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Apps, Fintechs, Start-ups – How digitization helps to save costs especially for startups

The account opening takes place on the smartphone and lasts ten minutes. The app is free, domestic and sepa transfers cost nothing. The Swiss start-up Neon wants to offer one of the slimmest and cheapest forms of banking: an account app and a Maestro card.

Neon wants to push in the still poorly developed in Switzerland market of account apps. Revolut is already out in the UK with a similar offer, a smartphone application that is becoming increasingly popular in Switzerland primarily because of low foreign exchange rates – however, Revolut does not have a banking license in Switzerland.

Bank Cler, in turn, is on the market as a Swiss bank with the “Zak” account app, which of course ultimately includes Bank Cler and its owner, Basler Kantonalbank.

Even neon does not get along without a bank. On the one hand, the start-up uses the acclaimed open-banking interface Finstar from Hypothekarbank Lenzburg. On the other hand, neon customers also have a physical and deposit-protected account at Hypo Lenzburg.

Otherwise, however, Neon can advertise having little in common with a conventional bank: no opening hours, no risk trading on the financial markets, no bankers with high bonuses.

Whether the account app Neon in Switzerland will soon be downloaded in droves will be shown. Neon is an early stage start-up and will not make much money with the offer alone. “Neon as a business model is sort of a bet on the future,” says Ralf Beyeler, technology expert at the comparison service Moneyland.

The fintech will probably have to offer in addition to a free basic product and paid premium services in order to survive.

But for customers, the crucial message is different: Neon is also a signal that, thanks to digitization, costs will fall or even decline. Simple account apps or apps for payments in Germany and abroad will prevail over time, as connoisseurs of the scene are sure. Other digitized banking and investment products are already one step ahead.

Investments, loans and mortgages digitally

Stock trading in online banks has been around for quite some time: there, the fees are generally cheaper than at large and private banks. With the Hypomat, Glarner Kantonalbank digitized the market for home loans in 2016.

Here the cost factor is more difficult to compare with traditional mortgage lenders, because in this market prices are not completely transparent. Sure, but the Hypomat can score with a cost advantage.

For loans, cheaper than traditional providers is crowd lending, where loans are channeled directly from lenders to borrowers through the platform. Well-known providers such as Cashare, Lend or Swisspeers offer cheaper consumer and personal loans than traditional providers who are allowed to charge up to 10 percent interest on a regulatory basis.

Stock exchange trading is also digitized. Robo-Advisors specializing in automated investment processes have been on the road in Switzerland for several years. Suppliers such as True Wealth, Digifolio, Saxo Bank or Swissquote use cheap index products such as ETF (Exchange Traded Funds) and charge fees of around 0.5 to 0.8 percent (cash reported). Banks offering traditional investment strategies to clients struggle to keep costs down.

Robo-Advisors not only want to allow low fees, but also deliver good returns. Because these providers are still relatively new, it is difficult to compare them to traditional investment business.

Poorly managed ETFs, such as those used by Robos, are usually no less profitable than actively managed funds or strategies.

Fixed-term and art market fintechs are coming

Savedo, a German company, is also offering optimized returns and will be launching in Switzerland. The platform offers fixed-term products in various European countries. In Switzerland, Savedo plans to make fixed deposits from Swiss, British and German banks with at least AA rating palatable to customers in the near future.

It is advertised with free account management and free investment. The correspondent bank for Swiss users here too is the mortgage bank Lenzburg, where an account is set up for Savedo customers.

The planned Savedo offer for Switzerland is still somewhat meager: online money is available at a term of one to seven years with up to 0.7 percent annual interest. For Swiss medium-term notes, an instrument comparable to a fixed-term deposit, there are some even better interest rates.

In Germany, however, Savedo also arranges time deposits from Southern and Eastern European banks, with lower credit ratings, but higher interest rates. For example, a Croatian bank is granting 1.75 per cent interest on Savedo for a five-year term deposit. Compared to a Swiss bank account a clearly better interest rate.

Even more exotic fintechs have the potential to shake up the investment world. The art trade is a niche in the world of financial investments, and the niche in the niche is then the digital art.

The Zug startup Orion Vault wants to make this very closed, insider-dominated market accessible to a broader public. Orion Vault is one of the early stage fintechs. At the heart of the startup is acquiring, trading, and storing digital artwork across the platform. This makes the art trade more transparent and at least potentially cheaper.

In addition, Blockchain’s decentralized storage chain certifies the ownership of a digital artwork – making it one of the few blockchain applications in the financial world. Even in an exotic investment form this is a remarkable development.

Also published on Medium.

Published inAppsFintechStartups

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