A Song of Value Chain and Capital Requirements: mapping out the European fintech & insurtech fullstack ecosystem
A growing number of fintechs and insurtechs are going fullstack. What does that mean? It means that they want to be risk carriers and gobble up as much of the value chain as they can to earn more margin on their clients. Aha, and more concretely?
- In the world of banking, these guys want to operate a traditional banking model of transforming deposits into loans and other credit facilities without the need to rely on anyone else’s balance sheet.
- For those attacking the insurance industry, they want to underwrite the risk and insure clients directly and, once again, without the need to rely on anyone else’s balance sheet
This is a major development for the financial services industry as we are witnessing a shift from asset light businesses to balance-sheet driven business models. It is also worth noticing that quite a significant number of them have acquired, or plan to acquire, this asset pre-launch, thus requiring a significant war chest even before the operational start as regulators only vet what they deem to be serious players.
Let’s take a closer look at this flurry of ambitious startups (please note that we only listed those companies that either have already acquired their license or have clearly indicated they are in the middle of the application process).
This map gives you a rough idea of the geographic distribution of these players and, if fully licensed banks are mostly British, Germany is leading the pack when it comes to fully licensed insurers. In total across both sectors, Germany can boast of 11 new players (at the time this article was written) that have either already acquired a license from the local regulator, the Bundesanstalt für Finanzdienstleistungsaufsicht (or BaFin) or have indicated they would seek one. This compares to the 12 other fullstack players that exist elsewhere in Europe.
Fully licensed neobanks: what are the forces at play?
With its 4 neobanks and a fifth expected soon, the UK is clearly establishing itself as the European leader in this category.
In the B2C banking segment, you can find Fidor, N26, Monzo, Tandem, Starling Bank, Atom Bank, Younited Credit and bunq that have already secured their banking licenses while Revolut has indicated it has applied for one in Europe.
In the B2SME space, while there are many players out there targeting this segment, only Margo Bank has clearly stated it will go for it banking license before launching its operations.
Also, two payment services providers, Adyen and Klarna have gone to the trouble of acquiring a full banking license.
The outlier here is solarisBank, which has positioned itself as a banking enabler, a B2B2X business model whereby it rents its license and/or tech stack to third parties looking to develop their own banking activities. It is worth noting that Fidor also has developed this B2B2X business model.
The insurance industry: numerous new cool kids on the block, mostly from Germany
Germany is where more modern insurance experience seems to be most badly needed: 8 out of all 10 European fully licensed insurers come from there! Other than them, France and Greece have one each only. So, who do we have here?
On the one hand, property & casualty subsegments are the most common focus of these players: Coya, Neodigital, WeFox/One and Hellas Direct already have acquired their licenses and Flypper has announced its intention to go after it. Friday and Nexible are a different type of animals as they have been set up by industry incumbent Baloise and Ergo respectively but operate on their own balance sheets.
Still operating in the P&C subsegment, Element is a different kind of animal as it deploys a subtle B2B2X business model, thereby enabling other businesses to distribute their own P&C insurance products (excl. motor insurance).
On the other hand, health insurance seems to be a trickier bet for startups: only 2 have sprouted across Europe namely Alan in France and Ottonova in Germany to try and challenge the status quo.
So, there you have it: the mapping of those guys that want to go full stack and own the entire value chain of either the banking of the insurance indusry. In a later post, we’ll discuss what this outpouring of fullstack startups means for the wider European financial services market.
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