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Diana Lipcan: How did you come to the idea of your start-up and which customer problem do you try to solve with it? In other words, what customer needs do you try to address?
Marco Trautmann: From the very beginning we wanted to do something in the fintech area because that’s where our background is—we all come from different financial institutions and consultancies in the financial industry and were looking for areas that still offer space for disruptive business models. We looked at Payments and realized that there are already many strong players, like paypal, as well as many new companies which are currently testing innovative payment solutions. It seemed that the market was already occupied, so it didn’t make that much sense for us to offer just another digital payment solution. We looked at the Asset Management area and we also saw that there is already a handful of robo advisors that is challenged by tough investment regulations and resistance by the consumer to invest in the stock market in Germany. The only area we thought that was still underpenetrated and offered room for disruption was Personal Savings. So we decided to attack the retail banks at their core—the saving of money. We investigated the savings market in countries such as the U.S. and at that time digit had just started. They developed an algorithm which helped people save small amounts of money and put them into ETFs. We tested their concept as well as a few others within focus groups in order to better understand which concept could also be applied in Germany and where adjustments are required. The feedback was that the users did not really like the black box algorithm from digit but preferred more control over the savings mechanisms. Therefore, we decided to adapt the business model to Europe by not having a fully automated algorithm but by allowing our customers to make their own savings rules. So this was our business idea. We built a small pilot and brought the idea into an area that is relevant for almost everybody—savings. The success of this approach has been confirmed to us by the fact that now more and more fintechs are entering the savings field.
Business model of savedroid
Diana Lipcan: What could you tell us about your business model? How did you develop it based on your idea? You have end customers, the app, a partner bank and the partner shops. How do they all work together?
Marco Trautmann: I think that the interesting fact about our business model is that we don’t plan to make money with our core product. We noticed that users prefer apps free of charge (except for later in-app purchases), so we are not using subscription models. Besides, Germans are used to free payment and free savings accounts, so charging for an account did not sound appealing either. We came to the conclusion that we don’t want to monetize our model by the financial product itself, but by the various value-added services that we can build around the financial product. We launched the MVP version (minimal viable product) of the app only with the savings functionality in 2016 and just released the first value-added service: a fully automated optimization of energy contracts. With our self-learning algorithm and access to Germany’s most comprehensive and up-to-date tariff database, we recommend our customers new providers who in turn pay a commission to us. The key differentiator is that our customers are not required to fill in long forms on benchmarking sites but they can simply trust the intelligence of our analytics.
Target group of savedroid
Diana Lipcan: Who is your main target group?
Marco Trautmann: Our target group are the millennials for two reasons: first, these are the people who use mobile apps intensely and who feel comfortable using financial products on their smartphones such as mobile banking. They are also easier to address because they have less data privacy concerns when doing business on their smartphones. And second, these are the people who have the highest needs and are just at the starting point of building up financial wealth. Nevertheless, we also have customers at all ages with any income level.
Diana Lipcan: All of the app users have a savings account with a bank: i.e. Wirecard Bank. How did you find this bank and which conditions did it have to fulfill in order to be able to cooperate with you?
Marco Trautmann: We came around many banks in Germany and the first pre-condition was the technical feasibility. We were looking for a bank which has a comprehensive API and, to be honest, most of the German banks did not qualify for it. The only ones which could offer a ready-to-use API were Fidor, Wirecard and biw. We pretty much talked to all of them and Wirecard offered us the most attractive proposal.
Diana Lipcan: What about savedroid? Did you have to fulfill certain conditions as well in order to get this bank as a partner?
Marco Trautmann: Yes, absolutely. They checked the team very thoroughly—they wanted to make sure that we can build something sustainable. They also had a very close look at our business model, user forecast, IT setup and team’s experience.
Diana Lipcan: So it’s mainly about the business model and your team.
Marco Trautmann: Yes, they didn’t have any capital requirements or anything like that.
Competition and expansion
Diana Lipcan: Who is your competition and how does savedroid try to beat it?
Marco Trautmann: As I mentioned before, it’s digit in the U.S. However, looking at the German market, we don’t have any direct competitors yet. To a certain extent the traditional banks are our competitors as they have traditional savings products. There might be one or two players who are trying to build similar business models to ours but their products are still not live. Our strategy is to be the first on the market and to keep our market share by constantly innovating. But apart from that, I think that the market is big enough for two to three brands, so I’m not too concerned.
Diana Lipcan: You’re currently operating only in Germany, or better said, in the whole D.A.CH. region. Is that correct?
Marco Trautmann: For regulatory reasons we are operating only in Germany at the moment but we are preparing to expand to other markets. Our bank has the possibility for EU passporting, which means that from a regulatory point of view we can easily launch our products in other EU countries as well. We just have to notify the supervisory authorities about that.
Diana Lipcan: Do you plan to stay in Europe or expand beyond it?
Marco Trautmann: In the next two to three years we will probably stay here but we already have a high demand from Asian countries. The product that we are offering here is extremely relevant for them.
Diana Lipcan: How come your product is so attractive for them?
Marco Trautmann: Well, in the case of India, it is a nation that does not usually save enough, so its savings ratio is much lower than the one in Germany. On the other hand, Japanese banks are very interested in our product because their savings behavior is similar to Germany. They have a high savings ratio, but they are now trying to automate it and make it more entertaining.
Diana Lipcan: Your product offering is an innovative way of saving money for people in order to fulfill their wishes. Do you plan to stick to this idea or would you consider adding some other features or complementary products/services?
Marco Trautmann: Absolutely. We are taking our core product and expanding it into a savings and spending optimization platform. We plan to help people save in the future on energy and mobile phone contracts but also optimize their online shopping by offering them the best operators so that they can choose partners where their money can be used more efficiently. We think that we can optimize spending and savings patterns through these features.
What about data protection?
Diana Lipcan: As a result of your business model you have access to a lot of customer data. How do you deal with the topic of data protection?
Marco Trautmann: We take this topic very seriously in the sense that it’s very high on our agenda and we try to design our IT landscape by putting personal privacy first. We are TÜV-certified on our data protection measures and are supported by our external data protection officer. Amongst others, we also ran IT security penetration tests with external security experts which generated great results.
Diana Lipcan: How do you see the cooperation between banks and start-ups in the future?
Marco Trautmann: I think that in the future the fintechs will continue to be a strong competition for the banks and will try to take a larger share from them like N26 and paypal did. Nevertheless, I also see a close collaboration between them—fintechs like us, which are closely working with banks, helping them to survive and even tap into new markets for them. I see this collaboration intensifying, I see banks working together with multiple fintechs, quickly testing new markets, developing great ideas and then finally integrating them into their platforms.
Future of savedroid
Diana Lipcan: How do you see savedroid in five years?
Marco Trautmann: In five years we don’t see ourselves anymore as just a fintech start-up but rather as an artificial intelligence enterprise that uses behavioral and financial data to create more added value for our customers.
Diana Lipcan: Do you have any pearls of wisdom as a result of your experience in the fintech industry?
Marco Trautmann: I would say that you have to be very fast, be a quick decision maker and make your product very efficient. Don’t focus too much on being perfect or on having perfect products. Just test them quickly on the market, add innovative features to them, make good decisions and be faster than the competition.
Marco, thank you very much for this interview.