Today, we are thrilled to officially announce that we participated in the seed financing round of Etvas together with our Co-Investors, High-Tech Gründerfonds, Sparkasse Bremen and Plug and Play.
It’s a commodity trap
For decades, banks and financial institutions successfully relied on their branch network as the main sales channel for private clients. Up to the financial crisis in 2007, it was usual for a retail bank’s total share of deposits to be closely linked to the size of its branch network (1). Later, there were the first online banking solutions and even direct banks that worked without any branches, proving that the heyday of the distribution-led growth strategy was over. Nowadays, we see the next major shift to mobile and open banking, implying that every bank aims to become “mobile first” and an “ecosystem” player.
Since the German banking market is overbanked, banking products like saving accounts or simple mortgages are undifferentiated and highly commoditized (2). Or do you care where the mortgage for your new house comes from? Furthermore, non-banking competitors such as marketplaces and platforms have emerged where retail customers can easily compare prices. As if that were not enough, new regulations like the “Kontowechsel-Service” have reduced switching costs dramatically, eroding brand loyalty even more. Today, more Germans than ever before have multiple bank accounts and banking connections. Welcome to the commodity trap!
Until recently, many banks tried to escape the trap by offering in-person holistic advisory services, which helped to distinguish them from the competition. However, the number of banking branches in Germany is decreasing since customers make use of digital channels so that banks are losing an important customer touchpoint that could make up for this highly-commoditized product portfolio (3). Furthermore, the increased use of digital channels by customers led to unsatisfactory customer experiences as banks struggled to build true digital products.
That being stated, we feel that customers nevertheless expect personalized services and offers — regardless of the channel.
The empire strikes back!
Banks have finally reacted by (slowly) moving to open- and beyond-banking. In theory this means that customers interact with their bank not only when it comes to financial matters, but also when managing and switching utility contracts or purchasing their new travel insurance. Basically, real features and products should be offered when relevant and be just “one click” away.
By doing so, banks and also insurance companies will deliver a more personalized product experience as well as increasing switching costs as customers are locked-in in their ecosystem. To do so, banks need to build open-banking as well as beyond-banking capabilities, a vibrant ecosystem of third-party service providers and useful offerings is thus key to these solutions. But how to turn theory into practice?
Escaping the commodity trap: Entering Etvas
With Etvas, banks and financial institutions are able to personalize their commodity-products. Etvas is a whitelabel marketplace, which gets integrated into the bank’s interface, and where customers can purchase an almost unlimited range of value-add services like travel insurances or cyber protection services.
Etvas onboards service partners technically and contractually — meaning banks, insurance providers or other companies can rely on a prebuilt ecosystem and a one-time technical API integration.
By deploying Etvas, banks and insurance companies can not only create a pre-build ecosystem and offer personalized services. They can also monetize those value-added services as they are free to set the prices for the various services. For example, as a bank, you could define that you want to earn a 10% margin on travel insurance, but it is also totally up to you to decide that you want to offer that service to your customers for free. Hence, bundling and unbundling of extra services is now as easy as it can get.
The right team for the task at hand
However, our experience as an investor tells us that an idea might look cool on a PowerPoint Deck, but the most crucial factor is always the team!
We are totally convinced that the founding team, namely Sören and Ilie, is absolutely up to this task. The combination of the technical know-how in building great digital products and industry knowledge, as well as experience, is a great asset to build a company that matters. We are really excited to be working with such great founders. Thanks for taking us onboard!
If you are now just as excited about Etvas as we are, please feel free to contact the founders for more information on their product HERE.
As an investment team, we are of course always on the look-out for any game-changing solutions that help financial institutions to overcome similar traps in their respective markets. If you have an idea, or want to exchange any thoughts, please let us know and reach out to us HERE.