Interview with SWK Bank - Banking-as-a-service in credit business and deposits

Friday 17 September 2021 08:40 CET | Editor: Alin Popa | Interview

Ulf Meyer from SWK Bank provides key insights about the future of consumer credit and business credit 

What is the story of SWK Bank and how would you describe the company’s business model, services, and target group?

SWK Bank was founded in 1959 and was always in the private consumer loans and product financing business. Since 2001 SWK Bank is providing online consumer loans using APIs and has ever been a first mover using new technologies. In 2010 it was one of the first banks using a credit calculator app followed by being 2014 the first bank in Germany offering video legitimation. In 2017 SWK Bank launched the 100% digital consumer loan, called “couchkredit”, giving customers the ability to finish the loan applications within minutes and receiving the loan payment on the following business day. Today SWK Bank is active in Germany and Switzerland with its brands “SWK Bank” and “good finance” providing consumer loans as well as providing loan and deposit services currently for 14 banks and financial institutions as a Banking-as-a-Service provider. 

What are the current challenges in consumer credit and long-term deposits? What are the current customer requirements in the lending business?

The development in the deposit and consumer credit business is characterised by declining margins and increasing customer demands in terms of speed, transparency, user-friendliness and price. Digital-personal and fully digital solutions are playing an increasingly important role, especially in the post-Corona era. The consumer credit of the future must become even simpler and more convenient, just as customers are used to when shopping online. Although the future is characterised by increasing data- and technology-driven orientation of the product, personal, individual customer care and direct dialogue remain as important as ever. Overall, loans will move very close to purchases, and hire purchase and leasing of products will continue to increase. Legitimation will become easier, the Videoident procedure will be replaced by fully digital legitimation, which is already standard in other European countries. It is even more important to be relevant for customers on a daily basis through smart, intelligent and embedded digital services, as a long-term companion for personal liquidity management beyond the individual financial product.

How is digitalisation, especially in a post-Covid world, remaking the future of the lending business?

Covid has strongly accelerated digitalisation in the financial sector, with more and more older customers using digital services and internet/smartphone-based products and services. In the context of digitalisation, artificial intelligence (AI) can be used to make analyses and decisions in the lending business faster, so that loans can be offered in real time. AI enables the automation of routine tasks and increases the speed of payment processing and compliance reporting. In addition, AI can provide a more accurate analysis of potential borrowers at a lower cost: By considering selected variables and using relevant data sets, AI develops credit systems that can reliably distinguish the difference between high and low default risk applicants. The advantage for banks include: AI applications can reduce operating costs in customer contact, increase revenue per customer as well as improve customer satisfaction and achieve greater brand loyalty. 

The future in the credit business will be characterised by the introduction of new, further technologies, which will also include the crypto market. In addition, the optimisation of the legitimation processes will be further advanced under technological as well as security-relevant aspects; for example, self ident/face recognition or also the automatic comparison with ID document images will become standard. For the future challenges in the context of digitalisation in the credit business, it is crucial to constructively disrupt processes, products and services with new solutions. Disruption should not take place for the sake of disruption, but only if and to the extent that disruption actually helps to improve processes and procedures for all parties involved (banks, platforms, customers) and makes daily financial life easier.

How would you describe Banking-as-a-Service? What is the role of Banking-as-a-Service in credit business and deposits? What are the benefits?

The banking market in general and payment systems in particular, as well as the retail landscape, have changed drastically due to technology and Covid. Banking services look very different today as customers (B2B)/(B2C) have changed financial management/payment process requirements. Post-Covid financial transactions are being conducted more and more online/via the internet than traditionally, BNPL as a payment system as well as cashless payments with cards/smartphones are growing and offer new options for end customers and retailers/service providers. In this changing environment, Banking as a Service is becoming a trend and a fast growing business sector. In simple terms, Banking-as-a-Service is technology combined with regulatory compliance as a modular service for third parties. An important aspect: Banking-as-a-Service partners need appropriate experience and a proven track record.

The availability and mastery of regulation, technology and the technical skills of employees are crucial: there is a need for "new bankers" who also understand and master AI, process automation and data analysis. As a digital pioneer, SWK Bank has BaaS in its DNA. The technology with digital account check, video legitimation and qualified electronic signature introduced as part of the launch of its Couchkredit in February 2017 has now become a basic technology for many processes that are also offered to third parties as Banking-as-a-Service (currently already 14 partners). The fully digital and signature-free credit application fulfils all the requirements of German regulation and is a good example of how digital innovations, sustainability and convenience can be efficiently combined.

This technology can easily be embedded in other processes and/or ecosystems. Advantages for partners - an experienced bank that masters processes, procedures and regulation, advantages for end customers: simple, straightforward digital products and processes that enable high customer satisfaction and positive customer experiences.

 What is on the roadmap for SWK Bank for the next years? 

SWK Bank wants to maintain and further expand its technological leadership in the lending sector. With its distinctive digital competence and many years of experience in the consumer credit and deposit business, the goal is to offer the field-tested digital processes and applications in the form of market and customer-oriented products and services. SWK Bank wants to become the most digital consumer credit bank in Europe. SWK Bank wants to share all of this with other banks and fintechs as a Banking-as-a-Partner provider, thereby making a significant contribution to the success of these partners in a rapidly changing market and customer environment.

About Ulf Meyer

Ulf Meyer, born 1974 in Lübeck, is Managing Director of Süd-West-Kreditbank Finanzierung GmbH, Bingen am Rhein (SWK Bank) since 2013. He is responsible for Marketing & Sales, Business Development, Legal and Auditing. He has an intense expertise in the areas of banking strategy and management, business development, sales, regulatory law and especially in the implementation and introduction of digital products and processes as well as the rapid scaling of new business areas.


About SWK Bank

Süd-West-Kreditbank (or SWK Bank) is one of the leading direct banks for loans and fixed-term deposits in Germany and employs 150 people, with total assets of EUR 1.5 billion in 2020. SWK Bank is considered a pioneer in digitalisation and innovation, offering fast application processes with TÜV-approved security. As a Banking-as-a-Service partner, SWK Bank cooperates with other banks and fintech companies and makes its systems and processes available as services in the lending and deposit business. SWK Bank has more than 20 years BPO experience and serviced more than EUR 25 billion with EUR 10 bn. Assets under Management.

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Keywords: BaaS, lending, digitalisation, credit card, API
Categories: Banking & Fintech | Online & Mobile Banking
Countries: Europe
This article is part of category

Banking & Fintech