4 “Simple banks for SMEs”: Holvi, Tochka, Tide, CivilisedBank

Read full story in the new issue of Money Of The Future 2016\2017 report

There were many representatives of neobanks and many discussions around them with a lot of attention. But all of them are neobanks for retail clients — and I think that fintech for SMEs is booming right now and demand for “Simple banks for entrepreneurs” will rapidly increasing during the current year.


Holvi — the Finnish digital banking service for European SMEs announced in November the appointment of Antti-Jussi Suominen as the company’s new CEO. He started in his new role on January 2nd 2017. Antti-Jussi has previously worked in senior management roles driving new business growth in companies such as Sonera, Nokia and most recently in Elisa. “Antti-Jussi’s experience of building online businesses and rolling out services internationally in different domains makes him a great addition to the Holvi team, said Martti Granberg, Chairman of the board at Holvi. “His previous experience from various senior executive roles in startup and corporate environments helps in leading the company in its international expansion.“
 Johan Lorenzen, ex-CEO, has been the CEO of Holvi for three years and leaves the company on his own initiative.

2016 has been a strong year of growth for Holvi. In March, Holvi was acquired by BBVA, allowing faster scale and overseas growth for the Finnish fintech. This was followed by the release of the Holvi Business MasterCard — allowing real time mobile expense management and automated categorisation. Holvi is now live in Finland, Germany and Austria and offers customers products to grow their business as part of their banking service, such as bookkeeping and expense management.

Buy this book for 9,99$ or download for free on http://ariv.al/

In March Spanish multinational banking giant BBVA has acquired Holvi, a Finnish firm that specializes in providing online current accounts and related services for “makers and doers” — ie small businesses, freelancers, and entrepreneurs. “For us BBVA is the ideal owner– a bank with the understanding of the digital world that can give us the necessary room to grow, and then the scale and expertise to underpin that growth with sound foundation,” said Holvi in a blog post.

BBVA said that it’s looking to “expand its portfolio of digital businesses to complement the Group’s overall transformation process,” and although Holvi will continue to operate as a standalone business, there will now be a “two-way flow of knowledge, ideas and support” between the two parties. Terms of the deal were not disclosed.

Stefan Klestil from SpeedInvest VC (has been lead investor into Holvi, and is invested in Loot neobank, Stefan is advisory board member of N26) wrote, that BBVA’s acquisition of Holvi is remarkable in several ways. “To my knowledge, this is the first customer-facing FinTech acquisition by one of the big banks in Europe. There have been many investments into FinTechs by banks often via their in-house accelerators or VCs, there have been partnerships, there have been several tech acquisitions especially in the infrastructure domain but never before has a bank decided to directly take over a customer-facing FinTech brand in Europe.

… BBVA has a vision and a team that is attractive and inspiring even for top-notch FinTech founders — a key asset when it comes to actually closing a deal.
 The deal confirms the attractiveness and growing importance of the prosumer/solopreneur/microenterprise segment. The digital entrepreneurs, or “makers and doers” as Holvi calls its customers are strongly growing across Europe and are in need of digital workbenches and payment and banking infrastructure to easily handle its business and money matters. Traditionally banks have not been able to service this segment profitably. In addition, Basel 3 and further regulation are pushing banks out of lending to this segment alltogether. Propositions like Holvi allow access to this segment at low CACs and service costs and with high cross-selling potential especially in lending and FX.
 The deal in my view marks the starting point of banks using M&A to buy themselves into segment-specific FinTech brands in Europe. … They are able to acquire and serve customers at a fraction of the cost of financial institutions, enable frictionless onboarding and cross-selling and offer a beautiful smartphone-only experience that millennials have come to expect. And most importantly, they are offering services that cater to the needs of specific segments such as young professionals, expats, millennial entrepreneurs, students and small merchants. As FinTechs grow to dominate these segments Banks will have no choice but to acquire these FinTech brands if they don’t want to completely lose access and relevance.
 FinTechs can survive compliance due diligence of a big bank! The bank exit channel is fundamentally more complex due to heavy regulation in Anti-Money Laundering (AML), Know-Your Customer Procedures (KYC), operating licenses and approval procedures by the regulator. This puts additional heavy burden on the FinTechs to set procedures up in the right way and thoroughly prepare DD towards exit. Unsurprisingly, exit processes take generally a lot longer than in other industries.”

And he told me, when we were skeakers and judges at European Fintech Awards: “We will be seeing a number of consumer facing Brands in FinTech that address specific segments (18–35 year olds). The underlying economics are so compelling that they will ensure a structural shift away from the banks. The logic is very simple: 
 — customer acquisition cost in the 7 to 13€ range, ie factor 10–20 cheaper than the banks
 — cross-sell ratios at 4–7x (on top of the current account), vs 1,5–2x by the banks today
 — unit cost at 1–2€ per customer per year for account maintenance/IT vs. 20–50x depending on how much of the overall bank cost base you allocate to this (vs the older segments that still need branches etc).”


Imagine paying your bills, checking your account balance, getting help with financial questions, and generally managing all your everyday banking needs via Facebook. Sounds hard to believe? Not for customers of Tochka Bank in Russia (acquired by Otkrytie bank, after that Rocketbank, “Russian Simple”, too, and hosted on Tochka infrustructure), where all of this is possible today.

Bots, of course, are big right now. But burgers and boarding passes are one thing. Paying your utilities or credit card bill is another. And talking to a representative of your bank about arranging a mortgage for a new property you want to purchase is yet another.
 But all of those are available from Tochka, where clearly the bank’s leadership wants to not only present a modern high-tech appearance to the world, but also to deliver on that promise to customers. Over 12,000 clients used the Facebook bot on the first day, and an astonishing 50% of them initiated a payment from the bot. Those are very significant numbers for a bot, since bots can be hard to find and start using, and the idea of communicating with a company via Facebook Messenger is still very new outside of the WeChat empire in China.

Boris Dyakonov, CEO and co-founder of Tochka bank, wrote: “I’ve wanted to have a purposeful business bot for years now.
 We at Tochka hesitated to launch the world’s first Facebook banking bot — with full payment functionality — for almost two years. The bot itself is only a moderate success, but it has certainly been a useful tool to explore how customers behave with such a toy. We have been trying to answer questions about whether a bank might need a bot in the first place, what platform it should run on, whether artificial intelligence would be useful, and whether our bot should have a character of its own.
 From our work on these questions, I would say that for a bot to be as useful as possible, it should have a personality and it should run on the platform that is the most popular with clients. But A.I. might be too early in its development to work here.

… Another area that got us thinking about bot applications was the evolution of the personal business assistant. Our typical client, an entrepreneur, might not use a web interface or a mobile app. If they wanted to find out their bank balance, check on incoming payments, or give orders to wire funds, their pattern might be to text their business assistant or an accountant. So, we reasoned, if they can chat with an assistant, why can’t they chat with a bot?
 … Bots should be useful. In our case, the bot had to emulate the basic tasks a business assistant would perform, that is giving advice, directing someone to a nearby ATM, telling them their balance, and helping them make a payment.
 Bots should have a personality, as well. We learned a lot from Microsoft’s experience in this area. If you remember, Microsoft had to pull its Tay chatbot from Twitter after human users managed to train the innocent A.I. into become a swearing racist xenophobe in less than 24 hours from launch.
 We definitely did not want our bot to follow in Tay’s steps and learn to yell at customers like an annoyed teller. I thought about how I would not want my mom to talk to a bot equipped with artificial intelligence, even if it was a lot like Siri. Artificial stupidity instead of artificial intelligence annoys me more often than it helps me, and we could all do with less annoyance in the world. It’s better to give R&D departments a couple more years to bring A.I. to the level my mom would be able to deal with. However, embedding banking commands in Siri and the like might be a great development in the near future.
 Tochka’s bot has a mild personality. It is not a machine pretending to be human but rather a machine pretending to be helpful. For better or worse, Tochka’s bot is not personalized and cannot tell jokes yet, like “Why do bankers make good cyclists? Because they are good at keeping their balance.””


According to CEO George Bevis, Tide claims to be the ‘world’s first’ mobile-first banking service for small businesses. It’s raised a $2m seed round from Passion Capital (with Passion partner Eileen Burbidge joining as Chairman), and others.

George Bevis and Eileen Burbidge

Tide’s mobile app will literally read your ID — such as a passport — and establish your identity. It then lets you set up a business current account in 3 minutes or less. Benefits include no set-up, monthly or annual fees. The space is ripe for development since Main Street banks just don’t really care enough about small businesses as they are painful to deal with. So tech startups are well placed to enter the arena.
 In addition, Tide also has a range of additional valuable features for UK small business owners. These include:
 • Free banking forever — no monthly, annual or setup fees, just 20p per bank payment
 • Money-saving tools including credit, payments (accept cards and direct debits) and foreign exchange which will be available later in 2016
 • Fully extensible APIs to build bespoke apps on top of, or easily integrate with, Tide
 • Easier accounting and expenses including auto-categorisation of transactions, native integrations to leading accounting software like Xero and FreeAgent, and the ability to issue and send invoices instantly from the app and attach photos of receipts from recent transactions for expenses
 • Banking assistance whenever needed, including instant help available from staff via instant messaging and an online customer community
 • Safety and security including bank payments always authorised on a known mobile, photo ID and automated Companies House verification required to set up an account, and spend controls for different team members. All deposits made with Tide are ring-fenced at Barclays under an FCA e-money licence

Burbidge, co-founder of Tide, said: “Tide is the future of small business banking services by addressing serious pain points for small business owners and entrepreneurs. With Tide, small business owners can get an intuitive mobile-first experience that is almost instant to set up and easily integrates with best in class cloud-based tools and services seamlessly.”
 It must be made clear that Tide is not a bank: member deposits are kept in a ring-fenced account at Barclays under an FCA-regulated e-money license by PrePay Solutions (a large B2B deposit manager co-owned by Edenred — a multi-billion dollar B2B financial services provider — and MasterCard). Funds are held under an e-money license, not a banking license. Tide deposits are held by PPS in a ring-fenced account at Barclays and cannot be invested by PPS. But to all intents and purposes, a small business would simply use Tide just like it would use a normal business banking account.
The aptly named CivilisedBank wants to lead a charge to change banks’ culture. It became the first lender to swear a new “bankers’ oath”. This commits employees to act responsibly and “have the best interests of the customer in mind” — cue images of a Boy Scout pledging allegiance to the God and the Queen. It remains to be seen whether reading a few words off a sheet of paper, or even from memory, can herald a cultural shift. “I will confront profligacy and impropriety wherever I encounter it, for the conduct of bankers can have dramatic consequence for society”, bankers must pledge. Say goodbye to blowing that bonus on a Lamborghini then.

‘CivilisedBank’, the new UK-wide business and retail bank, announced that it has submitted to the regulators (the FCA and the PRA) its banking licence application. It expects to receive its banking licence later this year and to launch early in 2017. Over the coming months CivilisedBank will focus on meeting its regulatory capital requirements and on developing its technology and operations platform ahead of launch early next (2017) year.
 CivilisedBank will not have branches but will operate through a network of Local Bankers backed by an innovative, yet tried-and-tested technology platform being deployed for the first time in the UK. Its unique, branchless local banker network will help build one-to-one relationships, without the traditional costs associated with high street banks.
 CivilisedBank will target owner-managers of small and medium-sized UK businesses by offering businesses current accounts with deposits, transaction banking, overdrafts, foreign currency exchange, investments, savings and loans. It will also address the UK retail market with specific savings and investment products.

Chris Jolly, Chairman, CivilisedBank said: “Applying for a full banking licence is a major milestone for CivilisedBank and places us firmly on track for a customer launch early in 2017. Customers remain poorly served by the incumbent banks, which is why our team of local bankers will be responsive to their financial needs. We will bring back the best of banking: one-to-one relationship banking for business customers, enabled by the latest banking technology.”


Now, the already crowded Indian mobile banking space has a new entrant: Singapore-based DBS Bank’s Digibank, a mobile-only bank (mostly for SMEs). 
 After having a not-so-impressive performance in the country so far, DBS is making its strongest bid to expand its retail presence in India, which, along with China and Indonesia, is now part of the trinity of strategic markets for growth identified by the DBS board. India is the only country in which Digibank has been introduced (in April), with plans to roll it out in Indonesia and China over the next 12 to 18 months.

Taking advantage of the existing infrastructure — mobile phone and internet penetration, Aadhaar card-related and PAN card-related information (gathered and verified by the government) — DBS’s Digibank is completely branchless and paperless. Becoming a customer would require a one-time biometric authentication process at any of the 500 Café Coffee Day outlets in eight cities.
 In 2013, the group changed its strategy from growth by acquisition to growth by digitisation. In the last few years, DBS has spent more than SGD 2 billion (US $1.45 billion) to strengthen infrastructure, and improve the resilience of its networks and hardware. Unlike other Western global banks, it was not limited in terms of capital or liquidity: The Asia-focussed bank has total assets of SGD 458 billion (US $332.4 billion) and reported a record net profit of SGD 4.45 billion (US $3.22 billion) for the year ended December 2015. Compare this with Bank of America, which had total assets of $2.1 trillion and a net profit of $15.9 billion for the same period.
 DBS’s digital strategy was also spurred by Piyush Gupta’s concern for the way in which Alibaba, China’s ecommerce behemoth, entered several aspects of businesses that were traditionally carried out by banks, like payments and credit ratings. “Alibaba’s finance affiliate company [Ant Financial] has created its own credit bureau Sesame. They have the fastest growing loan book. They are one of the biggest payment companies, with zero branches,” says Gupta. “If consumers are willing to accept it from an Alibaba or a Wechat, then why not from an integrated banking provider? That is our basic premise.”
 But instead of launching in China — a significant market for DBS — Digibank was started in India. Gupta says that even though the country is three years behind China in terms of smartphone penetration and usage, it offers a unique stack in the form of an architectural framework that is still being created. This includes an existing eKYC (know your client) system and the Aadhaar authentication framework, electronic signatures and digital lockers, the recently launched Unified Payments Interface (UPI) — which allows for swift payments across banks — and finally, a consent system where customer information is made available to anyone else for use. “This type of architecture is not available in the US or in China. India is one of the few countries that have put together a public architecture to enable this tele-services system,” he says.
 This also means that DBS’s Digibank will be competing with mobile payment systems such as HDFC Bank’s PayZapp, ICICI Bank’s Pockets, Axis Bank’s Lime, and State Bank of India’s SBI Buddy, along with mobile wallet companies like Paytm and MobiKwik.
 DBS plans to build a liability book of Rs 50,000 crore and an asset book of Rs 10,000 crore in the next three years for its Digibank platform, and will introduce investment products like mutual funds, insurance and consumer loans over the next six months. To woo new customers, it is offering savings account interest rates of 7 percent, and is looking to have 5 million Digibank accounts in the next five years. Apart from Digibank, DBS will continue to expand its business through SME lending, wealth management and transaction business.
 Once it secures RBI approval, DBS plans to expand to between 60 and 70 branches in India, which is expected to help increase its SME lending. DBS operates through subsidiaries in all its big markets — Hong Kong, China and Taiwan — where SME lending activities are already strong. DBS Group’s income from SME banking grew 9 percent to a record SGD 1.53 billion in 2015 from a year earlier. “The WOS will help build out an SME footprint,” says Gupta. “In the meantime, we can build a stronger retail footprint in India through digital.”

When tablet-based cash-register POYNT will come to Asia-Pacific region?
 JP Morgan is opening a virtual business branch in Indonesia, using technology to expand its geographic reach without having to buy real estate. The virtual branch promises a comprehensive suite of banking services that can be securely accessed from desktops and mobile devices, enabling clients to submit documents digitally, initiate and approve transactions online as well as have complete visibility of all cross-border and statutory payment transactions.
 The Indonesian virtual outpost comes after a similar offering was introduced in India last year. JP Morgan says that the Indian branch has been growing rapidly and that it plans to expand the idea to Thailand and China soon.

Read full story in the new issue of Money Of The Future 2016\2017 report


P.S. Singapore-based Life.SREDA VC successfully invested in several neobanks — Simple (US, exit, BBVA), Moven (US, exit*), Fidor (Germany, exit**, BPCE), Rocketbank (Russia, exit, Otrytie), YoloLite (Singapore), — and in Anthemis Group (UK, exit*) investor of Simple, Moven, Fidor and Atom bank at previous rounds.

*Exit as secondary deal **JV