Let’s start from the beginning: A fintech startup is a company that uses technology to offer innovative solutions for financial services. The term ‘fintech’ is composed of the words ‘Financial’ and ‘Technology’. Fintech startups use technologies such as big data, artificial intelligence (AI), blockchain, and mobile applications to improve and automate traditional financial services or create entirely new financial products and services.
Fintech startup monitor
And innovation is necessary in the financial industry: Even established industry giants now recognize that collaboration with innovative companies is essential if they don’t want to fall behind in the digitalization process, and they are accordingly investing in fintech solutions. However, many “young upstarts” also need collaboration with established financial service providers – cooperation instead of confrontation is the motto here.
The status of the startup ecosystem in the financial sector in Germany was examined for the first time in 2021 by the fintech startup monitor by the German Startups Association. It revealed strengths and weaknesses of this industry: Fintechs, for example, came through the coronavirus crisis significantly better than other startups. However, it also became clear that the fintech world is male-dominated. The share of women among fintech founders was only seven percent in the startup ecosystem in 2021. For comparison: across all industries, the share of female founders at that time was 16 percent. There is clearly still significant catching up to do.
Activities of fintech startups
The activities of fintech startups span various areas of traditional banking. Here are some of the most common segments and business models covered by fintechs:
- Payments and transfers: Fintech companies develop solutions for simple, fast, and cost-effective money transfers and payments.
- Lending and credit assessment: Automated lending platforms use data analysis to conduct creditworthiness checks and issue loans faster and more efficiently.
- Investment and wealth management: Platforms offer automated investment advice, digital asset management, and peer-to-peer investment opportunities.
- Crowdfunding: Fintech startups enable companies and individuals to raise capital from a broad group of investors via online platforms.
- Insurance technology (insurtech): By using technologies such as artificial intelligence, fintech companies attempt to modernize the insurance sector and offer more efficient products.
- Blockchain and cryptocurrencies: Some fintech startups focus on the use of blockchain technology and the development of cryptocurrencies or offer services in the area of crypto trading and custody.
- Regtech (regulatory technology): Fintechs develop solutions to support financial service providers in complying with regulations and regulatory requirements.
Munich startups active in the industry
The Munich startup ecosystem has also produced successful fintech startups, most notably Scalable Capital, a true unicorn. Since 2014, Scalable Capital has enabled private investors to access digital investments. Starting as a digital asset manager, the fintech expanded its platform in 2020 to include a full-service brokerage offering. Today, the broker’s customers can invest in ETFs, stocks, funds, bonds, cryptocurrencies, and derivatives.
Dealing with the educational aspects of wealth building is Beatvest. The Munich-based investment platform targets stock market enthusiasts with its app who want to acquire the necessary knowledge for the right investment decisions and test their knowledge with a fictional investment feature. In this way, the startup aims to minimize the initial difficulties of investing in the capital market and help especially young people build wealth early on. Vinlivt also aims to bring together the three areas of saving, investing, and insurance with its app and help users understand their current financial situation. They can then start taking initial precautions.
Artificial intelligence comes into play at Sub Capitals – or rather into financial products. The Munich startup offers an AI certificate that uses its AI to invest. Consumers can purchase the certificate through a regular broker and thus add a security to their portfolio that is based on artificial intelligence. Cometum is a neo-private bank that uses blockchain to divide large assets such as classic cars, art, or diamonds into smaller units. Through this tokenization, Cometum primarily aims to introduce young wealthy individuals to these asset classes.
Munich fintechs also have solutions for B2B: Finway digitizes the entire financial sector of companies to eliminate spreadsheets from financial management. The startup’s software offers, among other things, digital access to approval processes, payments, and receipts. Additionally, Finway offers companies physical and virtual debit cards. And Xpay also offers cards – specifically Mastercard prepaid credit cards. The company offers these to merchants so they can build loyalty programs around them. In this way, merchants can not only offer various discounts and benefits; the cards also provide important data on purchasing behavior.
For more information on Munich fintech startups, Munich Startup regularly has answers. We also explore the topic regularly in our podcast.