December is traditionally a time when we look back through the past year. We go through everything that happened, we evaluate what turned out well and what we could have done differently. The same approach can be applied to companies – going through particular successes and also things that can be valuable lessons. The latter is an inseparable part of our existence. Without them, we would never be able to move forward and learn.
The bank-fintech partnership was just a few years ago considered more of a utopia than something that could work. Banks as subject to regulations, with a fixed organizational structure and complex processes, are seemingly the exact opposite of startups. Those can innovate, grow and move forward very quickly almost from month to month, which is usually not so fast for a banking institution. However, these differences can also be seen as a chance to work together and draw on a mutual symbiosis that brings benefits to both partners. At KB SmartSolutions we believe that fintechs are not competitors for banks, but potential partners. What might appear to be a possible dispute can be used as a chance to learn from each other.
Komerční banka as a leader in cooperation with fintechs
The days when banks and fintechs were seen as rivals are long gone. The journey of this claim took a rapid turn and it ended irretrievably in the abyss of history. More and more banks have seen fintech as the fastest way to accelerate their digital transformation processes. If we look at the hard statistics – overall, 65% of banks and credit unions entered at least one fintech partnership over the past three years, and 35% invested in a fintech startup.
Komerční banka is even one step ahead and very quickly understood that cooperation with startups can not only enrich it with new products, distribution channels, segment offers, and competencies but help with constant innovation or satisfying the needs of its customers faster and using original solutions. On the other hand, it also turned out that Komerční banka can bring essential value to cooperating fintechs as well. To cooperate with startups, Komerční banka founded KB SmartSolutions in the form of a so-called “corporate venture house”. KB SmartSolutions is the link between both partners. Its members are in everyday touch with the Bank, finding the needs of customers, looking for suitable solutions on the market, and at the same time searching for those smart solutions on the market and preparing startups for cooperation with the Bank. KB SmartSolutions works with fintech on their further development, growth, scaling, and foreign expansion. It is not just an investment to achieve its appreciation, it is the very development of the solution to the maximum possible level.
And here is the right moment to bring the evidence of functional partnerships and collaborations that KB SmartSolutions brought to the Bank over the past four years of its existence. These successful cooperations are the feedback. Therefore, sharpen your senses and prepare your hands to applaud our stars. Entering the scene are Finbricks, ENVIROS and KB Advisory, Upvest, Roger, and Lemonero.
Finbricks simply folds up blocks of financial services on top of each other
Finbricks enables payment gateways, e-commerce companies, fintechs, banks, EPR systems, and others to build a variety of financial technology products for their customers on its back-end services. Finbricks improves and complements the open banking services of commercial banks and, after years of market stagnation, puts the concept of PSD2 into practice. Finbricks introduces the new open banking aggregation platform MULTIBANK, which gives access to a wide range of financial data and banking products. With a total volume of CZK 850+ million in PSD2 payments and a 95% success rate, Finbricks has established itself as a reliable partner that meets the strict regulatory requirements of the payment world and ensures the smooth flow of payments.
In 2022 (only in its second year of operation), Finbricks took a big step forward. From an internal startup, it became a full-fledged company aiming to become a major player in the payments market. The proof is the fact that he received tens of millions of crowns from Komerční banka for further development. A purely technological PSD2 aggregation solution has become a fully functional e-commerce payment platform. Instead of bank buttons and transfers from internet banking, one payment gateway to twelve banks in the Czech Republic from Finbricks. It spread from the Czech Republic to Slovakia, and an important milestone was the submission of an application for a license to operate a payment institution to the CNB. In addition to setting basic company processes, it meant building a robust system of checks and ensuring safety and operation.
What is next? In the coming months and years, Finbricks will intensively continue its expansion beyond the borders of the Czech Republic – the next target is Hungary and subsequently other European countries. The company also aims to expand its partner groups, and the new platform www.platito.online is also in pilot operation in a wider area, for example.
ENVIROS and KB Advisory: how to do business with the best players on the market in a sustainable way
KB Advisory is another originally internal startup of Komerční banka, which provides comprehensive consultancy in the field of ESG. Komerční banka decided to support its further development by acquiring the company ENVIROS, which is one of the leading domestic players among consulting firms dealing with energy and environmental consulting. It also deals with the financing of energy-saving projects and projects of renewable resources for several large companies in the Central European market. These are all areas that Komerční banka is also interested in.
KB Advisory and ENVIROS have already implemented several joint projects before the acquisition. Thanks to the connection between the two companies, they will be more efficient and able to implement more projects for customers. The goal is a closer connection of consulting services and financing, for example in the field of energy savings or building certification.
What is next? To become the definite advisory leader in the field of energy and ESG and the only Bank that will be able to provide customers with a full range of services from advisory to sustainable financing.
Upvest as a real estate crowdfunding guru
Upvest brought an original crowdfunding model of investing in real estate through debt financing to the Czech market. Their platform is flawless not only technologically, but also in using expertise in real estate and finance to deliver high-return, low-risk investments to customers. With the help of KB SmartSolutions, Komerční banka acquired a stake in Upvest in 2020 to bring innovations in technology and products to customers. A year later, it increased its equity stake, and as Upvest managed to exceed the set business goals on the market, in the summer of 2022 the Bank decided to buy the platform, even earlier than originally planned. The demand for Upvest‘s projects exceeded expectations.
In more than five years of existence, customers have invested a total of CZK 1.6 billion through the Upvest platform, divided into 35 successfully financed projects with a total value of more than CZK 12.3 billion.
What is next? Upvest‘s long-term goal is to offer investors every month a new project, to expand the product offering, to include other sectors beyond the real estate sector, and to develop the platform in such a way that it is attractive to even the most demanding investors from the KB portfolio and beyond. Upvest is currently set for strong growth – and intends to continue to do so. Komerční banka wants to multiply its value over the next few years.
Roger and the art of factoring
Platební instituce Roger shortens the due date of invoices to three days and thus helps entrepreneurs with the optimization of operating finances. To investors, Roger offers short-term investments in invoices issued to solvent companies. Roger works on the principle of auctions. Investors compete for company invoices by offering the interest at which they are willing to buy them. In 2020, Roger teamed up with one of the biggest players in the banking market – Komerční banka.
Several important things happened for Roger in 2022. First of all the company financed a total of CZK 15 billion through factoring since its establishment. Last year, the company focused primarily on creating innovations for investors, and now it has introduced the new application Plus – Direct payments. It enables direct connection of Bank accounts between the sender and the recipient of the payment. At the same time, it is only the third non-banking company in the Czech Republic that managed to obtain a PSD2 license from the Czech National Bank. The Plus application works precisely on its basis. As one of the first on the domestic market, it enables automatic pairing and payment entry.
The new application follows several other novelties that Roger presented in 2022. One of them was an investment machine that itself bids for the investor, i.e. according to the specified parameters, the machine selects auctions and enters offers. The demand for shortening long invoice maturities is thus still growing. Honest work pays off … even within three days – as says the Roger advertisement claim.
What is next? Roger will continue to actively improve his services and come up with great news in the coming year. Thanks to them, Roger is expected to become the largest independent company for financing long-term invoices in the region within a few years. Of course, many new hacks on the Roger platform are being prepared.
Lemonero and their artificial intelligence save underfunded e-shops
Lemonero is a Czech fintech that provides financing based on the real performance of e-shops. It uses artificial intelligence for evaluation. It determines the loan offer objectively based on data. Lemonero itself offers loans in several ways. Part of the funding goes through the platform directly using extensions on e-shop systems such as Shoptet, Eshop-rychle, or Upgates. The second share of loans is represented by embedded collaborations with Mallo and Alza. Repayment is subsequently made in the form of monthly installments or, more recently, also through so-called revenue-based financing, when installments are paid only from actual transactions. Repayment is thus directly linked to the turnover of the e-shop and does not burden its performance, for example, in the off-season. Since 2021, Lemonero has financed CZK hundreds of millions in hundreds of e-shops and has grown by more than 500% year-on-year (2021/2022). In the past year, Lemonero established many successful collaborations, e.g. with the payment gateway GoPay, and also went beyond the borders of the Czech Republic and made its services available to e-shops in the Netherlands at the end of the year.
In 2020, Komerční banka bought the 11% stake in Lemonero and raised its stake in the summer of 2022.
What is next? Lemonero wants to focus mainly on expansion abroad. The current expansion steps of the startup are directly related to the geographical position of the French group Société Générale, owner of Komerční banka. In the first wave at the turn of this year and at the turn of next year, it will head to France, prospectively at the turn of 2023 and 2024 it plans to enter German-speaking countries and other states of Central and Eastern Europe.
What is the greatest potential of KB SmartSolutions?
In addition to the news directly related to our fintechs and partnerships, several other important events took place. KB SmartSolutions has become an active member of the Czech fintech association, through which it wants to support the domestic fintech/startup ecosystem. They also actively participated in several important conferences. For all of them, we mention the European Financial Investment Summit from Startup Disrupt, the CEE SME Banking Club Conference, or regular events organized by the ČFA.
If we want to more closely define what KB SmartSolutions offers to fintechs thanks to the partnership with the Bank, then it is above all the mantra of growth. KB SmartSolutions is unique in the market and offers startups help with growth in various dimensions. On the one hand, it offers growth for customers. Here, he has already developed a reliable procedure for getting solutions directly to customers through the “hostile” processes of large corporations. On the other hand, it helps with product growth where the product can be scaled and extended significantly. We cannot forget the unique way of growth in the market by using a combination of equity and credit, which few people in the market can do. And the group is closed by an equally interesting and important possibility of growth in the form of expansion abroad with the help of the parent company Société Générale, and not only in France.
KB SmartSolutions can connect two seemingly different worlds – the dynamic world of a startup and the world of a corporation, which in the case of a Bank is also strictly regulated. The great potential of KB SmartSolutions lies precisely in the fact that it is not completely bound by banking regulations and thus has more freedom in building partnerships. Another reason why it is better to launch untested things outside of Komerční banka is the robust and therefore slower processes that are typical in a large, publicly traded company, but at the same time contradict the intention to systematically discover and quickly evaluate new services. The reason for the quick market response cannot be overlooked either.
And what else?!
The year 2022 was undoubtedly a challenging but also a successful year for Komerční banka, KB SmartSolutions, and our fintechs. Together, we are moving forward in leaps and bounds, and we still have many of these steps ahead of us. We are also planning news and interesting events in 2023 and there is a lot to look forward to!