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Behind every racy fintech, a sensible German saver

This is the modern financial paradox. People who want to be disruptors rely on banks. Risk-loving genius kids are in love with risk-hating Germans.

Both Wirecard and Greensill Capital owned Deutsche Bank. Surviving fintech companies such as N26 and Klarna are also raising money through German deposits.

“Because we are a bank, most of our balance sheets are covered by government-guaranteed deposits,” said Sebastian Siemitkowski, CEO of Swedish payment services and point-of-sale lender Klarna. I will.

According to Siemitkowski, in the eyes of German savers, Klarna benefits from the Swedish halo effect. “Sweden is so wealthy that France has a lower rating than Sweden and is actually increasing deposits at lower interest rates than Crédit Agricole. So it’s kind of funny how these work. is.”

National stereotypes are not a great way for customers to choose where to put their savings. However, most Germans who give their hard-earned euros to FinTech-related banks are completely cautious. They often do so in return for higher interest rates. In addition, deposit insurance protects deposits of up to € 100,000 in the event of a bank bankruptcy.

Klarna accesses German depositors through Raisin, the Berlin-based deposit market. “Germans’ preferred behavior for optimizing cash returns is so-called rate hopping,” said Tamaz Georgaze, raisin chief executive officer.

It has gained new popularity since major German lenders such as Deutsche Bank and Commerzbank began telling new clients that they would apply negative interest rates to large deposits.

“If someone picks up my money, I’m sensitive to it,” said Georgadze. Raisin’s highest immediate access rate is currently only 0.17%, but above negative numbers.

The overwhelming majority of lenders on Raisin’s platform are established banks, many of whom come to Germany from elsewhere in Europe to take advantage of wealthy depositors. However, Raisin also offered the option to save to Wyelands Bank, a British lender owned by Sanjeev Gupta. Wyelands Bank, regulators forced the return of deposits in March. Raisin has also deposited the funds of German depositors with the Greensill Bank. Greensill Bank was part of a bankrupt supply chain finance company, Greensill Capital.

Approximately 15% of Germany-based Greensill Bank deposits were provided by Raisin, Georgadze said. “Customers’ money is safe and repaid. Our role is to regulate the market. That’s not to say, he said, Greensill Bank conducted a clean audit under BaFin’s supervision and there was no public danger signal until the German supervisor appointed a special auditor and closed it. Said.

The bankruptcy of Greensill Bank will cause some depositors to lose money. These depositors are primarily institutional depositors, such as dozens of local governments, totaling € 500 million. Individuals and SMEs, some of which are related to Green Silva Raisins, are protected by the German deposit insurance system and have already paid more than € 2.8 billion.

For now, this is a valid system. Fintech companies in need of cheap funding have access to German savers who are happy with rates above zero. Large banks struggling with regulations and ultra-low interest rates can reduce excess deposits.

However, it raises the question of whether life is a little too easy for a particular fintech and potentially too costly for a taxpayer-backed insurance scheme.

Behind every racy fintech, a sensible German saver Source link Behind every racy fintech, a sensible German saver

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