What could be ahead for Open Banking in Germany – interview with FinTecSystems

Thursday 17 December 2020 08:35 CET | Editor: Oana Ifrim | Interview

Stefan Krautkrämer, Founder & Managing Director at FinTecSystems, discusses Open Banking's untapped potential in Germany and what should be the right approach for the future

What is the story of FinTecSystems and how would you describe the company’s business model and services? What role does the company play in the Open Banking ecosystem in Germany? 

FinTecSystem was, to my knowledge, the first Open Banking platform in the German market when I founded it, together with Dirk Rudolf back in 2014. Prior to founding FTS, we had built up the payment pioneer SOFORT which was internationally one of the first payment methods which allowed customers to generate payments directly from their bank accounts. As this hadn’t been around back then, legislation had to react to this new trend and I dare to say that our launch of SOFORT was a major initiator for the Payment Services Directive 2 (PSD2) which followed more than a decade after we had founded SOFORT. After having sold SOFORT to Klarna in 2013, I took some time to think about my next step and quickly realised: The potential of Open Banking is too big to not launch another company with an Open Banking business model. That’s when Dirk and I decided to build FinTecSystems as a pure B2B infrastructure play, enabling companies to benefit from the access-to-account technology.

In the past six years, we’ve developed FTS to be an Open Banking key player in the German-speaking region with more than 150 clients, among them well-known names such as Santander, N26, DKB or Experian, and connectivity to more than 6.000 banks. Since 2019, we’re licensed by the German regulator BaFin as a payment initiation and account information service provider. Our services include, for example, real-time credit checks on the back of our Open Banking platform as well as automated real-time fraud prevention, personal finance recommendations, and AML-compliant identification and account holder validation. We strongly believe in enriching raw financial data to offer smart end-to-end solutions instead of ’just‘ providing connectivity.

What is the state of affairs of Open Banking in Germany? How far does Germany have still to go in its Open Banking journey? And what are some of the challenges Germany is facing in Open Banking? 

For me, powerful APIs are a necessity to enable true Open Banking innovation. Unfortunately, in Germany, we’re still far away from a consistently high-performance level of banking APIs. To give you an example: although most APIs from banks are generally available in the sense of stable interfaces, we are seeing frequent technical errors or long request times that lead to timeouts. For fintechs making use of these APIs that’s a nightmare. If an end-customer tries your app for the first time, you need to build trust right away. A timeout and the unavailability of your service will kill that first bit of trust in a second. Another example of a current challenge is the burden of multiple strong customer authentications. There are still APIs with which the customer needs to go through two or three SCAs for payment initiation. Such a customer journey is not competitive and therefore not acceptable for us. Long story short: we’re making progress but there’s still a long way to go.

What’s the attitude of German banks when it comes to opening up their systems to fintechs? What are the approaches (pace of innovation) in Open Banking among these different banks? What are some of the challenges for fintechs partnering with banks in Germany?

To say that the German banking market is crowded is certainly understated. So, it’s no surprise that we still see a good amount of heterogeneity in the way banks deal with PSD2-compliant APIs in terms of data quality and parity. Even though I don’t find this surprising, I have to say that I find it irritating. We have been discussing the topics of PSD2 for years and we still haven’t managed to find a common mindset to see PSD2 as a driver of innovation? How is it possible that we still see a huge difference in the performance of APIs from banks? Don’t get me wrong. There are also plenty of positive examples of German banks having changed their mindset and now making use of the opportunities of Open Banking. But some players are just very slow to move.

Germany has one of the highest rates of cash use in the European Union. Could Open Banking play a role in this? Can Open Banking be a driver for non-cash payments in Germany?

The COVID-19 pandemic has accelerated digital innovation in a way nobody would’ve expected it. This has even led to a massive increase in cashless payments in Germany. Sure, this isn’t a development which is driven by Open Banking. But it changes the starting point. The openness towards new and digital payment methods is steadily increasing. And payment methods using Open Banking technology will benefit from it. I can give you two examples from the payment sector in which Open Banking is already playing a decisive role.

One major innovation we saw being launched in Germany this year was mobile payment solution Samsung Pay. For Samsung Pay, which is enabled by banking-as-a-service platform Solarisbank, the access-to-account technology provided by us is crucial to identify customers as quickly and easily as possible within the regulatory framework. Using microtransactions instead of lengthy video identification sessions saves not only time but also increases the conversion rate. For me, this case is truly a groundbreaking innovation in the digital identification field.

Another example is point-of-sale instalment loans which rely on automated credit decisions and immediate payouts. Without real-time banking data, such decisions simply wouldn’t be possible. But by customers using their financial data to allow real-time scoring by banks, we can bring financing to an unprecedented point-of-sale. In the ecommerce and online space, such instalment loans have already grown in popularity quite a bit. Now, they'll start to grow massively in analogue commerce as well.

How have digital banking and innovation been accelerated this year in Germany?

This year’s pandemic has had a very strong impact on innovation in the digital banking sector. Besides the increase of mobile payment adoption, as mentioned before, we have seen a strong need for fast and digital SME lending. In Germany, many players such as SME banking provider Penta have worked hard on bringing the Corona loans for small and medium-sized businesses to the digital world. Companies such as Banxware, which aim to bridge the gap between banks and digital platforms, have also just launched in this field this year. Next to this, I’ve also mentioned the revolution in the digital onboarding space driven by Open Banking such as know-your-customer transaction-driven processes based on Open Banking data. All in all, as tough and challenging as this year has been, it has certainly fostered some outstanding innovation.

What is on your roadmap for FinTecSystems for the next two years? 

We see a lot of untapped potential for Open Banking in the insurance and regulatory technology sector. Whereas more and more banks have started embracing the opportunities of open finance, insurances haven’t opened up in an equal fashion yet. RegTech is also a really interesting field for Open Banking applications. Current RegTech providers mostly focus on analysing databases filled with transactional data only. I also see a high potential for real-time KYC processes at the very moment the transaction takes place.

So, all in all, there’s plenty of room for us and Open Banking, in general, to further grow. We will also extend our geographical footprint. After having expanded to Southern Europe and the German-speaking countries, we will further grow internationally, starting with the Benelux countries and then continuing our path further North within Europe. Lastly, we plan to raise fresh funding on the back of our strong growth in recent years as well as our further growth potential within Germany and Europe. All of this will keep the team and me more than busy, I’m sure.

About Stefan Krautkrämer

Stefan is Co-Founder and Managing Director of FinTecSystems (FTS). The Open Banking expert studied Business Informatics in Regensburg and Valencia. He has been part of the founding team of Sofortüberweisung for 7 years and was COO at SOFORT AG until the sale to Klarna AB. At FTS Stefan is responsible for Corporate Development and Investor Relations.

About FinTecSystems

FinTecSystems (FTS) is a B2B fintech founded in 2014 and licensed by BaFin since 2019. FTS is specialised in Open Banking infrastructure and data analysis. With our digital infrastructure and  machine learning technology, we prepare account data in a way which enables companies to make better, data-driven and automated decisions. We are a key player in the German-speaking region in Open Banking with access to over 6000 banks.


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Keywords: Stefan Krautkrämer, FinTecSystems, Open Banking, Germany, interview, data, payments , AP, fraud prevention, personal finance, AML, banks, fintech, machine learning
Categories: Banking & Fintech
Countries: Germany
This article is part of category

Banking & Fintech