On the back of new investment from Goldman Sachs, totalling EUR25 million, German fintech firm Raisin has acquired fellow German fintech specialist retirement savings firm, fairr.
The merger will bring Raisin access to the EUR12 trillion European pension and retirement savings market, allowing Raisin customers access to savings, investments and pension products through one registration in an online marketplace.
Putting this acquisition into the UK perspective, Kevin Mountford, CEO of the UK business, Raisin UK, explains that the UK version only launched last year, whereas the continental version has over 195,000 registered customers and some EUR15.5 billion in brokerage, with 81 banks on board.
“They are at a different chapter in their journey,” Mountford says. “It makes sense to build relationships, such as building ETFs with Vanguard, and fairr gets them into the post retirement space and a rounder proposition.”
The UK business arose out of the purchase of Mountford’s business, PBF, Plan B Funding, in 2017. His background was in retail and business banking, having worked at HBOS, Birmingham Midshires and MoneySuperMarket. The PBF business was designed to help start-up banks diversify their distribution, building, where required an origination platform and on-line application flow using affiliates and aggregates.
“Raisin had been in the business for about the same time and had identified that the UK was one of the biggest start-up bank markets in Europe but that it was a battle ground and also had Brexit in the background to consider.”
September 2017 saw Raisin buy PBF and May 2018 saw the launch of Raisin UK.
“There are lots of technological developments for things like credit cards and loans but nothing for cash savings,” Mountford says. “The consequence of the economic crash is that people are disillusioned with savings but one of two things have changed with banks having to reconsider their deposit raising strategies. Any bank that is trying to grow needs to raise deposits.”
Mountford cites other wealth managers and IFA networks that offer a cash solution, such as Hargreaves or St. James’s Place’s connection with Flagstone.
“Our main proposition is that it’s a single registration and through the service banks we work with there is a single AML and KYC check which allows the client to deposit cash across a variety of banks and products.”
Currently, Raisin UK offers access to 10 banks on their panel, with around 20 products in the fixed term space. Notice accounts are about to launch and easy access accounts are planned for the end of the year, with cash ISAs on the horizon in 2020.
By the end of this year, Mountford expects that panel to have increased to 20 banks, including some household name banks, and is hopeful of GBP1 billion in sterling with the firm.
“It’s different in the UK,” Mountford says. “Continental Europe has a single currency across multi-jurisdictions but within the UK we are limited to sterling denominations and UK residents.”
However, even within those restrictions, Mountford says that Raisin UK offers a compelling solution to start-up banks looking for deposits. “For some of these banks, we are their exclusive route to market. Challenger banks are an eclectic mix of organisations, some are retail but also some are involved in specialist lending which means their spreads are slightly higher than the traditional retail rates.”
Outsourcing to Raisin also keeps the operational costs down. “Our route to market is three-fold,” Mountford says. “Our own brand activity, products on the aggregators and affiliators’ platforms and we also work with distribution partners, such as Legal & General and ClearScore, where we give them an integrated solution to promote cash to their customer base, and there are more of those deals coming.
“Our job is to build up the relationships but what we are seeing is that the pressures on banks to diversify their routes to the market mean that we are increasingly working with more household names and bigger banks.”
The banks on the panel are all UK regulated entities, mostly covered by the FCA and under the deposit compensation scheme, although a few are European offering consumer protection under the European scheme, which might be affected by Brexit.
“There is no real risk to the consumer,” Mountford says, “but no one wants to rely on the deposit compensation scheme so we limit every customer to GBP85,000 per bank and if someone is higher in their net worth, they can spread their cash.”