What is a FinTech company?
FinTech is an abbreviation made up of two English terms: Financial Services and Technology. FinTech companies are a new category in the financial industry. The new market participants use innovative technologies and thus make the product range of traditional financial institutions more customer-friendly and improve them. With disruptive technologies, they replace existing services or even completely displace them from the market. The Donors Association shows some examples of this. An extensive Study on the FinTech market in Germany commissioned the Federal Ministry of Finance. This also forecasts the market development for this area up to 2035.
The digital business account is a good example. Lots of companies, for example GmbHs, are obliged to keep a separate business account. You are not allowed to simply use the manager’s private account as many self-employed and freelancers do.
Penta offers one here Online business account that offers extensive services, has mobile and digital features and is user-friendly. In the B2B area, companies focus on increasing efficiency, they automate existing processes. The prerequisite for this is a mature business model. For FinTechs, this means higher start-up costs, which ultimately pay off through long-term, profitable customer relationships.
FinTech in the B2B and B2C sector
There are roughly the same number of fintechs in Germany that concentrate on the B2B and B2C sectors, with the B2B segment being somewhat more strongly represented. This also includes the FinTechs that are active as cooperation partners of a bank in the private customer business, i.e. B2B2C. A key success factor is not to lose sight of increasing regulation. In Germany, the trend in the financial services sector is towards more and more regulation instead of less. That is not necessarily a bad thing.
The additional regulation by BaFin increases the requirements and the effort for companies. This is particularly difficult for start-ups and small market participants. But the uniform regulation also offers opportunities in the FinTech market. Uniform competitive conditions are created within the EU. In addition, potential cooperation partners, customers and investors have more confidence in companies that meet the regulatory requirements. FinTechs from non-EU countries have to cope with higher market entry barriers. This additionally strengthens the market position of the local FinTechs.
What’s different about Penta?
Penta is a young start-up that launched its business account at the end of 2017. Since it does not have a banking license, it works with a bank. Penta has an offer specifically aimed at sole proprietorships, start-ups, freelancers and smaller companies. Penta wants to differentiate itself from other providers. There is, for example, the budget management function. This enables a company to give certain employees or departments a budget that they can manage independently directly in the online business account without the need for extensive authorization.
There are also numerous tools that can be used to integrate existing booking systems or work platforms. The tools help with international transfers or forecasts of the company’s liquidity. Everything goes online at Penta. It starts with the opening of the online business account. The security identification takes place via an online video identification. Only an identification document has to be kept ready.
FinTechs – a product of the financial crisis
The FinTech boom began in the early 2000s. Young companies wanted to use the rapidly developing information technology. A few months before the bank crash of 2008 and the collapse of Lehman, Apple’s App Store hit the market. What was new was that most of the applications in the App Store were not from Apple at all. Third-party providers and independent developers were able to bring their products directly to users there. For a long time after the crisis, the established banks were busy getting back on their feet. FinTechs came up with fresh ideas and challenged the banks in their traditional fields of business.
Until then, traditional banking in Germany was not necessarily known for its innovative strength. Products and services were created in secret. The agile FinTech companythat have just appeared on the market, this mentality gradually changed. The banks themselves began to digitize their business. Today they work with FinTechs or similar technology start-ups.
Financial innovations change the world
Such Financial innovations are also growing in other countries in which there is no banking system like the one in Germany. In Africa, for example, there are no regulated payments, and nobody has a bank account there. For a long time it was not that easy to send money there. The people there don’t have bank accounts, but they do have cell phones. M-Pesa took advantage of this and developed an app for mobile payment. People pay with their smartphones and can even get cash at a kiosk, for example. That would not be possible at all in Germany through the regulation of the banks.
There is a similar system in China, which was created with AliBaba, a platform for Internet trading. Around 80 percent of all mobile payments in China and around 60 percent of online payments take place there today. Customers can do everything there: buy and pay for goods, book cinema tickets, flights or a rental car, share the bill with friends in the restaurant.
01/29/2021