Stone money and first FinTech license in Switzerland—how do they fit together?

Yapeal is a well-known name in the Swiss FinTech scene. If you want to know more about digital banks, you will definitely come across this name.Yapeal is composed of two words: appeal and Yap. Yap is an island in Micronesia known for its stone money which is still being used as a currency. This means of payment can be seen as a blockchain “prototype”. Since the stones are too heavy to move, they simply remain where they are even when the owners change and the islanders memorize the property rights. I had the honor of speaking with one of Yapeal’s founders and CEO Thomas Hilgendorff.
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About Yapeal

Thomas, what was the idea behind Yapeal, how did it emerge?

10 years ago, a colleague and I founded a consulting firm. We specialized in digitalization in the banking sector – and that’s how we came into contact with FinTech companies. After some time, we also started to invest. At the end of 2017, I was having lunch with my old friend Christian R. Meier and we had an exciting conversation about the reasons why there was so much going on in the area of challenger banks in England and in Germany but not in Switzerland?

Word for word, that’s how we wrote a white paper, initially for ourselves. Next, we discussed our paper with a few colleagues, then with investors. Then everything went quickly: the business plan was completed between Christmas and New Year’s Eve 2017. A short time later, 12 dedicated colleagues and 3 board members joined forces, we involved the first investors and thus founded Yapeal on June 6, 2018.

Goal of Yapeal is to serve the needs of our customers in the new digital age. These needs have changed, but continue to be simple. It’s about convenience, it’s about being heard and understood. We created the Yapster Community to listen to our customers carefully. We knew the first 200 users personally, they were friends, acquaintances, former colleagues … The community has grown, we now have about 1,500 members with an affinity for and an open mind about the topic and they make a very valuable contribution to our further development.

We do not focus on customer segments, but on customer needs. Our customers want to pay bills, control their expenses, transfer pocket money to their children … simple services that have been lacking innovation for years. Our “Family Shizzle” or “Financial Amigo” packages are designed to exactly cover these needs. Let’s be honest, more than 60% of bank customers are “over-banked”—not every bank customer needs the full range of services which are offered by the bank and which in the end have to be borne by all bank customers.

Most digital banks are (almost) free of charge. How does Yapeal plan to make money?

In contrast to the traditional business models of other banks, we build on transparency and sustainability. We do not want to sell expensive and partly unnecessary products, our fee structure shall be comprehensible and fair. We listen to our customers: they want excellent customer service and financial services that are actually used. That’s why we take companies such as Spotify as an example. Our customers will pay a subscription fee only for the services they really need.

We have noticed that most customers have no clue as to what they are paying at their bank. And not everything that seems free of charge is really free of cost. Yapeal does not focus on free offers, Yapeal’s focus on quality and sustainability. We want to inspire our customers and thus retain them. Our advantage is that, unlike the traditional large banks, we have no legacy and can therefore work agilely and respond very flexibly to customer needs.

Of course, we also compare ourselves with our direct competitors, more precisely other challenger banks. Most of them offer FX payments, but this is not the most important service for our community. eBill has been rated as much more important by them. But sure, we also offer FX payments. As to other products such as loans etc., we think that (at least for the time being) cooperation will make more sense. To this end, we are in regular contact with well-known providers and promising FinTech companies.

What mistakes do traditional banks make?

From your point of view, what mistakes do traditional banks make and what do you learn out of it?

They lack ideas and courage. Traditional banks realize far too late that they are losing a customer. Even if digital banks are mostly seen as a second account or holiday payment provider, after a few months most customers realize that a digital bank can be just as safe and then even cheaper and more innovative, and so they change bank. Then it’s too late to change anything. Monzo claims to have up to 7 touchpoints with each of its customers. In contrast, how often does an average customer of a traditional bank visit a bank branch? And how often does he or she log in to e-banking?

More and more traditional banks are contacting Yapeal, telling us that they have heard about us, that they like our onboarding process and want to learn from us or need our help for process optimization. In fact, we are also registered in the commercial register as software developers. We have built our company completely according to Scrum. So we are able to react very quickly to changing customer needs or new market conditions.

We want to have a very fragmented product range, this means that if customers need a ski insurance in winter (only this insurance, and not the entire home contents insurance), then they definitely get it. To enable this modular connection of offers and also of third parties, we have to keep our software up to date at all times.

Our app is lean, all data is obtained from the so-called “YapCore”, which is simply a data lake. This also ensures integration with the payments service provider. Our data analytics is also based on data lake technology, and the same applies to our “Family Shizzle” and “Financial Amigo” packages.  This way, we can adapt our packages at any time and put together new ones.

Future plans of Yapeal

Where do you see Yapeal in five years, Thomas?

This year has been very important for us. Our first live transaction was successfully carried out in mid-August. We are currently testing our app with the first 60 customers, our “alphas”. We already successfully tested all the use cases which could only be tested live. At present, our customers still pay in their money via a correspondent bank—a FinTech license would change that. Probably the biggest and most important step this year: we applied for a FinTech license from FINMA—a first in Switzerland.

All other digital banks in Switzerland have a banking license with restrictions, but no FinTech license. The main difference is that we are allowed to accept customer deposits of up to CHF 100 million and are not allowed to use them for conducting any interest-bearing transactions. As to the rest, there is no difference to a banking license. We expect to obtain the FinTech license in late 2019 or early 2020, so “go-public” would be scheduled for the first quarter of 2020.

Where do I see Yapeal in five years … As a startup founder you have to think about the exit. As an entrepreneur, I hope that Yapeal continues to grow and will become successful on the market (perhaps even abroad?). We do not exclude that our portfolio might someday also contain B2B services, such as process optimization for traditional banks. But we do not want to spread ourselves too thin. After all, we live the “economy of scope” and want to concentrate on our most important mission: the needs of our customers.

Thank you very much for the interview and all the best, Thomas!

Feel free to contact us!

Alesia Prytulchyk / author BankingHub

Alesia Prytulchyk

Senior Manager Office Zurich

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