Komerční banka, one of the biggest Czech banks, decided to pursue the vision of becoming the bank of the future. One of the ways how to achieve it lies in cooperation with fintechs. For this purpose, its subsidiary KB SmartSolutions was established 2 years ago, aiming to seek out and cultivate this kind of partnership. Where do these collaborations move over the last year? What is going to happen next and what are the future plans of KB SmartSolutions?
Christmas time is here. That means also winter, short days, and sometimes rapidly changing weather, but also a time of joy during the Advent season. In this period, we tend to think about the past year, evaluate what has worked and what not so much, what we want to keep on track and what would we rather do differently, what awaits us in the new year, and where we want to move.
Komerční banka has thanks to KB SmartSolutions revolutionized banking. After all, her motto “We build the bank of the future” speaks for itself. Patrik Nový, one of the two CEOs at the same time adds “and we are looking for brave partners who will join us. We won’t come up with all the smart solutions by ourselves.” And this is an opportunity for young and go-ahead start-ups. For start-ups with a specific technological solution, thanks to which the bank can offer its clients a digital, simple, and user-friendly solution and thus move one step closer to creating the bank of the future with a full-scale ecosystem. However, the fact that KB SmartSolutions also fulfills its mission through building its own fintech from scratch cannot be overlooked. A great example is the internal fintech Finbricks.
Let’s go back in time
The year 2020 definitely was successful for KB SmartSolutions. Thanks to them Komerční banka managed 3 equity entries into unique Czech fintechs – Upvest, Platební Instituce Roger and Lemonero. Upvest is a crowdfunding platform allowing individuals to invest their spare funds into real estate and developers to obtain additional resources needed to put into practice their project. Roger shortens long invoice maturities by up to 3 days, thus improving the cash flow of companies. And Lemonero brings funding based on the real performance of the e-shop using artificial intelligence and big data, all completely online while the e-shop can get the funding in an all-time high short time.
But let’s move on to 2021 – in a very similar spirit. Traditional banks have realized that working with young innovative companies can bring benefits to both parties. Such symbiosis has become a trend. Dynamic fintechs not only have a lot of great ideas, but also an itch for clients of established financial houses. Banks, on the other hand, have a lot of money at their disposal, thanks to which they can turn a competitor into a devoted ally.
Here, too, KB SmartSolutions and their partnership did not lag, and several important milestones took place.
Upvest and real estate investment still rock on!
It has been already over a year since Komerční banka’s equity entry into Upvest. Their cooperation has developed over this period, and the two sides have synchronized with each other. Komerční Banka sealed the excellent mutual collaboration by increasing its share in the company from the current 18.9% to 31.06%. During that time, 12 new investment projects in a total volume of more than CZK 400 million were added to the Upvest platform, including the largest investment of CZK 109 million up to date. (Author’s note: the total number of investment projects placed on the platform since its origins in 2017 is 22 and all were successfully financed.) In autumn, a joint sales pilot was launched, in which Komerční banka began offering its clients the opportunity to invest individually giving them preferential treatment. Thanks to this, the open projects were financed at an all-time high short time.
Furthermore, both parties would like to focus on non-development projects in the future. The goal is to place on the platform also projects from other areas than real estate from other areas, such as energy, renewables, healthcare, or other socially beneficial areas.
Roger as a big fintech investment
Komerční banka’s investment of hundreds of millions of CZK into fintech Roger spoke in clear terms about Komerční banka’s intentions in the area of cooperation with fintech. It was one of the largest fintech investments in the Czech Republic while having only local players involved. Adam Šoukal, the company’s founder and CEO, attended conferences years before concluding the cooperation and disproving myths about cooperation between conservative banks and the young start-ups working in the Czech Republic. He was right that nothing like that had existed locally for a long time. In the end, however, it was his fintech Roger who became one of the first to break the ice, and together with Komerční banka, he showed that it is possible.
This cooperation was not just a gesture. In the conservative banking world, the patronage of such a company, member of globally recognized Société Générale group, is important and immediately opened the door for Roger. However, it did not happen overnight. It took several years of hard work. Šoukal and his team had to gain the bank’s confidence and convince them of the cooperation.
Since the signing of the equity entry, cooperation has been constantly evolving, partners are coordinating and actively seeking further synergies. During the year, Roger worked primarily with the e-commerce sector, which was the only way for most people to buy products during the coronavirus crisis. The various partnerships were established – with marketplaces Alza, MALL.CZ, or with Datart or Pilulka (pharma merchant). In the first half of the year, Roger launched a new product Roger Ověření assessing the financial health of companies based on their public and non-public data. It is publicly available, free of charge, and can be implemented very easily via the API interface, which significantly simplifies and speeds up the entire verification process.
Lemonero and rocket growth of e-shop financing
Lemonero is not only the last equity entry of Komerční banka but also a very specific partnership. No traditional banking house has ever merged with a start-up at such an early stage of development as Lemonero was at the time of signing. (Author’s note: Lemonero was established at the end of 2019 and the equity entry took place one year after its establishment, including approximately 6 months of negotiations including.) Lemonero operates on the market as a digital bank – it lends money without paperwork, even to e-shops operating for a few months. They can send funding within one day. Its huge advantage over other lenders is the data they have and use them in a way so they can determine exactly how much it can lend to the e-shop.
In 2021 Lemonero partnered with major local e-commerce players such as Shoptet, Eshop-Rychle, or UPgates. Since April, Lemonero has been working with Alza and the Mall Group, where it provides financing to its clients within marketplaces. Mall Group was recently sold to the Polish Allegro for 23 billion CZK. At the end of the year, Lemonero also received an award from the SME Banking Club, and it officially became the 2021 best digital financing solution for small and medium-sized businesses in the fintech category in Central and Eastern Europe.
For the coming year, they have big expansion plans, both in terms of company size and amount of client funding and expansion beyond the borders of the Czech Republic.
Finbricks makes PSD2 easier to use and interconnects clients with banks
2021 was for KB SmartSolutions successful also in terms of internal start-ups. They build internal start-ups, that fit into the business model of Komerční banka, and test their success on the market. Finbricks is a great example. In its beginnings, back then as Zaplaceno.cz., through which Komerční banka reacted to the PSD2 directive. It aimed to make a comprehensive PSD2 platform for everyone. At present already as Finbricks exists as a separate company providing its services to other clients. This is a service that has a wide range of uses on the market primarily making open banking accessible not only to banks.
The company grew significantly in the last 12 months. The services are available using an API interface, which eliminates differences between the solutions of various banks. It currently covers nine Czech banks and negotiations with several large local market players are taking place.
What comes next?
Upvest, Roger, and Lemonero shall not remain the only equity entries into star-ups of Komerční banka. “We are convinced that there are many good projects in the Czech Republic with which we can imagine cooperation with in the future, whatever the form of the cooperation. We now focus primarily on making our current partnerships commercially successful. However, this does not mean that we do not have other areas and acquisitions that we would like to focus on in the coming periods, ”reveals Patrik Nový, CEO of KB SmartSolutions. He and his colleagues would like to make one investment in retail fintech and are also looking beyond the borders of the Czech Republic.
Thanks to KB SmartSolutions, Komerční banka has not only succeeded in gaining a place on the market as a leader in cooperation with fintechs, but it has also succeeded in actively developing these collaborations, constantly innovating and realistically approaching the bank’s vision of the future. Of course, these successes are a joint work of KB SmartSolutions and many skillful and determined people from Komerční banka and fintechs, to whom belongs a big thanks for their efforts. We believe that we will deepen these successes in the new year 2022.