechanical Engineering

Other manufacturing industries

Automotive

Financial and insurance service provider (insurance)

Energy and water utilities

Transport Chemicals ICT and and pharmaceuticals logistics

Healthcare

30 Digitalization

30 90

Sources: Lünendonk (2020), Kantar TNS Industry development and potential 26 Deep dive: e-commerce in Germany

E-commerce in Germany – an overview

According to the industry matrix, retail is most predisposed for the integration of financial servic- es. Not only does it show the highest value for CX processes, it is also at the forefront of digitali- zation. The industry is already highly digitalized, which is reinforced by the continuously growing share of e-commerce.

What‘s more, retailers are reaching a large num- ber of users with this digital offering: the penetra- tion rate of e-commerce in Germany was 75 per- cent in 2020. It no longer represents a mere niche, but a widely accepted form of shopping.

Deep dive: e-commerce in Germany 27 The digitalization of retail in Germany Embedded finance in e-commerce

Retail is one of the industries that have digitized E-commerce is an industry with a very large poten- in a fast and highly visible manner. From 2000 to tial for embedded finance – and not just in Germany. 2019, e-commerce sales in Germany increased This arises from a number of factors: sixty-fold from 1.1 billion euros to 59.6 billion euros. The COVID pandemic and the subsequent contain- ▪ E-commerce is by defi nition the digital arm of ment measures have accelerated this trend: commerce - it is therefore already fully digitized, In 2020, e-commerce turnover rose to more than and the path to the integration of fi nancial servic- 77 billion euros in Germany. es is comparatively short.

▪ E-commerce is now experiencing widespread penetration in all demographics. E-commerce penetration is particularly high among young consumers, who are also more open to embedded fi nance offerings.

This means that e-commerce is a segment that already has a high conversion potential today in relative comparison with other industries, making it suitable for an in-depth industry analysis.

B2C e-commerce revenue in Germany In billions of euros

64.6 67.2 67.9 68.2 59.2 62.4 53.3 48.9 44.2 39.9 35.6 32.0 28.0 24.4 20.2 15.6 12.6 8.4 10.4 4.4 6.4 1.3 1.6 2.2 3.0 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Forecast as of 2021 Sources: HDE, Statista

Deep dive: e-commerce in Germany 28 Customer satisfaction (1 = very good; 5 = poor)

2,2

DocMorris Amazon

Adidas dm H&M MediaMarkt

Conrad Rossmann Zalando Lidl Mean value

Zooplus Otto aboutyou Tchibo Fressnapf Westwing* Real

Rewe Obi

Hornbach

Ikea

3,0 Monthly returning visitors (retained audience)

0,2 2,0 20

Revenue ranges

> 5 Bn. € 500 M. – 1 Bn. € 100 – 250 M. €

1 – 5 Bn. € 250 – 500 M. € < 100 M. €

* Home and Living Sources: EHI, ECC, Similarweb, Deutschland Test Deep dive: e-commerce in Germany 29 The conversion potential in German e-commerce

While the e-commerce segment as a whole offers The graphic E-Commerce Matrix - EF Potential favorable conditions for integrating financial services, shows a selection of e-commerce providers relevant the question remains which factors within the indus- in Germany from key retail segments: fashion, elec- try influence such an offering. For the analysis of the tronics & media, hobby & DIY, furniture & household industry, consumer trust in the brand is the key factor. as well as groceries & toiletries. This includes a pronounced consumer loyalty and a positive attachment to a provider. The matrix maps three dimensions of the business evaluation: In the analysis of German e-commerce, this brand strength and loyalty is represented by two measura- ▪ The number of returning users, ble indicators: ▪ the satisfaction of the users with the provider ▪ Customer satisfaction with a provider, and; form the two axes of the matrix and

▪ customer loyalty, measured by the number of ▪ the size of the company plot shows the e- users returning monthly (retained audience). commerce revenue of the respective provider in Germany.

Thus, the matrix shows the opportunities that the respective businesses have in the area of embedded finance:The position on the matrix reveals the con- version potential. Consequently, when combined with the sales volume in this segment, this lets one approximate the potential market relevance.

Along these parameters, the method can be applied to all other providers in the e-commerce industry. In addition, the method can be replicated in other in- dustries by adjusting the industry-specific indicators.

Deep dive: e-commerce in Germany 30 To test the hypothesis, a second methodological METHODOLOGY: approach is conducted in this analysis: a direct survey of potential users. In a survey of a repre- Satisfaction with the analyzed online stores is sentative sample, 2,000 participants were asked based on a publication by the Focus Money brand to indicate for all the e-commerce providers „Deutschland Test“ from 2020. Together with the analyzed whether they use them and if they would research institute ServiceValue, the experience with use a selection of financial services from these online stores in Germany was surveyed as part of a providers. representative survey of the population. Consumers responded on a scale of 1 (best possible rating) to 6 (worst rating). The e-commerce matrix Data from the market research company Nielsen is Amazon stands out among the group of busi- used for the frequency of contact. The specific key nesses considered. The leading e-commerce figure used is the retained audience, which com- provider in Germany records not only by far the pares the number of unique users in a month (data highest number of monthly returning visitors used: as of 02/2021) with that of the previous month (retained audience) - Amazon is also in the top for each of the online stores examined. The meas- group in terms of customer satisfaction. In ad- ure of returning users controls for outliers arising dition, Amazon is the business with the highest from one-time users, for example in the course of e-commerce sales - and by a clear margin. Otto, marketing campaigns, and is focused on frequent the second-largest of the online retailers in terms users who are more receptive to a deepening of the of turnover, generates around a third of the sales. customer relationship.

The external source analysis was also validated Conversion potential based on through primary data collection: A representative trust indicators survey directly queried the frequency of use of all 21 online stores analyzed. The data used is based on Among the businesses analyzed, Amazon is un- an online survey conducted by YouGov Deutschland doubtedly in pole position in terms of establishing GmbH, in which 2,039 people participated between embedded financial services – and is already active February 24, 2021 and February 26, 2021. The in this area. results were weighted and are representative of the German population aged 18 and over. Otto trails behind by some distance: As the second largest provider in terms of visitors and turnover, Revenue, the third dimension included in the matrix, Otto shows a tendency toward strong customer is represented by the size of the respective compa- satisfaction, resulting in a high conversion potential. ny presentation. The figures are taken directly from And like Amazon, Otto already has its first offerings data provided by e-commerce providers for their on the market. German stores..

The aforementioned brands from the groceries & toiletries segment also show a relatively high conver- sion potential.

Deep dive: e-commerce in Germany 31 In the upper midfield, MediaMarkt and Zalando are provider and is almost 30 years younger than also noteworthy cases. The two brands could hardly MediaMarkt. On the basis of the criteria examined, be more different in their origin: The electronics however, both have very similar conversion potential retailer MediaMarkt has evolved from a leading and lie above the average. brick-and-mortar chain to a relevant player in the online segment; the fashion retailer Zalando, on the other hand, started out as a pure e-commerce

Deep dive: e-commerce in Germany 32 Conversion potential based on the direct survey

The e-commerce matrix shows the relative potential analyzed. The different types of financial services the different providers have in offering financial ser- considered were: vices. The question of the absolute potential must be derived by a further step. ▪ Current accounts

Together with the opinion research institute YouGov, ▪ Credit cards a representative sample of the German population was surveyed on their willingness to use a finan- ▪ And installment payments cial service provided by the e-commerce providers

Survey “Would you use one or more of the listed banking/ payment products from the online stores of the following companies?”, in %

Yes, 7.6 15.3 28.2 current account

Yes, 6.5 10.9 23.8 credit card

Yes, install- 3.2 5.9 14.6 ments

0 % 15 % 30 %

Source: Own survey Lowest value Mean value Highest value

Deep dive: e-commerce in Germany 33 Using an account Survey “Would you use one or more of the listed banking/ payment products from the online stores of the The basis for all financial services, the account, following companies?”, in % received the highest level of approval from respondents: on average, more than 15 percent of respondents say they would use a checking Yes, current account account from one of the brands. Amazon can claim the highest approval rate: 28.2 percent – meaning that significantly more than one in four Germans is willing to use a checking 28.2 20.2 18.9 account offered by Amazon.

The e-commerce giant Amazon is also the north Amazon Lidl dm star in the company matrix, providing orientation for the remaining e-commerce providers. In the direct survey, Amazon thus confirms the poten- Source: Own survey tial that was also attributed to the business on the basis of the matrix.

This mechanism can also be observed in the other businesses surveyed: The frequency with which users and providers interact can be translated into a high conversion potential. A high level of customer satisfaction can rein- force this.

The following places in the user survey are occu- pied by Lidl and dm, two providers that were also ranked in this order on the basis of the indicator analysis – a pattern that is also largely matched for the remainder of the list.

Deep dive: e-commerce in Germany 34 Using a credit card Survey “Would you use one or more of the listed banking/ For credit cards, the overall willingness was lower, payment products from the online stores of the following companies?”, in % albeit still relevant: on average, just under 11 percent of respondents can imagine using a credit card from the brands analyzed. The provider with the highest Yes, credit card adoption rate is again Amazon: At 23.8 percent, just under one in four Germans could imagine this ser- vice. Again, across providers, a correlation can be seen between the intensity of customer touchpoints 23.8 15.0 13.3 and the willingness to consider a business‘s embed- ded finance offer.

Amazon Mediamarkt Ikea The fact that there are somewhat lower overall ap- proval rates for the credit card than for the checking account is surprising at first glance, since the prac- Source: Own survey tice of offering branded credit cards from providers outside of the banking sector is already widespread. However, credit cards have not gained the impor- tance in Germany that they have in other countries, such as the USA.

Followed by Amazon is MediaMarkt. Based on the matrix it would be fair to expect MediaMarkt to be among the top group, but rather somewhat further back. While the remainder of the distribution follows the matrix distribution quite closely, there is a clear outlier in third place: IKEA. This suggests that IKEA is able to transfer its brand strength from its brick-and-mortar presence very well – contrary to what was to be expected on the basis of the e-commerce matrix.

Deep dive: e-commerce in Germany 35 Using a credit product Survey “Would you use one or more of the listed banking/ There is lower overall demand among respondents payment products from the online stores of the following companies?”, in % for the providers’ offer for installment payments, with just under 6 percent of respondents stating on average that they would use such an option. The Yes, installments e-commerce provider with the highest approval rate can interest 14.6 percent of respondents in such an offer. 14.6 11.9 10.0 What is striking about the results for the ques- tion on installment payments is not merely the Otto Mediamarkt Ikea overall lower willingness to use them, but also the stark difference in the ranking of business- es compared to the question on accounts and credit cards. The highest approval rating for in- Source: Own survey stallment payments goes to Otto - a provider that already has an installment payment option prom- inently featured in its offering. More importantly, however, Otto offers goods from a very broad range of segments, including those with a high average shopping cart value. The same applies to the other businesses with high adoption rates in this area.

The mechanism behind the adoption rate of install- ment products is thus different from that for the other two services: demand is less clearly linked to the respondents‘ interaction rate, but shows a closer link to the potential shopping cart value. This suggests a different motivation among users: payment by installments becomes relevant as the purchase requires a higher share of income – making the option to pay in installments more attractive. When this condition is fulfilled, the user is also happy to use a credit offering that comes from the product provider itself.

Deep dive: e-commerce in Germany 36 Conversion potential – conclusion

Overall, the conversion potential for e-commerce The results of the direct survey of a representa- providers in Germany is considerable: across the tive sample confirm the results of the conversion various financial services, 61 percent of respond- matrix. Consequently, this methodology can be ents could imagine using an integrated financial adapted for other businesses and industries in order service. to derive their respective potential for embedded finance, without having to conduct an extensive More than a quarter of Germans could imagine using population survey for each case again. a checking account from Amazon. The e-commerce giant from the USA is thus clearly at the top of the – list of providers compared, but is by no means an exception. The high conversion potential in e-commerce overall shows ▪ A conversion potential of 61 percent across the various providers and financial services shows a that advanced digitalization significant acceptance rate already today. and strong customer centricity ▪ The conversion potential is particularly high among enable significant potential younger age groups, so an increasing demand over for embedded finance. time is to be expected. – ▪ For accounts and credit cards, the conversion potential is linked particularly to how frequently a The relative distribution of businesses within user uses the online store. e-commerce indicates that contact intensity and satisfaction are linked to conversion potential, but ▪ When installment payments are offered, on the other parameters are also relevant, depending on other hand, the potential of a higher shopping cart the financial service. value plays a greater role.

Deep dive: e-commerce in Germany 37 At IKEA, for example, there is still a strong dis- The results for accounts and credit cards repli- tinction between the brick-and-mortar business cate the results from prior analyses in the U.S. and the online business; its e-commerce arm for the first time. In a consumer survey in the has yet to match the standing it enjoys in brick- USA, analysts from Cornerstone Advisors queried and-mortar retail. In the direct survey of willing- the willingness to take out an account with busi- ness to use an embedded finance solution, how- nesses in other non-financial sectors. ever, the brand ranks among the very top, given its relatively high shopping cart values. This is Across all age groups, Amazon is the provider an advantage that IKEA’s competitor Westwing, respondents would be most likely to leave their who has already penetrated the online niche for account services to - between 46 percent (Mil- the furniture segment, cannot yet claim for itself. lennials) and 9 percent (seniors) would be willing to do so. There are also still significant approval Thus, the ranking of providers when it comes to rates for the other providers queried. It is evident the demand for installment payments reveals that all these digital businesses are predisposed a mechanism comparable to that known from to offering embedded financial services, and in the automotive industry: a high purchase val- fact many of them do so already. ue, which makes financing more relevant, also results in an openness to embedded offers from The different characteristics between the age providers. groups can also be observed in Germany. The general use of online stores and the frequency of contact with them is higher among younger respondents, and they are also more open to em- bedded financial services.

Survey “Would you use a current account from Amazon?”, in %

46

38

30

11 9

21–25 years 26–40 years 41–55 years 56–75 years 76+ years

Source: Conerstone Advisors

Deep dive: e-commerce in Germany 38 Market potential of embedded finance in Germany

Using the retail sector in Germany as an example, the Akin to the analysis of e-commerce businesses study shows how businesses can determine the con- above, this approximation is made with a focus on version potential for embedded finance among their the German market. According to the Deutsche customers. In order to derive a market potential from Bundesbank, the interest and commission income this, one must approximate the market as a whole. of credit institutions in Germany is 208 billion eu- ros per year. This question also requires a gradual approach, as the market for embedded finance is still emerging While the design of embedded finance is multi- and the scope of potential services varies. faceted and can encompass the entire range of financial services, it is reasonable to assume that the e-commerce companies will focus on B2C offerings.

Development of the revenue pool in , 2019–2022 in billion euros

52 51 Scenario 1: 50 Recovery

44 Scenario 2: Crash

2019 2020 2021 2022

Source: Oliver Wyman Analyse

Deep dive: e-commerce in Germany 39 According to studies by Oliver Wyman and zeb con- Looking at the results of the population survey sult, the revenue potential in the private customer for e-commerce, 61 percent of respondents business is just under EUR 50 billion per year – which across all brands and financial services said they puts a figure on the scope of the B2C segment. could imagine using an embedded finance offer- ing – a substantial market is therefore waiting to The focus can be drawn even narrower in the area be unlocked. When breaking down the potential of e-commerce. The natural starting point for these of an individual company, it should be noted that providers is in the processing of payment services. one is entering an already developed and satu- Here, financial services are a direct extension of the rated market – at the same time as other market core business. entrants.

▪ Revenues in the German payment market amount However, market saturation is only a limiting to around EUR 25 billion per year. This represents factor to an extent, since for many customers the lower end of the total market potential. the decision is not one of „either, or”. For a large proportion of customers, the use of a provider‘s ▪ Revenues of just under EUR 50 billion per year services, for example in the area of e-commerce, from the overall retail banking business represent is not accompanied by immediate termination the upper end of the market in the short to medi- of the account with a previous provider; rather, um term. there is scope for parallel use. Although, it is well understood that competition inevitably arises ▪ The extension of the company‘s own range of when services are duplicated. financial services beyond retail banking are undoubtedly just as possible, but are currently The mutual competition between the providers more likely to be seen in the long-term. in a segment is equally relevant. Many of the customers use a majority of the e-commerce – providers previously analyzed. Therefore, a This range indicates just how parallel use of financial services from multiple non-bank providers is also imaginable - but likely large the market is that busi- at a decreasing rate the more relationships the nesses can tap into. user already has. In addition, the extent to which services are used from each provider will de- – crease as customers build up more accounts.

Deep dive: e-commerce in Germany 40 What’s next?

Dr. Max Flötotto, Senior Partner, Leader German Banking Practice & Co-Leader European Fintech Practice, McKinsey & Company

The banking sector has long been considered relatively conservative, especially in Germany. Banks could be quite sure of their customers’ loyalty. To what extent is this still true?

The banking sector is changing more rapidly than Even if most customers in Germany continue ever before. Customer demands are increasing: Are to have a long-standing relationship with their processes simple and intuitive, are customer jour- main bank, the willingness to switch is increas- neys possible completely digitally, and are services ing: while only 12 percent of bank customers available quickly? Customers are increasingly taking were willing to change their main bank in 2016, their cue from their experiences at Apple, Amazon this figure had already risen to 17 percent by or Lieferando. Pizza comes at the push of a button, 2019. The trend is clear. And the willingness why can‘t personal loans do the same? The success of Germans to switch is also relatively high in of direct and neobanks and comparison platforms a European comparison. We see that younger shows that customers are happy to accept offers of people are more inclined to switch, as are peo- this kind - especially if their bank‘s performance no ple with higher incomes. longer meets their requirements. Direct banks and neobanks now have a share of over 20 percent of checking accounts. Around 35 percent of all private real estate loans no longer come from banks directly, but from intermediaries.

What’s next? 41 What makes customers switch financial services However, the market remains dynamic. Neobanks providers or open up to new providers? will try to reach out to the broad mass of customers via the early adopters, expand their market share Like customers, the reasons for switching are and, in some cases, broaden their product range. varied. Advertising, bonus programs and recom- At the same time, neobanks will have a massive mendations are becoming increasingly important, influence on the development of other banks – but for most customers, bad experiences with customers will demand intuitive digital offerings and their old bank remain the most important reason simple processes from traditional banks as well. In for switching, e.g., unexpected or excessively high this context, the incumbent banks will try to counter prices and fees, poor advice, or non-functioning the further growth of neobanks with fast-follower or non-existent digital channels. In addition, it is strategies and their own innovations. important events in the lives of bank customers, such as moving house or buying a property, that make them think thoroughly about their financial The results of our consumer survey show a products and consider switching banks. Depend- high willingness to obtain financial services ing on their product needs, customers choose the from e-commerce providers. How will embedded best offer for them. finance develop in the coming years? Which sectors are in focus? More than 50 percent of customers now have more than one bank account, and 30 percent even The market will continue to grow strongly and have more than two. The willingness to use non- develop dynamically in the future. Here, too, the banks for financial services is also increasing. Our focus is on customer journeys: where and how can own research has also shown that up to 25 percent financial services be integrated? Experiences from of customers can imagine conducting parts of China and the U.S. show a focus on payment trans- their banking transactions via e-wallet providers or actions, consumer finance and smaller insurance (online) retailers, for example. companies. Payment is no longer a separate step but disappears into the app, financing a purchase is directly part of the offer, and insurance is available Neobanks have been pushing into the market for on an ad-hoc basis. some time. How far along is this development in Germany? Crucially, most e-commerce providers have little interest in becoming a traditional bank. Regulato- The process is still in its infancy. Despite all the ry hurdles are high and growth opportunities are successes, neobanks are still heavily focused on fewer than in their core business. In other words, early adopters. Most customers continue to have cooperation with banks is becoming increasingly their main banking relationship with a traditional important – but always with the aim of ensuring that branch bank. margins end up with them and not with banks.

What’s next? 42 What factors determine whether a brand can The U.S. with their American Big Techs as well as successfully offer embedded financial services? China are considered pioneers of this develop- ment. Where does Europe stand in comparison? A well-rounded customer experience and the provision of digital and personalized customer One can observe many interesting developments in experiences will be equally important for players China and the USA. In China, for instance, we see that are not banks in the traditional sense. The the development of ecosystems around Alibaba, number of customers, as well as the length of the WeChat and PingAn that incorporate many embed- relationship and the frequency of interaction that ded finance services. In the USA on the other hand, customers have with the brand or business, will there are multiple innovations around payments, also play a significant role. Businesses that already data analysis and financing. Europe lags well behind have a broad customer base and with whom cus- China and the U.S. - especially in the B2C sector. tomers interact regularly have a large advantage Admittedly, there are differences: customer prefer- here. Of course, brand trust and the feeling of ences are different, there are differing regulations security should not be disregarded. Other factors and specifications with regard to data protection, include the type of business or the reputation of the and Europe hardly has any Big Techs of its own. industry. For example, customers show a greater And yet: businesses can scale more at the European willingness to use financial services provided by level, for example, and government institutions can e-wallet providers and (online) retailers than from focus even more on enabling an innovation-friendly social media companies, for example. environment. It is therefore important that Europe develops its own ideas in a timely manner and builds a sustainable model that works for Europe.

What’s next? 43 Solarisbank is Europe’s leading Banking-as-a-Service platform. As a technology company with a full German banking license, Solarisbank enables other companies to offer their own financial services. Via APIs, partners integrate Solarisbank’s modular banking services directly into their own product offering. The platform offers digital bank accounts and payment cards, identification and lending services, digital asset custody as well as services provided by integrated third-party providers. In 2019 Solarisbank established the 100% subsidiary Solaris Digital Assets GmbH to offer a licensed custodial solution for digital assets. To date, Solarisbank has raised more than EUR 160 million from a bluechip shareholder base, including ABN AMRO’s Digital Impact Fund, BBVA, finleap, Global Brain, HV Holtzbrinck Ventures, Lakestar, Samsung Catalyst Fund, SBI Group, Storm Ventures, Visa, Vulcan Capital, and yabeo Capital.

The Handelsblatt Research Institute (HRI) is an independent research institute under the umbrella of Verlagsgruppe Handelsblatt GmbH. It conducts scientific studies on behalf of clients such as companies, financial investors, associations, foundations and government agencies. It combines the scientific expertise of its 30-strong team of economists, social and natural scientists and historians with journalistic competence in the preparation of its findings. It works with a network of partners and specialists. In addition, the Handelsblatt Research Institute offers desk research, competitive analyses and market research.

Imprint

Publisher Concept, research and design Solarisbank AG Handelsblatt Research Institute Cuvrystraße 53 Toulouser Allee 27 10997 40211 Düsseldorf www.handelsblatt-research.com www.solarisbank.com Authors: Dennis Huchzermeier, Dr. Jan Kleibrink, Gudrun Matthee-Will, Cornelia Zoglauer

Design: Isabel Rösler, Christina Wiesen

Images: Solarisbank AG, unsplash.com

Editorial deadline: March 31, 2021

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