Dr Tim Sievers, the CEO of Deposit Solutions, believes that the American market will embrace open banking
Revolutionary Open Banking pioneer Deposit Solutions has announced that it has expanded its successful business offering into the United States. The company is unique in that it allows banks to offer third party deposit products to their own customers without setting up a new account. Since 2011, the Hamburg-headquartered firm has facilitated the deposit of more than $10 billion through its Business to Consumer (B2C) sector. Moreover, its Business to Business (B2B) platform has connected banks in 16 different European countries.
“Our ambition is to grow the business and make our Open Banking technology the standard for the $50 trillion global savings deposit market,” explains Dr Tim Sievers, the CEO of Deposit Solutions. “We are in an excellent position to move to the next phase of our growth having just surpassed the $10 billion mark in transmitted savings deposits through our B2C channels ZINSPILOT and SAVEDO.”
A Clear Solution
Indeed, Deposit Solutions can be seen to have fully embraced the European Open Banking revolution.
The firm successfully raised $100 million at its most recent investment round in August, with funding led by private equity firm Vitruvian Partners, Swedish investment house
This spectacular growth led to an invitation to join the World Economic Forum’s San Francisco-based Centre for the Fourth Industrial Revolution. Deposit Solutions became the first European fintech company to join the Centre, which partners with leading global companies, governments and civil society experts from across the globe to help them grow under the auspices of the increasing amalgamation of the physical, digital and biological workplace.
Through its ZINSPILOT and Savedo platforms, Deposit Solutions allows consumers to access the best interest rates from different banks without having to open separate accounts with each lender. This means that the customer is not dependent on using the low daily or fixed interest rates of their house bank.
ZINSPILOT lets German consumers use the daily and fixed-term offers of a variety of banks based in the European Union, such as My Money Bank in France and Close Brothers in the United Kingdom. Banks can only be listed on the platform, however, if the country they are based in has been rated as Investment Grade by two of the three major rating agencies: Fitch, Moody’s and S&P.
Deposit Solutions acquired Berlin-based retail deposit platform Savedo in August 2017 to act as its international channel. This move saw the firm add more than 18,000 registered clients, 13 new partner banks such as the Portuguese Banco Finantia and Slovakian Privatbanka and extend its offering for consumers into two new countries, Austria and the Netherlands.
So, Why Uncle Sam?
Whilst Europe has long been the focus for Deposit Solutions, with plans also underway to expand into the Swiss market, the firm believes that growth into the U.S. is a natural next step.
“We have spent more than one year carefully preparing our U.S. market entry and I am glad that we can now take the signing of our first partner bank for our U.S. platform as the occasion to announce this important step,” explained Dr Sievers. “The expansion into the United States is another milestone on our way to establishing our Open Banking technology as the industry standards for the $50 trillion global savings deposit market.”
The market entry into the U.S. will also be headed by recently recruited Philipp von Girsewald, previously a Partner at
For Deposit Solutions, the U.S. provides the perfect market for their platform.
Firstly, its population is extremely tech-savvy and willing to embrace new digital banking technology, such as Open Banking. A study carried out by Morning Consult for the American Bankers Association, found that online and mobile banking now represents the primary banking channel for two-thirds of the American population. This figure has rapidly increased from just under half in 2014. The trend was not limited to younger Americans, with online banking the first choice for more than half of those over the age of 65. Only 18% of Americans surveyed stated that visiting their bank branch was their preferred method to bank, with a mere 7% using ATMs and less still, just 2%, relying on the mail. However, it is not just the consumer that has embraced the digital banking revolution with 90% of American banks revealing that they will invest in developing open APIs and customer-friendly banking tools.
“We have conducted a broad variety of focus group interviews across the U.S.,” said Dr Sievers. “The interviews show that potential clients are using technology – mostly mobiles and computers throughout the day to manage their investments and access best deals. And they like single interfaces so our proprietary Open Banking platform, as well as non-proprietary Point-of-Sale channels, will offer exactly this and allow for cash investments to be managed through a single interface on a portfolio basis as an asset class.”
Secondly, the size and nature of the American deposit market means that Deposit Solutions’ B2C platform is likely to be in high demand. The American domestic deposit market has rapidly grown in recent years and currently stands at an enormous $13.2 trillion. Much of this growth can be attributed to the Federal Reserve’s repeated raising of interest rates over the past few years making cash and thus savings deposits attractive as an asset class. Officials raised interest rates as recently as September 2018 by 0.25% to a range between 2-2.25% – the eighth increase since 2015 – with another expected before the end of the year.
Nevertheless, the American banking ecosystem is fragmented, with 9,000 banks in operation in the country, many of which serve a local or regional customer-base and which cannot, therefore, afford to run their own deposit gathering operation. Deposit Solutions offers these banks the opportunity to increase their reach nationally by gaining access to more deposits without having to physically build-out across the U.S.
Thirdly, the American Congress appears increasingly supportive of digitalization with the Senate Banking Committee holding the first official discussions in September on how to embrace fintech and Open Banking in the U.S.. The Treasury Department has also called for a new interpretation of Section 1033 of the Dodd-Frank Act, which would allow Americans to make their financial data more readily available through Open APIs.
“We are observing a bifurcation in the banking industry between those banks that own the relationships and those which provide the products – this is exactly the idea of Open Banking,” concludes Dr Sievers. “Our Open Banking platform provides for this set-up in a healthy ecosystem to the benefits of savers and banks. Point of Sales can provide consumers with best in class products through a single relationship; two of them are our proprietary Point-of-Sale channels, Savedo and ZINSPILOT and banks can offer their products efficiently.”