Germany

Part
01
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Part
01

English Usage: Germany

Approximately 46,165,637 people in Germany speak English as a second or first language. In major cities across the country, most people can speak near-perfect English; however, the number diminishes as one goes into the rural areas. Presented below are further details on the usage of English as a first or second language in Germany.

HOW WIDELY ENGLISH IS USED AS A FIRST OR SECOND LANGUAGE IN GERMANY

GENERAL POPULATION SPEAKS ENGLISH

  • 56% of the population speaks English as a second or first language, while 95% of the population are still using German. In 2019, the total population of Germany is estimated at 82,438,639.
  • Based on the total population figure and the percentage of English speakers in Germany (56%), it can be estimated that approximately 46,165,637 Germans speak English. The calculation is included in the methodology section.
  • 59% of Germans are in favor of the recognition of English as an official language in the European Union.

HOW WIDELY USED IN EACH COUNTRY FOR BUSINESS AND IN ADVERTISING OR MEDIA

BUSINESS
ADVERTISING AND MEDIA
  • Results of a study on language in advertising stated that 62% of Germans admitted that they did not understand the English used in adverts. Another 72% of the respondents were unable to translate the English used in the ads into German correctly.
  • German companies are embracing English, which they use in advertising and marketing to their international customers. Previously, German companies advertised products using German phrases, and some ads featured a combination of both English and Germany.
  • Many Germany radio stations also play a lot of English music. For instance, American pop is popular in Germany and has contributed to English-speaking in Germany.

RESEARCH STRATEGY

We leveraged information in business news or news site to get the information such as business insider or marketplace. We searched there because these sites show how Germans use English as per a report published by Marketplace Organization, with the complaints from Germany government that Germans use too much English.

CALCULATION

To determine the number of Germans who speak English, we used the estimated percentage of Germans who speak English (56%) as provided by World Atlas. Next, we determined the total population of Germany, which we found to be 82,438,639, as published by Worldometers.
Arithmetically, 56% x 82,438,639 = 46,165,637 Germans.
Part
02
of twelve
Part
02

Digital Banking By Industry: Germany

After an extensive and thorough search, information on German industries that have most embraced the business banking services of traditional and digital-only banks/EMIs is not available in the public domain. However, the research team was able to gather valuable insights on the subject.

DIGITAL BANKING BY INDUSTRY: GERMANY

RETAIL INDUSTRY

  • SOFORT Banking is a real-time online banking payment service available to customers with a bank account in Germany, Austria, Belgium, or the Netherlands. In Germany, services like SOFORT fill the gap between mobile payment and point-of-sale systems.
  • Increasingly, Germans are using e-wallet payments in their national eCommerce market. According to Worldpay, e-wallets are expected to surpass bank transfers as Germans’ preferred eCommerce payment method by 2021. Experts expect that PayPal, Apple Pay, and Android Pay will overtake bank transfers (capturing 23.9% of the market) in the coming years.

TRAVEL BOOKING INDUSTRY

  • The travel booking industry is composed of e-wallet payments for both offline and online travel booking (i.e., flight, bus, train, hotel, transit & toll, metro & cab bookings). Additionally, these bookings include domestic and international travel.

MOBILE PAYMENT INDUSTRY:

  • Germany's mobile payment industry includes mobile recharge; bill payment (e.g., fuel, healthcare, wellness, and credit card payments); insurance payments; rental payment; DTH recharge/payment; broadband/data cards recharge/payment; and landline recharge/payment. The mobile payment industry in Germany is expected to grow at a CAGR of 9.2% to reach $248,347.3 billion by 2025.

ADDITIONAL INSIGHTS: DIGITAL BANKING SERVICES IN GERMANY

  • The German Federal Financial Supervisory Authority (BaFin) approved First Data as an e-money institution in Germany.
  • E-money systems like GeldKarte, PayCard, CyberCash, and eCash have not played a pivotal role in Germany's e-banking and e-money markets. CyberCash and eCash discontinued operations.
  • Financing investments in Fintech startups in Germany accounted for €541 million in 2017, less than the e-commerce startup sector.
  • Payment institutions (PIs) and electronic money institutions (EMIs) are focusing on strengthening customer loyalty to counter possible threats from BigTech firms.
  • A significant number of PIs and EMIs are developing innovative products jointly with FinTech firms and technology providers.
  • Nearly six million people in Germany (i.e., 8% of the population) uses mobile payments. However, eMarketer reports that the full adoption of mobile payments is held back by Germany's cash culture. That said, Apple Pay is expected to launch in Germany shortly to compete with Google Pay, which launched in June 2018.
  • The value of Germany's mobile wallet payment segment is forecast to increase at a CAGR of 8.9% during the 2018-2025 period. And Germans' willingness to accept remote advice and digital sales is well above the actual levels, which, according to McKinsey, is 36%.

ADDITIONAL INSIGHTS: BANKS IN GERMANY

  • Between 2000 and 2017, the total number of banks in Germany declined by 43% to 1600, and the number of branches declined by 46% to around 30,000. Germany’s banking system is composed of three pillars: private-commercial banks (with 40% of total bank assets), public-sector banks (26%), and cooperative banks (17%).

ADDITIONAL INSIGHTS: LIST OF EMI AND DIGITAL BANKS IN GERMANY

  • Anytime France for EU/EEA
  • Bred Espace France for EU/EEA
  • Bunq Netherlands Mobile Netherlands Maestro for EU/EEA.
  • Deutsche Handelsbank Germany by Bank Sofort for Own Non- Business
  • Hello Bank France by Bank BNP for Personal
  • Holvi Finland by MasterCard Germany E-money Wirecard for EU/EEA Business
  • ImaginBank Spain by Spain Bank for EU/EEA Personal
  • LeuPay Malta / Bulgaria by Malta MasterCard Bulgaria for personal
  • MisterTango Lithuania
  • Monese Estonia Mobile for EU/EEA Personal
  • MoneyPlusCard
  • N26 Germany by Germany MasterCard for EU/EEA
  • PayMix Malta Web
  • Paysera Lithuania by Lithuania Visa UK E-money
  • Revolut UK, aggregate IBAN MasterCard UK E-money for EU/EEA Personal
  • Swirl Card Ireland for Personal
  • Viabuy Germany by MasterCard Germany for EU/EEA Personal
  • Worldcore Czech Republic by Czech Republic MasterCard

RESEARCH STRATEGY

We began our investigation with an inquiry into banking industry reports for data on Germany's digital banking sector. We used sources like PwC, McKinsey, Deloitte, Market Research, Businesswire, MarketsandMarkets, eMarketer, and Transparency Market Research. While these sources provided data concerning information on German digital banking, perceptions of Germany's banking industry, and Germany's digital adaptations, none of them provided information on what German industries had fully embraced digital business banking services. Our next approach was to inquire into the German federal government as well as the governmental institutions of the European Union (e.g., European Banking Federation, Bank of International Settlements, and Regulation Tomorrow). However, all the information found concerned the broad services and players, with no information on specific user industries. Finally, we looked into German media sources (e.g., E-commerce Germany News, Frankfurt General Newspaper, and The Local). The data acquired via this method only highlighted the general news of Germany's online banking segment.

We then switched our approach and looked to triangulating the necessary information. We used business intelligence databases (e.g., Statista, Businesswire, the Digital Economy Report of Germany, and VentureRadar) to surface data for our calculations and estimations. Though we were able to identify the largest industries in Germany, we were unable to identify what percentage of those industries were dependent on digital business banking services. We next attempted triangulation through annual reports from top digital banks and EMIs (e.g., Deutsche Handelsbank Germany by Bank Sofort for Own Non-Business, Hello Bank France by Bank BNP for Personal, Holvi Finland by MasterCard Germany E-money Wirecard for EU/EEA Business, Monese Estonia Mobile for EU/EEA Personal, MoneyPlusCard, and N26 Germany). However, almost all the information provided by these entities focused on personal services and did not highlight business services. The exception was Holvi Finland by MasterCard Germany E-money Wirecard for EU/EEA Business. Unfortunately, the corporate website did not provide any details about the company itself or the companies it services.

We note that we did locate a paywall-locked report ("The German Mobile Wallet & Payment Market to 2025") that references "Germany Mobile Wallet and Payment Market Opportunities (Databook Series) — Market Size and Forecast Across 45+ Market Segments." Unfortunately, the paywall meant that we were unable to access any relevant data found within.

We next broadened the parameters of our research to include EU industries that have most embraced digital business banking services. We made inquiries into sources similar to those above (e.g., MasterCard's newsroom, Crowdfund Insider, Global Newswire, and eMarketer). However, all data surfaced through this route concerned the services and product profiles of various banks and broad trends.

While we were able to surface data on EMIs and general industries adapting digital business banking services in Germany, information on what industries have most embraced digital business banking services is not publicly available.
Part
03
of twelve
Part
03

Digital Banking: Germany

Digital banking is common among Germans, but this popularity is still low compared to other countries in the European Union. The access of digital banking through smartphones is getting popular among German millenials. More information is provided in the following overview.

INDICATORS OF HOW COMMON DIGITAL BANKING IS IN GERMANY

  • In 2018, Germany ranked #15 in online banking penetration in the European Union (EU), which represents 9 million online banking customers.
  • According to a report, 51% of people in Germany would be open to purchasing financial products from "established technology companies".
  • Approximately 59% of Germans make use of internet banking, "which is above the EU average" but below other countries like France, Belgium, UK and the Netherlands.
  • Currently there are about 700 fintech startups in Germany. This number has increased by an average of 33% each year "over the past decade". Its capital, Berlin, "is one of Europe’s key fintech hubs".
  • Due to fintechs, German banks are losing around €1.5 billion (3% of their retail revenue) each year. This number is expected to reach €2 billion a year by 2022.
  • Nowadays, people who live in Germany have numerous mobile banking options such as national German banks (Deutsche Bank and Commerzbank), online-only banks (bunq and N26), international banks (HSBC), and mobile payment providers (Apple and Google).
  • In Germany, 79.8% of millenials manage everyday banking tasks, such as making transfers and "checking their account balance", exclusively online.

HOW PEOPLE ACCESS DIGITAL BANKING

Part
04
of twelve
Part
04

Apple Pay Statistics: Germany

While no pre-existing statistics exist for the number of Apple Pay payments by volume or by value, the research team was able to provide the number of payment terminals accepting Apple Pay, as well as estimate the number of Apple pay users in Germany. There are just over two million (calculations below) Apple Pay users and 820,000 merchants who accept Apple Pay in Germany.

Number of Apple pay users in Germany

  • There are 2.001 million (triangulation below) Apple Pay users in Germany.
  • The market share of Apple Pay in Germany is 29%.
  • The number of people in Germany that use mobile payment is 6.9 million.

Number of payment terminals accepting Apple Pay in Germany

  • The number of payment terminals for Apple Pay in Germany was 820,000 as of 2018.

Research Strategy:

What was not found?

  • Number of Apple pay payments by volume (e.g. 1,000 per month) in Germany
  • Number of Apple pay payments by value (EUR) in Germany
To identify the number of Apple Pay payments (both by volume and value), we commenced our research with the company website, press releases, white papers, investor reports and all other publicly available resources authored by Apple. I found that the company launched the Apple Pay services in Germany in December 2018 and that statistics on Apple Pay’s performance is rarely provided by the company with the product’s financial performance bundled into its services segment, which covers a wide range of products including takings from apps and customer care plans. Therefore, this strategy was not useful in identifying the number of Apple Pay payments by volume or value in Germany.

As a next step, we switched our focus to articles and journals published in Germany, as well as global news and media resources mainly covering the fintech industry such as mobileworldlive.com, bankingandpayments.com, thelocal.de, and others. The sources only threw light on the successful launch of Apple Pay in Germany in December 2018 and banks that have partnered with the mobile payment channel. However, there was no information on the volume of payments that took place in the past eight months.

Furthermore, we looked for any information disclosed by the partner banks in Germany (Deutsche Bank, Comdirect and HVB). The idea was to look for their performance and estimate the amount or volume of transactions based on that. We looked for data on the partner banks' websites, press releases and reports to find statistics that could be further used for triangulation. While there was information on their partnership and their positive outlook on the same, no hard data was found that could have been used for further triangulation.

As a last resort, we broadened our research criteria and looked for the global number of Apple Pay payments (both volume and value) in sources such as Statista and Mintel and then, attempted to find Germany's market share. While we were able to find some global statistics, we could not identify Germany's market share and only found that the cash culture in Germany is holding back mobile payment adoption in the country and that the penetration of mobile payment in Germany is among the lowest in Europe.

As per the research conducted, Apple Pay was launched in Germany in December 2018. No annual data has been released by Apple or partner banks identifying the number of Apple Pay payments (both volume and value). Further, it was found that the German population still heavily relies on cash, which makes the mode of payment a niche subject. These factors are some of the reasons some of the requested information is not available in the public domain.

Calculations

Number of Apple pay users in this country

The credible report by eMarketer identified the penetration of Mobile Payments in Germany as 6.9 million users as of 2019. According to an article published by Payment&Banking, the market share of Apple Pay in Germany, that is, the percentage of mobile payment users that use Apple Pay is 29%. Therefore,
  • Number of Apple pay users in Germany = percent of mobile payment users that use Apple Pay * Total number of mobile payment users
  • Number of Apple pay users in Germany = 29% * 6.9 million
  • Number of Apple pay users in Germany = 2.001 million
Part
05
of twelve
Part
05

Google Pay Statistics: Germany

After thorough research, we could not determine how Google Pay is used in Germany, the number of Google Pay users, the number of Google Pay payments by value (EUR), and the number of merchants accepting Google Pay in this country. We have, however, provided some useful insights below.

USEFUL FINDINGS

  • One of Google Pay's partners in Germany, N26, noted a constant increase in demand by customers for mobile payment services.
  • Google Pay can be used in 19 countries and regions.
  • Google Pay made its debut in Deutschland on June 2018, making it the 19th country in the world to introduce the mobile payment service.
  • Google Pay help page confirmed that four local banks, which are Wirecard, Comdirect, Commerzbank, and N26, are now supported by Google pay.
  • With Visa or MasterCard issued by Commerzbank, Comdirect, N26, or Wirecard’s Boon, one can add it as a prepaid credit card and skip the lengthy identity verification process, which is known as the know your customer (KYC) process.
  • Google Pay only works on Android phones, and Apple’s iPhone only has a 20 percent market share in Germany. Even with the speculation about Apple Pay's imminent arrival, it is nowhere to be seen.
  • Consumers can use the service of Google Pay at businesses such as Aldi, Lidl, McDonald's, and Media Market.

RESEARCH STRATEGY

The research team began by going through global organizations that provide analytical data for various countries of the world in a bid to find the statistics showing how Google Pay is used in Germany, the number of Google Pay users in this country, the number of Google Pay payments by value (EUR) in this country, and the number of merchants accepting Google Pay in Germany.
We came across the Local, but the report only stated that Google Pay made its debut in Deutschland, making it the 19th country in the world to introduce the mobile payment service, without giving details on how Google Pay is used in Germany, the number of Google Pay users in this country, the number of Google Pay payments by value (EUR) in this country, and the number of merchants accepting Google Pay in Germany.
Next, we explored regional data where we checked Android Police and found Google Pay help page confirming that four local banks, which are Wirecard, Comdirect, Commerzbank, and N26 were supported, without giving details on how Google Pay is used in Germany, the number of Google Pay users in this country, the number of Google Pay payments by value (EUR) in this country, and the number of merchants accepting Google Pay in Germany.

We also checked Deutsche Welle, where we only noticed that one of Google Pay's partners, N26 noted a constant increase in demand from customers for mobile payment services, without giving details on how Google Pay is used in Germany, the number of Google Pay users in this country, the number of Google Pay payments by value (EUR) in this country, and the number of merchants accepting Google Pay in Germany.
The research team also checked statistical data, which only listed consumers who can use the service of Google Pay at businesses in Germany such as, Lidl, McDonalds and Media Markt. However, this data was not sufficient in providing information on how Google Pay is used in Germany, the number of Google Pay users in this country, the number of Google Pay payments by value (EUR) in this country, and the number of merchants accepting Google Pay in Germany. We also used analytical apps from SimilarWeb to drag data across the internet In Germany on the subject matter for analysis but had no data available to answer the requested information.
With the above information, there is no way we could use the data to triangulate an answer for how Google Pay is used in Germany, the number of Google Pay users in Germany, the number of Google Pay payments by value (EUR) in this country, and the number of merchants accepting Google Pay in Germany.

Part
06
of twelve
Part
06

Digital Services Trends: Germany

Some trends in terms of digital services offered to businesses in Germany include the growth of banking & lending services, more business to consumer solutions, the proliferation of payment solutions, enabling business processes and technology, etc. Banks in Germany have continued to expand as well as deepen cooperation with FinTechs as they intensify efforts towards digitization of their business models.

BANKING & LENDING SERVICES

  • There has been an increase in banking and lending services offered in the financial services sector to businesses in Germany.
  • As of 2018, about 84 Fintech companies were decisively advertising to German customers about their presence and willingness to offer services.
  • According to Ernst & Young (E&Y) GmbH, about 35% of foreign founded Fintechs that have a presence in Germany offer banking and lending services to their customers.
  • As of 2018, about 42% of Fintechs operating in Germany but founded outside its shores offered B2C services, while 39% offered B2B services.
  • About 19% of Fintechs operating in Germany but founded outside its shores offered both B2B and B2C services in 2018.
  • Lendico, a German-based Fintech has raised $22 million in total funding and offers online P2P lending platform services to small businesses (SMEs) and individual borrowers.
  • Founded in 2013, Lendico helps retail investors and small businesses (SMEs) to invest in its platform. Arrowgrass Capital acquired Lendico in 2017.
  • The peer to peer (P2P) lending market is estimated to surge at a CAGR of 51.5% between 2016 and 2022, due to new/emerging markets, increasing knowledge of the lending marketplace, higher investment transparency, as well as "lower interest rates" accrued to consumers.

MORE B2C THAN B2B SOLUTIONS

  • There has been a growth in B2B business solutions offered in the financial services sector to businesses in Germany.
  • More foreign founded Fintechs (42%) are offering B2C types of solutions to German-based businesses than B2B solutions.
  • As of 2018, locally founded Fintechs (43%) were offering B2C types of solutions to German-based businesses than B2B solutions (42%). About 100 local-founded Fintechs have a stronger base in Germany than abroad.
  • Deposit Solutions is a German-based Fintech that was founded in 2011 and has raised about $144 million in funding.
  • Deposit Solutions offers financial services that are "revolutionizing the value chain" for savers as well as banks. The solution is an open-architecture platform which allows organizations to gather retail deposits onto a home balance sheet without the need for a "proprietary local retail infrastructure."
  • Another Fintech, eBillme, has raised about $23 million in funding and provides online payments solutions that successfully extend online banking to the checkout process of merchants. This B2C solution allows business organizations to checkout their consumers during purchase successfully.
  • According to Ecommerce Germany, new technologies from the digital era are being used in everyday life and shopping. E-commerce happens to be a growing industry due to the numerous advantages it brings.
  • E-commerce (retail) is a B2C business model.

PAYMENT SOLUTIONS

  • Several Fintechs in Germany are offering payment solutions to business organizations.
  • As of 2018, about 27% of foreign-based Fintechs present in Germany offered payment solutions to business organizations in Germany.
  • N26 bank cooperates with other Fintechs in Germany to facilitate payment solutions for "selected retail partner companies."
  • Traxpay is a German-based Fintech that was founded since 2012 and has raised about $19 million in funding. Traxpay provides a platform to facilitate round-the-clock B2B payments solutions and transactions in real-time.
  • According to Boston Consulting Group (BCG), the payments market is predicted to grow by $1.1 trillion between 2010 and 2027. It has been "growing at a CAGR of 6.8%" since 2010.
  • The growing demand for non-cash-based payment is driving this growth and providing a windfall of opportunities for payments providers. Germany, Spain, and Russia will benefit from this market.

BUSINESS PROCESSES AND TECHNOLOGY

  • There is a proliferation of business process and technology services being offered in the financial services sector to businesses in Germany.
  • As of 2018, about 17% of local-based Fintechs offered processes & technology-based solutions to business organizations in Germany.
  • About 27% of foreign Fintechs (founded outside Germany) offered processes & technology-based solutions to business organizations in Germany as of 2018.
  • Founded since 2015, Zeitgold has raised about $27.5 million in funding. Zeitgold offers AI-enabled services to automate the process of payroll, bookkeeping, as well as other financial services for businesses and local merchants.
  • Zeitgold uses automation technology and optimized processes to capture the financial data of business organizations and turns the data into a "complete, structured, high-quality," and updated data set for the businesses.
  • The global market for accounting software was $11,071.6 million as of 2018 and is projected to be valued at $20.408 billion by 2026, with a CAGR of about 8.02%. Factors driving this trend include rising demand for computerized accounting services, and the need to automate processes relating to account payable, accounts receivable, payroll, and trial balance, etc. Increasing demand for "cloud-based accounting software" will be a key factor driving this trend.

INSURTECH SERVICES

  • According to Ernst & Young (E&Y) GmbH, the German InsurTech (insurance technology) industry is gaining momentum and is driven by increased investment activities by a majority of large Germany-based insurers as well as strategic investors.
  • The total value of disclosed funding volume as of 2018 quarter 1, reached €71 million and is majorly attributed to a "handful of large financing rounds " taking place recently.
  • About 46% of InsurTech services offered by Fintechs to business organizations in Germany are for B2C clients. About 29% of InsurTech clients are B2B clients.
  • A chart illustrating the growth of InsurTech services in Germany between 2013 and 2018 is accessible via this link.
  • About 16% of InsurTech services reach organizations or individuals in the German health sector. Other sectors that benefit from the InsurTech services offered by Fintechs include life insurance sector (16%), business (14%).
  • The Fintech, Wefox, formerly called FinanceFox, was established in 2014. It has raised about $158 million in funding.
  • Wefox is an online platform which gives brokers, customers, and insurance companies the ability to manage their insurance services/products digitally. The company is focused on customer value and manages the entire insurance process from digitization to optimization and damage reporting.

RESEARCH STRATEGY

The research included publications of Financial agencies such as Ernst & Young, publications of digital agencies such as Tech Insight, etc. We researched trends in terms of digital services being offered to businesses in Germany. Ernst & Young revealed that banks in Germany are partnering with FinTechs as they intensify efforts towards digitization of their business models. Fintechs are known to offer digital-only banking services. For each trend, we have included a description of what it is, why it is trending, and an example of a company at the forefront.
Part
07
of twelve
Part
07

FinTech Companies: Germany

As a rapidly expanding industry, Fintech is expanding across the globe, especially in developed nations like Germany. The following is a list of ten German Fintech companies who have received Series A, B, C or D funding in 2018 or 2019.

Findings

1. N26

  • The company received $300,000,000 in Series C funding in January 2019.

2. Wefox

  • Wefox received $125,000,000 in Series B funding in March 2019.
  • The company operates two different online insurance platforms, One and Wefox. Both platforms attempt to streamline and partially automate the insurance industry by connecting brokers consumers and insureres directly.

3. Raisin

  • In February 2019, Raisin announced a $114,000,000 Series D investment.
  • Raisin allows users across Europe to move savings across the continent in an effort to get better insurance rates. It plans to expand to include the US.

4. Solarisbank

  • Solaris raised 56,000,000 euros in Series B funding in August of 2018.
  • Solaris is a completely online banking platform.

5. Finleap

  • Finleap received 41,000,000,000 euros in Series C funding in 2018.
  • Finleap is a company builder that provides support to other fintech companies.

6. Smava

  • Smava received $65,000,000 in funding in Series D investing in January 2018
  • Smava matches loans and financiers to customers.

7. Liqid

  • The company received 33,000,000 euros in Series C in September 2018.
  • Liqid offers composable infrasturctre for other companies. Composable infrastructure allows for data and storage to be reconfigured constantly.

8. Mambu

  • Mambu received 30,000,000 euros in Series C funding in February 2019.
  • Mambu is a Software-as-a-Service platform that provides lending and deposits for companies.

9. Clark

  • In April 2019, Clark received $29,000,000 in Series B funding.
  • Clark is a robo-insurance adviser, that allows clients to look at their insurance portfolios and provides advice.

10. Scalable Capital

Part
08
of twelve
Part
08

FinTech Climate: Germany

Germany is the fourth largest FinTech market in the world. FinTech funding in Germany recorded over 55% of YoY growth in 2018 with investments in the amount of EUR 1.13 billion in 2018.

Overview of the climate for FinTech businesses in Germany

  • Germany is the fourth largest FinTech market in the world.
  • FinTech funding in Germany recorded over 55% of YoY growth in 2018.
  • Germany is home to around 700 companies in the FinTech sector, half of which were established during the last three years. "Geographically, most German FinTech companies are established in Berlin (228 companies as of September 2017), followed by Frankfurt and Munich (84 respectively), Hamburg (67), and major cities in North Rhine-Westphalia (53)."
  • Celebrity FinTechs like N26 and wefox (formerly FinanceFox) raised $300 million and $120 million respectively, in the first quarter of 2019.
  • The 2nd largest venture capital funding in Germany was received by FinTech companies in the country after e-commerce businesses.
  • Venture capital investment in FinTech companies in Germany was estimated to be EUR 613 million as of 2017.
  • According to calculations by Dusseldorf-based Barkow Consulting, investments in German FinTech companies reached EUR 1.13 billion in 2018.

Recent Initiatives

  • Banks, insurance companies and other companies have established accelerator and incubator offices in order to establish new FinTech companies in the market.
  • Among the top-10 largest banks in Germany, investments (41%) and collaborations (35%) have been the most preferred response models to date in response to the growing presence of FinTechs in the market.
  • Several banks have also launched or are co-supporting various development programs for FinTechs, where FinTechs obtain expertise on a range of industry-specific topics (regulation, compliance, etc.) as well as funding support.

Government initiatives

  • As part of the initiatives of Germany's Federal Ministry for Economic Affairs and Energy, a number of regional digital hubs were established in the country. Frankfurt and Berlin have one FinTech hub each.
  • The Federal Financial Supervisory Authority (BaFin) is an autonomous public-law institution that brings the supervision of banks, financial service providers, insurance undertakings, and securities trading together under one roof as FinTech business models may require authorization from the Federal Financial Supervisory Authority due to diversity in their structure.

Germany as a leader for FinTech

  • FinTechs in Germany benefit from solid public and private sector support initiatives including the availability of training programs for young FinTechs, including accelerator programs, hackathons, support through mentorship and incubators. The focus of these programs is mainly non-financial support.
  • Main incubator (Commerzbank), Digital Factory (Deutsche Bank), Deutsche Börse Venture Network, Accelerator Frankfurt have been identified as key supporters of FinTechs through coaching.
  • The progress of these programs embracing FinTech was identified between medium and high in 2017 in a report covering 'Germany FinTech Landscape' by EY.
Part
09
of twelve
Part
09

Registering a New Company: Germany

The process of starting a new business in Germany starts with business registration from the entry in commercial register to business register and lastly, payment to the local finance office. Company Registration in Germany is an extremely rigid but straightforward process when completed correctly.

MAJOR FORMS OF CORPORATIONS IN GERMANY

I. LIMITED LIABILITY CORPORATION (GMBH)

II. MINI GMBH-UG
Alternatively, if one is low on funds they can choose the “mini GmbH” option and form a limited liability entrepreneurial company which has a €1 minimum starting capital per founder. But one still needs to reach the €25k eventually, because until then you need to set aside a quarter of ones profit each year.
III. STOCK CORPORATION
  • Appropriate for starting a business in Germany with more money and a large group.
    • The minimum share capital for a Stock Corporation (AG) is €50,000.
    • It is the standard corporate form for major public companies.
    • The minimum number of shareholders is one.
    • It is subject to heavy regulation as a listed company.
IV. PARTNERSHIPS

PROCESS OF STARTING A NEW BUSINESS IN GERMANY

1. BUSINESS REGISTRATION

ENTRY IN THE COMMERCIAL REGISTER
  • Once one has a business name, they can check with the commercial register (Handelsregister) if the name they have chosen is already in use and with the local court (Amtsgericht) whether they’ve fulfilled all the naming requirements.
    • The commercial register contains information about the name of the business, the name of the partner(s) and/or the personally liable partner(s), the managing director or the executive of corporations, the capital stock of companies, liability limitations of partners, the issuing and revoking of the power of attorney, the opening of insolvency proceedings, and the dissolving and ending of a company.
    • The application for registration in the commercial register is electronically filed in publicly certified form by a notary to the responsible commercial register.
  • Registration cost: The cost varies depending on the type of company. Costs incurred are made up of costs of the notarial certification and the fees charged by the district court for entry and publication in the Federal Gazette (Bundesanzeiger).
    • Limited Liability Company (GmbH): estimated total costs for the formation of a standard GmbH are approximately EUR 700 to EUR 800 plus fees for legal counsel if a lawyer is employed to draw up the articles of association.
    • Mini GmbH: establishment costs for a Mini GmbH are reduced to a total of around EUR 300.
    • The cost for registration and publication in the commercial register for a Stock Corporation AG is at least EUR 500.
    • The cost for registration and publication in the commercial register for a partnership is currently EUR 250 minimum.
  • Time Period:
    • Time period required for the formation of a GmbH is two to three weeks which is the same time for mini GmbH.
    • Establishing formalities for Stock Corporation and Partnership is moderately high, so it will take much time compared to GmbH and Mini Gmbh.
TRADE OFFICE REGISTER
  • Before starting their business operations, every business operator must inform the trades (or regulatory) office (Gewerbe- oder Ordnungsamt) of the town or local district in which the business operation is located.
    • One may need special permits if they’re a liberal professional (doctor, chemist, architect, engineer, etc.), which they can find out from their respective chamber for liberal professions (such as the Architektenkammer or Steuerberaterkammer).
    • For craftsmen (carpenter, glassblower, etc.), one needs to look into the master craftsman’s certificate (Meisterbrief) from the Chamber for Skilled Crafts (Handwerkskammer HWK).
    • Also, if your business requires good hygiene (food services, working with minors) you may need a health certificate from the Public Health Office (Gesundheitsamt). If you’re unsure whether you’ll need a permit, speak directly with the IHK.
  • The trade office automatically sends a copy of the business registration to the responsible tax office (Finanzamt). This then sends a registration form to the company for tax registration purposes.
VISIT LOCAL FINANCE OFFICE

2. TAXES, HIRING, INSURANCES, AND BANKING

SETTING UP ACCOUNTS/GETTING BOOKS IN ORDER
  • With the help of a licensed accountant or bookkeeper, a business need to establish an opening balance sheet (Eröffnungsbilanz) and at the end of the year a report of accounts (Jahresabschluss) for current business financials (Betriebswirtschaftliche Auswertung BWA), from where tax rates are calculated:
    • VAT: When one registers, they choose between Soll- and Ist-Versteuerung. The first means one pays the VAT on invoices once they send them to customers and the second means one pays the VAT only once the customer actually pays the invoice.
    • Income Tax: an income tax (Einkommensteuer) is calculated on your company profit. For small businesses, their income can be calculated based on an Einnahmenüberschussrechnung (EÜR), a simplified revenue and expenditure statement and are reported to the Responsible Tax Officer (Finanzamt).
    • Corporation Tax: (Körperschaftsteuer) is computed on the global taxable income. One may also need to pay a 25% withholding tax (Kapitalertragssteuer) on dividend payments if they have a parent company and a 25% final withholding tax (Abgeltungssteuer) on profits distributed to private shareholders.
    • Trade Tax: This is applied by the municipality to all commercial businesses (not civil) and varies between 7% and 17% depending on the local rate.
HIRING EMPLOYEES
  • Register the company with the Federal Employment Agency (Bundesagentur für Arbeit) to receive an 8-digit company number (Betriebsnummer) for payroll (Lohnabrechnung). This is required to draw up an employment contract and for social security, health insurance, nurse care insurance and unemployment insurance.
  • The company will also need to calculate and withhold the income tax (Lohnsteuer) for employee based on their tax class, in addition to the church tax and solidarity surcharge tax (Solidaritätszuschlag).
INSURANCE
  • Company insurance coverage protects businesses from losses due to events that may occur during the normal course of business. There are many types of insurance for businesses including coverage for property damage, legal liability and employee-related risks. Some of the company insurances available in Germany are:
    • Corporate liability insurance (Betriebs-Haftpflichtversicherung) covers potential mistakes of your employees, problems with suppliers, etc.
    • Professional liability insurance (Berufs-Haftpflichtversicherung) this is important for freelancers and consultants, covers mistakes or bad advice with financial consequences.
    • Business interruption insurance (Betriebs-Unterbrechungsversicherung) covers wages, expenses and running costs in times without business income.
    • Occupational accident insurance (Berufsgenossenschaft) covers accidents in and around the office and for employees while working.
BANKING
  • A separate business bank account (Geschäftskonto) is required for legal forms incorporating capital (GmbH, UG, AG, KGaA).
    • One of the main difficulties that people face in setting up a German limited liability company (GmbH) is in opening a bank account and the relevant know-your-customer (KYC) processes.

    HELPFUL FINDINGS:

    • Generally, those new to Germany can expect to encounter many rules and regulations and a low degree of flexibility and spontaneity which can result in slow progress when it comes to making decisions and an aversion to sudden changes which is considered challenging in setting up a business.
    Differences in the process of setting up a brick-and-mortar business vs. an online business.
    • Small businesses, civil partnerships (GbRs), freelancers and dependent branch offices do not have to be registered in the commercial register.
    • As a freelancer or small business owner you can be exempt from the VAT if in your first year your profits were less than €17.500 and the following year they were under €50.000 (Kleinunternehmerregelung).


    Part
    10
    of twelve
    Part
    10

    Co-Working Space: Germany

    There are nine major co-working space providers in Germany. These are We Work, Regus, Design Offices, Rent24, Mindspace, Betahaus, Beehive, Impact Hub, and Social Impact Labs.

    Overview:

    • Berlin and Hamburg are in the European top ranks, with a market share of 10 % and 5 % respectively.

    MAJOR CO-WORKING SPACE PROVIDERS IN GERMANY

    WE WORK

    • In addition to these locations, We Work has several locations in other countries such as the United States, Canada, China, Australia, and the United Kingdom.

    REGUS

    DESIGN OFFICES

    RENT24

    MINDSPACE

    BETAHAUS

    BEEHIVE

    IMPACT HUB

    SOCIAL IMPACT LABS

    Research Strategy:

    To provide the number of major coworking spaces providers in Germany, we searched for a pre-compiled list of coworking providers in Germany. We were able to find a list of the largest coworking providers in Germany from Bato Group. Also, we have collected a list of other coworking providers among different locations in Germany.

    We got creative in determining the major coworking space providers in Germany. As stated in the RC to define "major" as co-working space operators who have three or more locations in Germany (operators who have international locations but at least more than 3 in Germany)". To do this, we first compiled all the list of coworking providers in Germany and manually checked each of their company websites to count all coworking space locations. All listed major coworking space providers have more than 3 locations in Germany.

    In conclusion, there are nine major co-working spaces providers in Germany. These are We Work, Regus, Degisn Offices, Rent 24, Mindspace, Betahaus, Beehive, Impact Hub, and Social Impact Labs.



    Part
    11
    of twelve
    Part
    11

    Business Statistics: Germany

    In 2016, Germany registered about 720,000 new businesses in the non-financial business segment. It is found that about 99.6% of companies in Germany belong to the SME sector. Moreover, micro-businesses have a workforce of 2,036,100 employees.


    BUSINESS STATISTICS: GERMANY

    • In 2016, the total number of enterprises in Germany operating in the non-financial business segment with 0-9 employees stood at 2,022,140 businesses.
    • Alternatively, larger companies with more than 250 employees operating in the non-financial business segment stood at 11,762 companies.
    • According to the Federal Ministry of Economic Affairs and Energy, about 99.6% of companies in Germany belong to the SMEs. Additionally, about 720,000 new businesses were registered in 2016.
    • In 2016, the micro-businesses operating in the non-financial business segment had a workforce of 2,036,100 employees. Alternatively, small businesses and medium-sized businesses featured a workforce of 357,651 and 58,878 employees working in the non-financial business segment in Germany.


    RESEARCH STRATEGY

    Broad Data Search: Global Perspective

    We began combing through credible global publications in a bid to find data regarding the total number of businesses in Germany, proportion of all businesses that are sole traders, proportion of all businesses that have less than 10 employees, proportion of all businesses that have less than 250 employees, and proportion of all businesses that have less than €50 million in annual turnover in Germany.

    The Scheller International report only featured about how to register businesses in Germany. While the report from Global Edge gave data on corporations and the German economy in general. Additionally, Trading Economics gave the number of total businesses in Germany in 2007 to be around 2,869,925 businesses; this data being more than a decade old did not provide us with a reliable estimate to carry out our assumptions; hence, we did not consider it to be a reasonable estimate to triangulate any reliable and recent statistical data for businesses in Germany.

    Business statistics sites

    Statista featured the number of non-financial businesses in Germany; this was just a partial data about the total number of businesses in Germany and related statistics. Hence, we could not use the data for further triangulation as we did not find data from other sections to add up.

    Data Search: Country and Regional Perspective

    We had to narrow down our search to regional publications in a bid to find data concerning the business statistics for Germany. In our research, we found that the Federal Ministry of Economics and Affairs in Germany featured the percentage of all SMEs in Germany without giving us a corresponding number to carry out mathematical analysis to triangulate an answer regarding the total business statistics in Germany. While the European Commission and the SBA Fact sheet 2018 gave us partial data for various sectors of the industry without presenting any detailed analysis of the German business statistics.

    Triangulation

    The data from all the analytical searches was insufficient to carry out a reputable mathematical analysis to project an answer, hence we came to a conclusion that data for the total number of businesses in Germany, proportion of all businesses that are sole traders, proportion of all businesses that have less than 10 employees, proportion of all businesses that have less than 250 employees, and proportion of all businesses that have less than €50 million in annual turnover in Germany is not publicly available.
    Part
    12
    of twelve
    Part
    12

    Challenger Digital Banks: Germany

    Revolut, N26, Penta, Holvi, and Kontis are the top challenger digital banks in Germany. Newcomer, Fidor, has over 150,000 small business customers.

    REVOLUT

    • Revolut was founded in 2015 and is based in London. In 2017, they reported $15.67 million in revenue, and $17.31 in 2018. From 2016-2017, their revenue growth was 443%. They offer personal and business products. Revolut launched in Germany in 2017.
    • Their market valuation is currently $1.7 billion, with $336.5 million in total funding over 12 rounds, with the last being March 27, 2019. They are a private company and considered a tech unicorn.
    • Revolut has completed a total of 350 million transactions at a total value of $48.9 billion.
    • Revolut states they have 7,000 new accounts opened daily.
    • They have nearly 20,000 businesses as customers, along with 4.5 million customers total. In the UK, they have 1.6 million customers.
    • Businesses may hold, receive, and exchange 29 currencies without charge.
    • Revolut claims they are ten times cheaper than a bank.
    • They have had significant reported losses.
    • Their business customers have an Open API to integrate their Revolut account into their current workflow and stack.
    • Revolut operates in Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.
    • Their website may be viewed here.

    N26

    • N26 is a Berlin bank that operates in 20 countries in Europe. They have 2.5 million customers worldwide and were founded in 2013. They are a Late Stage Venture and have raised $682.2 million in funding over seven rounds. Their latest round was July 2019.
    • N26 has a current market valuation of $3.5 billion.
    • In 2017, they generated revenue of 11.24 million Euros which was a 2000% increase over 2016.
    • In late 2018 they had two million customers. They currently have over 3.5 million. Their monthly transaction volume exceeds 1.5 billion Euros.
    • N26 offers banking for freelancers and the self-employed.
    • They operate in Germany, Austria, France, Italy, Spain, Portugal, Ireland, Greece, the Netherlands, Belgium, Luxembourg, Finland, Latvia, Estonia, Lithuania, Slovakia, and Slovenia.
    • N26 is planning to expand to the US in 2019.
    • Their website may be viewed here.

    PENTA

    • Penta is a digital bank that targets SMEs located in Germany. They were founded in 2017. They are a private company that strives to meet all the needs of a SME business.
    • Penta has raised 17.2 million Euros over four funding rounds, with the latest being in August 2019.
    • There are currently 7,500 German businesses that use Penta.
    • Penta currently has a wait list with over 3,000 local businesses and boasts user numbers have increased over 900% in the last several months.
    • Penta offers a community driven approach that has made them very popular. Over 68% of Penta's new customers are businesses that have switched from their existing bank to Penta.
    • They offer multi-card support, which the older banks have struggled to deliver.
    • Their website may be viewed here.

    HOLVI

    • Holvi was founded in 2011 as a private company, and launched in Germany in 2016. They operate in Germany, Finland, and Austria. From 2017 to 2018 they saw year-on-year growth of 60 %.
    • Holvi has raised 4.3 million Euros over six funding rounds. Their last round was in 2015.
    • The majority, 85%, of their customers are freelancers.
    • Holvi has over 150,000 micro businesses across Europe as customers.
    • They describe themselves as "a simple one-stop-shop for small businesses to collect income, manage expense and get an understandable real-time view of their company finances. New Holvi accounts can be opened in minutes online and Holvi customers don’t need a separate bank account."
    • Holvi was voted the "Hottest Startup in Helsinki".
    • E-Residents may business bank with Holvi.
    • Their website may be viewed here.

    FIDOR

    • Fidor was founded in 2009, and is based in Munich. They are a private company that offers retail and business banking.
    • They were founded in 2009, as a response to the banking crisis to re-establish lost confidence. One of the ways they do this is to let their customers participate in the decision-making processes of Fidor.
    • In Germany, they have 100,000 clients, and 300,000 community members.
    • In 2018, they had $29 million in revenue.
    • Fidor has published a Fidor Bank Moneyfesto.
    • Their website may be viewed here.

    KONTIS

    • Kontis was founded in 2016, in Berlin. They are a private company.
    • They focus on freelancers.
    • Kontis raised over two million Euros in funding over three rounds. Their last round was in 2018.
    • Kontis states that their bank account can figure taxes in real time.
    • Their website may be viewed here.

    MARKET INFORMATION

    • The global digital banking market is expected to grow at a CAGR of around 3.8% between 2019-2025.
    • The German SME market is $3.6 million.
    • If left unchecked, the digital "movers" could cause banks to forfeit between 5-15% of their interest and fee income over the next five years.
    • Micro-enterprises occupy between 82-95% of the business space in Europe. In 2016, there were 30.6 million.
    • The number of banks in Germany has dropped by 52% since 1995. There are currently 1,584 banks in Germany. The low interest rate regulations like Basel III have increased capital requirements and have put more pressure to consolidate.

    RESEARCH STRATEGY

    To locate the top challenger digital banks, we first located industry articles that stated who the best digital challenger banks were. To be included in the next stage of our research, a bank had to be mentioned multiple times. Once we had our list, we then researched each bank separately to obtain an across the board metric. This proved difficult, as some banks did not list their annual revenue. We believe this happened because some banks are operating at a loss due to how new they are. Our next approach was to order them by their customer numbers. This again proved difficult, as the biggest bank we researched did not separate their customer base, and some banks only do business banking. Active users and monthly transactions also ran into the same issues. To combat this problem, we holistically looked at all the metrics we obtained to get our top listings.

    To assess the market penetration, we began by locating industry reports and market studies. This did not give us enough information to triangulate a market share, as most of the information was global. Consulting business press releases from Globe Newswire, PR Newswire and from each business’ website gave us the bulk of our information. To finish our research, we researched available banking information from the government. Again, this gave us a few facts. Ultimately, we were able to put together a snapshot of the market, but not exact figures.
    Sources
    Sources

    From Part 01
    Quotes
    • "If you in a big city like Berlin or Frankfurt you will be able to find plenty of locals who speak near-perfect English. You’ll also find a lot of Germans who may not be fluent but can manage enough to get by without too much confusion. In rural areas, it’s a lot harder to find an English speaker."
    • "Since the 1960s, English has been a mandatory school subject in Germany. German school children start learning English in either the second or third grade. They start with the basics, like how to introduce themselves, simple directions, and conversations about the weather. "
    Quotes
    • "Three senior German lawmakers are calling for an end to the dominance of English as the working language of the EU after Britain leaves the bloc and they would like German to be promoted instead. But even Drutschmann feels that is going too far."
    Quotes
    • "In a Handelsblatt poll, 18 of the 30 top companies listed in the DAX index of blue chips said English was their “official” business language, meaning that key documents, announcements and guidelines are penned in it. Only three companies surveyed said their official language remains exclusively German (see table below)."
    Quotes
    • "English is the language of advertisement and marketing and it is also often used by German companies to address international customers (or at least to pretend to do so). In the early past, German companies advertised their products with German phrases."
    From Part 04
    Quotes
    • "While the banks had been known for weeks for the launch of Apple yesterday, Apple presented three selected banking partners on site. Deutsche Bank had a box with MasterCard, Comdirect together with VISA and of course HVB as provider of the local FC-Bayern co-brand card."
    From Part 06
    Quotes
    • "Foreign FinTechs in Germany ► As of 2018, 84 companies are actively approaching German customers with 23 also having an office presence in Germany ► The most active FinTech players in the German market have mainly come from Switzerland, the United Kingdom and Austria (34 or 40%) ► Almost three quarters of foreign FinTechs operate in the segments Banking & Lending, Payments and Enabling Processes & Technology and target both companies and end consumers to approximately the same extent ► The most common reasons for FinTechs to enter the German market are the strategic importance of the market, the size of the market and the similarity of the market conditions (as many companies that enter are from Austria and Switzerland)."
    • "After an initial phase of hesitant and passive reaction to FinTechs financial institutions in Germany have ramped up their FinTech-related activities. Banks have continued to expand and deepen their cooperations with FinTechs, while also intensifying efforts to digitalize their business models. These efforts have been driven not least by increased FinTech activity, evolving customer expectations and important industry-wide developments (i.e. launch of open banking)"
    From Part 07
    Quotes
    • "Wefox is a platform that connects insurance providers, brokers and customers in an attempt to drag the insurance industry into the digital age. Rather than bypass human brokers entirely, Wefox lets independent brokers on-board their existing customers onto the platform to help deliver a better experience and more easily manage their clients’ coverage."
    Quotes
    • "A few years back, a key market for Raisin was the German saver stuck with a 1% or lower interest rate on savings, but who could grab a better return in Portugal, or even more outside the eurozone in Bulgaria (3% or more). Its service highlighted a lack of integration in Europe’s banking market, which was still mainly run along national lines. Raisin now has 175,000 customers across Europe and more than 75 bank partners."
    From Part 10
    Quotes
    • "There are currently more than 500 coworking spaces in Germany and the space take-up of this sector saw a fivefold increase from 2016 to 2017. More that 200,000 square metres or 5 % of total office space take-up were rented in the seven largest German office markets last year. "
    • "Two German cities, Berlin and Hamburg, are in the European top ranks. The top five are London with a market share of 26 %, Paris (15 %), Berlin (10 %), Warsaw (6 %) and Hamburg (5 %). "
    • "The largest coworking providers in Germany are currently WeWork (U.S.) with ca. 90.000 m²,Regus (Germany), 100.000 m², and Design Offices, (Germany) with ca. 8, 5.000 m², followed by Rent24, (Germany) with 50,000 m² after a merger with Friends Factory, mindspace from Israel and Spaces, from Netherlands with ca. 30.000 m² each."
    From Part 12