What is the current state of the German FinTech landscape, including major trends, opportunities, and challenges? In their recent report, FinTech Consult & Contextual Solutions analyzed what’s moving in the FinTech ecosystem.
Foreign B2C and B2B FinTech companies increasingly engage in the German market. The reasons are apparent. Germany offers a significant market potential with 83 M citizens, 3.5 M SMEs, and more than 1,500 banks. In addition, European passporting rules help explore new jurisdictions, and after BREXIT, Berlin is a strong candidate to replace London as the EU’s #1 FinTech hub.
However, an established business model in another market does not guarantee success in the German market. Therefore, the numerous particularities of the German market need to be studied thoroughly to understand their business model impacts. Some of the most significant market characteristics include the following:
- Being risk-averse, top-down business culture with long sales cycles.
- Being demanding
- Paying high importance to trust and security.
- Payment infrastructure being widely based on standards, but often built on legacy systems with dependency on key stakeholders with varying interests.
Furthermore
- The average state of digitization is lagging in aspects such as fiber internet or public services.
- Cooperation between banks and FinTechs is common, but the number of institutions, associations, and service providers increases complexity.
- The large SME sector is receiving pressure to digitize, relying widely on traditional financial products.
Recent Market Developments and Trends
In addition to the particularities outlined above, the German FinTech market was lately shaped by global events. Although the Covid-19 pandemic boosted the demand for digital solutions (e.g., contactless payments, trading apps), economic turmoil as the result of the Russian invasion of Ukraine, record inflation, rising interest rates, and a decline in funding led to a phase of consolidation in the ecosystem. Mass layoffs and weakened growth seem to be the most significant consequences so far. In addition, the German financial system is still shaken by the collapse of Wirecard with national regulators having put prominent FinTech players such as N26 or Solaris under tight supervision.
In this challenging environment, understanding the German market and addressing its particularities is more crucial than ever. Newcomers should demonstrate their local market knowledge using some localization methods. Some of the proven techniques to localize are:
- Building trust and collecting endorsement via partnerships, certifications, memberships, and similar
- Selecting the right partners
- Building a local network
- Integrating transparency into the value proposition
- Addressing German pragmatism
- Adjusting to local conditions and requirements
Additionally, companies should identify market trends and market gaps. Banking-as-a-service (Baas) & embedded finance, sustainable banking, open finance, and financial inclusion & education are topics that are in demand.
More Practical Market Guidance
The more particular a market is, the more preparation it needs. The good news is that a practical guide on successfully entering the sizable but challenging German market is now available.
Contextual Solutions and FinTech Consult were recently commissioned to prepare a report on behalf of the Netherlands Enterprise Agency (RVO) and the Netherlands Business Support Office (NBSO) Frankfurt am Main that provides a holistic overview of the German FinTech ecosystem. The study was prepared from the perspective of Dutch companies; however, it includes evergreen suggestions for companies preparing to enter the German market.
Using unique market insights, statements of experts and stakeholders, practical experience, desk research, and a survey, the report aims to:
- serve as an all-in-one resource for the status quo and trends in the German FinTech ecosystem,
- highlight the regional focal areas and relevant stakeholders,
- provide an overview of the investment trends in Germany, specifically related to FinTech,
- address the opportunities and the challenges for foreign FinTech companies, with a particular Dutch market focus, when accessing the German market, and
- formulate recommendations for the internationalization of Dutch FinTech companies towards Germany.
You can get your copy now using this link.
After browsing through the report, don’t forget to thoroughly assess market readiness and compatibility using the German market compatibility checklist at the end.
Key insights from the report
