How Raisin Helps European Savers

The vast majority of Europeans do their banking locally, earning on their savings whatever is paid by the banks in their home markets. Raisin aims to change that. Founded as SavingGlobal in 2012 and based in Berlin, Raisin is an online marketplace giving European savers access to higher-yielding term deposits from around the continent. European residents hold more than €10 trillion in current and savings account, so this is potentially a very large market.

So far, more than 60,000 customers have invested more than €2.0 billion with Raisin’s 27 partner banks from 15 countries via German-, French-, Spanish- and English-language platforms. Much of the money directed over the platform has gone to high-yield savings accounts in “peripheral” EU countries such as Bulgaria, Croatia, and Portugal, but banks in countries perceived as more stable, such as Sweden and Germany, have also attracted deposits. Raisin calculates that its customers have earned €15 million more in interest than they would have had they stayed with banks in their domestic markets. All accounts are protected 100% up to €100,000 per customer per bank by national deposit guarantee schemes which have been harmonized based on EU directives.

Raisin does not hold customer money itself. It establishes an individual account for each saver with the chosen bank. When deposits mature, proceeds are placed in an individual Raisin account maintained by Keytrade Bank. Keytrade Bank is the Belgian branch of Arkéa Direct Bank, a fully-licensed French bank. These accounts at Raisin pay no interest but are still insured.

Raisin receives a commission from the banks receiving deposits, and part of this commission is passed on to Keytrade Bank. Raisin has not disclosed the amount of these commissions. There are no services fees paid by savers.

Raisin partnered with Norway’s BN Bank to offer term deposits in Norwegian kroner on the pan-European (English-language) Raisin platform. This made BN Bank the first bank to offer a savings product denominated in a non-Euro currency on a pan-European level, introducing currency risk for Raisin customers for the first time. In addition, Raisin recently began offering U.S.-dollar-denominated deposits via Germany’s Greensill Bank.

Raisin has raised €30 million in two rounds, primarily from four investors, most recently a €20 million Series B led by Index Ventures out of Geneva and Palo-Alto-based Ribbit Capital. Yuri Milner and Tom Stafford of DST Global are the other two investors.

Tamaz Georgadze is CEO and co-Founder of Raisin. He is also a non-executive director of the Bank of Georgia. He graciously agreed to tell the Raisin story here.

Dr. Tamaz Georgadze

Q.   Tamaz, what gave you the idea for Raisin? What did you see happening that made the lightbulb go off?

A.   I spent almost ten years as a consultant at McKinsey, advising mainly banks and large retail financial institutions on investments and savings products. In 2008, I saw a real surge in client interest in gathering retail deposits. A couple of drivers contributed. One is pretty obvious: wholesale funding had dried up pretty quickly. The other is less obvious: what regulators didn’t like back then was that in a lot of cross-country holdings, there was a central treasury doing cross-country funding allocation at a certain intra-company rate.

Regulators hate this model because this was arbitraging different deposit insurance schemes, different country balance sheets against others, without consumers or regulators having transparency as to where the money is actually working on the asset side. That led to the effect that many holding banks were quite restricted in what they were doing previously, and needed to have self-funding local banks operating instead of being balanced on a full-bank level. That’s the second factor.

Thirdly, as a Georgian national, I had colleagues privately asking me if I could help them open high-yielding Euro and U.S. dollar savings accounts in Georgia, and I was doing this, helping with KYC, carrying documents from Germany to Georgia. Doing this led to understanding on a personal level how hard this is.

The combination of these three factors led to combining the simplicity of online with the cross-border proposition. With two former colleagues from McKinsey, I founded in 2013 a company which back then we called SavingGlobal, now called Raisin. It was a new thing, a marketplace-type offering consolidating savings deposit accounts across banking providers and integrating them into one interface. A one-stop-shop solution for regular savers.

Q.   What prompted the name change? SavingGlobal seems like a perfectly good name, and descriptive of what you do.

A.   The good thing is we changed it before we launched outside of Germany. In Germany, we are still called WeltSparen which means actually SavingGlobal or WorldSaving. That didn’t change. The German entity and the Austrian entity are still called WeltSparen.

The company name we changed from SavingGlobal to Raisin before we launched the client offering across Europe for two reasons. The first is that SavingGlobal isn’t quite correct in terms of grammar. It should be either GlobalSavings or SavingGlobally. And sometimes even our investors struggled to spell it correctly.

The other thing is, for our prospective clients, typing SavingGlobal into Google for a Spanish customer or a French customer is much more complicated than typing in Raisin. It’s shorter and easier to spell. It also has a product association, though it’s not so obvious. It comes from “raise your interest.”

Q.   The hunt for yield has pushed more investors into riskier assets. Many have taken on additional credit risk or gone out a bit longer in terms of maturity. But you’re offering European savers a higher yield that appears to have no added risk. Is that a fair assessment?

A.   That is exactly the idea. A lot of customers are a bit afraid of taking uncontrolled additional risk which is less transparent for them. So, our objective is to give transparent, high-yielding products but the type of products which customers understand and want to have.

In Europe traditionally bank deposits are much more important than in the USA. The share is much higher than in the USA. Bank savings make up roughly half of household savings in the EU. That’s why we decided to concentrate on what is understandable for the client and to deliver a significantly higher rate than the incumbent branch banks.

Q.   So why wouldn’t any Euro-denominated saver do this?

A.   That’s a good question. Our target market share is around 100%, though it’s still a bit lower than that currently.

The reasons are, first, that we’re a startup. This is the core of people’s savings, so we need time to establish ourselves both as a trustworthy brand but also as reliable on the operational side. A lot of questions and feedback we see are related to our reliability in terms of our processes – our speed, our quality. This is something on which we concentrate a lot. But it takes time for your brand to get established and for people to trust you.

The second thing is that it’s a new type of business. The first couple of years we needed to explain how the whole process works. It’s different than direct online banking. It takes time to explain to the customer so that he understands how it works.

The third thing is that all marketplaces depend on the offering they have. We launched and for the first six months we had just two or three banks on the platform. We now have 27 banks from 15 countries live. This increases the appeal of the marketplace. The customer can choose anything from German, to Italian, to Scandinavian deposits. Out of the top ten offers available in terms of yield, nine are on our marketplace. So, the marketplace proposition is now much more solid and convincing compared to the beginning.

Q.   What steps have you taken to prove to people that this is a safe thing to do?

A.   The first thing is the power of reality. Never in the history of the EU has a deposit insurance scheme failed to deliver on its promise to guarantee the value of the customer’s savings. Of course, history may make a bad prediction about the future, but we did live through the crisis of 2008. Historically, these schemes have not failed.

The second thing is that we educate a lot about the insurance scheme itself. What does it promise, what is the payout period, how does it work, what support would we provide in the case of the improbable event of a bank failure. We are very transparent about the relevant deposit insurance schemes. It’s very clear to the customer which bank he is taking as a counterparty, which country is responsible for the harmonized insurance scheme, and what are the payment terms.

Q.   With interest rates at historic lows, rates you can earn on even high-yielding term deposits are hard to get excited about. Has this held back consumer acceptance of your platform? How much extra yield do consumers need in order to take a chance with a young startup?

A.   Depending on the country, we see different yield levels that the banks need to promise to the customers. The German bank needs to match the best rates on the market but no more.

If you take our other AA and AAA countries, then it is very comparable. It is five maybe ten basis points more, but then people will accept those offers. But if you take the periphery – Italy, Portugal, Bulgaria, maybe Poland – then you would need to give more. It’s not really measurable in basis points, but in the relative difference to the best offers on the market. It’s 20-30% more than the best offers on the market.

Q.   What type of license is Raisin required to have?

A.   We are regulated directly as a deposit brokerage company. In some countries in the EU you need a license and in others you don’t. For example, in Germany, we do not need a license for the activity of deposit brokerage. In some other countries, such as France, we need a license so we have a license.

Q.   In the U.S., brokered deposits have sometimes meant “hot” money. Is this a concern for the banks accepting accounts from Raisin customers?

A.   If it were a worry to them, we couldn’t have persuaded 27 banks to join.

We are a different type of proposition. We are much more transparent to the customer. We avoid at all cost any type of hidden fees or features designed just to lure the customer. For example, some banks may want to offer for the first three months a rate that is competitive, and then the rate drops off. We do not allow this type of account. We offer plain vanilla deposit products. We have a “no footnotes” policy.

That is different from what banks may be doing currently. A lot of banks, especially incumbent banks, would have special products up to a certain amount or for a certain period, and then the rates drop off drastically. So the banks speculate on the customer being lazy. This is something they cannot do on our platform. They have to retain attractive products if they want to retain the customers.

On the other side, of course, it is more convenient to keep the money with the same bank. There is some latency on the platform itself. In that sense, the money is not hot. Plus, people stay with the platform over time. The loyalty level is very high. And they tend to increase the money they put on the platform by a lot. In the general scheme of things, the platform is very sticky.

The providers are warned by the platform not to do the kind of tricks they do elsewhere and to stay transparent and meaningful for the customer. What is rewarded is trying to stay attractive – not necessarily offering the highest rate. In those cases, customers tend to stick with the bank they have and not to use the switching procedures on the platform. This is much simpler than moving money across banks elsewhere, but still a switching procedure that entails performing some steps online. In that sense, the platform has a disciplinary function, so the banks try to avoid the bad practices they typically have going directly to the consumer.

Q.   Can you say what the average deposit is and how you measure stickiness, that is the percentage of customers who stay with the first bank they choose?

A.   We have a couple of numbers. We have around 60,000 customers across our platforms. We haven’t announced it yet, but as of roughly ten days ago, we reached €2 billion in deposits brokered on the platform. You can do the math.

We’ve found that the average customer will roughly double his deposit on the platform over his first two years.

Q.   Do you have standards for the financial strength of the banks you work with? I imagine that customers could worry that banks that participate in this program and have to offer higher yields might be weaker?

A.   We want to avoid at any price a bank failure because of the negative implications for the platform. We carefully evaluate the counterparties we add to the platform and we continually monitor them.

We look at the bank and we look at the country through a combination of quantitative and qualitative criteria. We look first at the country level. We do not take banks from Greece and Cyprus, for example. Then, on the individual bank level, we conduct an appraisal. We look at capital adequacy, liquidity ratios, the business model, etc.

Also, customers cannot deposit more than €100,000 per bank so that all their money is insured through the deposit insurance scheme.

Q.   What is happening on the back end of Raisin? I image that some banks you partner with have APIs and some do not; that some have home-grown systems and others are using third-party banking platforms. How are you managing integration with dozens of different banks?

A.   It is as you have imagined, but the picture you imagine is a bit brighter than the reality. We have a lot of online and offline processes. We have a lot of further documentation. There are specific questions that some banks ask of customers that others don’t. Unfortunately, because of double taxation agreements, there are different processes at the country level regarding how you declare your tax or your interest proceeds. Everything which we need to deal with that is individual, we deal with on the back-end side, but this is exactly our value-add to the customers and the banks because we automate it.

The more you understand, the more you can automate. And this is what protects the business model. It’s pretty wild on the back end, but we try to systematize and make it as structured and as automated as is possible, and as simple for the customer as is possible. We try to make it intuitive by asking the customers questions exactly when they would expect them, not too early, not too late.

Q.   So one of the benefits that you offer to the banks, in addition to a more diversified base of depositors, is that you do all the heavy lifting. Are they gaining further from the work you’ve done? Can they use what you’ve done in other channels?

A.   Exactly so. Our value added is that we try to bridge these cross-border differences for the banks. And, we have a lot of further use. For example, you ask about the type of banks that are joining us. It is mostly mid-sized banks, with balance sheets, on average, of €5 billion to €10 billion. A bank like this is not ING or Rabobank, which can roll out a proposition across several countries. For banks at the intermediate level, a cross-border offering doesn’t make any sense, because you’ll encounter differences in your call center, in your back-end processes, in your online banking applications. You’ll need a marketing team dedicated to each country.

This is everything we make available through just one resource investment in our marketplace of counterparties. We have a pay-as-you-go approach. There is no base fee or initial investment with us. For a business in which you formerly had to make an investment to go cross-border, there is now no investment at the beginning. They pay only as they use the platform.

If you need a parallel, it is like software as a service. You pay only for your actual usage. It’s no regrets. We take out all the hurdles you would encounter, like language barriers, market understanding barriers, and fixed costs.

Q.   Who are your customers today? What do they look like from both the demographic and psychographic point of view? What do you know about them?

A.   They are a bit on the older side in terms of demographics – on average, about 55 years old. Not because our platform is antiquated but because of the typical distribution of savings in the population. They are better educated, on average, and of course this is also skewed by wealth distribution, which is correlated with education. They are more financially literate, as well, as they can understand our offering. They are also more self-directed than the average guy on the street would be. The last thing is we are more heavily relying on urban areas than on rural areas.

Q.   One of the toughest things for any B2C FinTech startup is finding cost-effective client acquisition strategies that scale. So, how are you reaching folks?

A.   We have been in the market for three years, now. For more than two years we have used TV advertising on a differing but a heavy scale. We use what every bank in this area uses – we use comparison sites and best-buy tables. We are working all the other normal channels. We form online and offline partnerships, we bid on keywords on Google, so quite a broad range of marketing efforts.

We also work with various distribution partners. We work together with financial advisors and financial advisor networks. And, we partner with banks who integrate our marketplace offering in their online banking. More news will come in January or February, but we will soon be launching with our first banks in a fully integrated way.

Q.   How are you approaching the management of marketing programs in multiple languages and dozens of countries? Are you simply translating ads and content from one language to another, or are you customizing your approach in each country? Can you customize by country without a loss of efficiency?

A.   We differentiate in customer service and in marketing. The back end of the platform is exactly the same. On the front end, we have different language interfaces and customized for local language usage and a bit of local product look and feel.

In customer service, we use native speakers of that particular language. It’s a centralized call center but we allow only native speakers on the phone.

Q.   How have you organized your marketing team? Are you running a global approach with centralized teams for marketing or have you created country-specific or language-specific teams?

A.   We have someone responsible for each marketing channel, who drives that marketing channel across all countries. For a country, we will have one or two marketing specialists who understand that country better. They translate and do everything necessary to bring the product the local flavor. For instance, some of the comparison products differ by country. Some of the product names are different. A term deposit is not always called a term deposit when we translate to different languages. This is something people would search for in some countries and not in others. So, there is always someone driving on the functional side who is responsible for that particular channel, plus someone with country responsibilities who drives marketing for that particular country.

Q.   Which channels have you found to be most successful for building and engaging with your customer base? Are you seeing that different marketing channels perform differently in each country?

A.   Yes, that’s correct. Across all countries, for us, comparison sites and best-buy tables are important everywhere. But search performs differently country by country. The endorsers which they value and the rates which are attractive compared to the local market level, these things are different. Beyond the best-buy tables, the advertising becomes very local.

Q.   Do customers view themselves as customers of Raisin, or of the banks where their deposits are held?

A.   I think people will tell you they value our service very much. They will tell you first they are with WeltSparen or Raisin. But I think 95% will be able to tell you the name of the bank they are banking with.

We try to measure everything on the platform. 97% tell us they are willing to recommend us to their friends or family. Our NPS score is consistently in the last year over 40.

Q.   Who gets to market to them? Is it just Raisin or WeltSparen? Or is it also the banks which holds deposits their deposits?

A.   In general terms, customers are customers of both Raisin (or WeltSparen) and the banks that hold their deposits. What we try to avoid is having customers bombarded with multiple counterparty offerings, so we limit the advertising. On the other side, we understand that there are some offers banks want to make known to their customers. Typical advertising of rate changes or new products are made available to all our customers, and then if it’s very specific product advertising it is targeted to those customers affected.

Q.   What is your mobile strategy? I couldn’t find a Raisin iPhone app.

A.   You did not miss anything. We do not have one. I think we would not be on the prime screen of the customer, and so for this reason our investment allocated there is limited. There is no use for geolocation or other services which would make the app experience meaningful. So, until now we have not focused on that, but to launch with functionality on the desktop.

Q.   You say that you operate entirely online, and yet signup can’t be completed until I receive login credentials by post. Why is that?

A.   We have white mail for login credentials for two reasons. The first is security for the customer; they receive paper and have to scratch off their first-time PIN. The second is we also want to make sure that the address the customer has indicated is the real address.

It’s a business and security decision trade-off. We are thinking of alternatives that could be much more convenient, more along the lines of what is used in online marketplaces beyond banking.

Q.   How are you handling remote authentication, AML, and KYC? Does Germany still require face-to-face authentication?

A.   For all customers. Our processing in Germany and Austria differs from our processing outside those two countries. In Germany and Austria customers either do a video chat with an employee or go to a post office to verify identity. Outside of Germany and Austria we have fully digital KYC.

Q.   Talk to me about taxes. Where are taxes on interest earned owed?

A.   Taxes are owed where you put your deposit in because you get your interest paid out by a counterparty in that country.

Q.   Do German clients who direct deposits to a bank in Portugal need to file taxes in Portugal? Do they need to do it in Portuguese?

A.   Very good question. It depends on the country. The general rule is you file your taxes where you live. Your tax residence is where you need to file. There is, though, a second level question: does the bank withhold, and if the bank withholds, how do I get it back? Or how can I deduct that on my local tax return. That question is answered differently country by country. On that level, the EU is not harmonized, unfortunately. But we do try to make this process more convenient because we give you an annual overview of all your taxable interest rate returns by country and by bank so you have it on one page which you can give to the tax authority.

Q.   Do any jurisdictions appear unfriendly to Raisin?

A.   There is no country where we are not allowed. We allow customers from all EU countries plus Iceland, Norway, Switzerland and Lichtenstein. We have two specific situations where we are not open to customers currently. One is in Belgium because we are undergoing a special clearing process because we are using a Belgian bank, but the Belgian National Bank has looked at our proposition and has cleared it for a customer offering. The other situation is in Ireland. We have stopped accepting new customers in Ireland because of a disagreement between Irish banking regulators and us over our nature and licensing needs there. So, we do not advertise in Ireland. But we are optimistic that we can resume our Irish offering soon.

Q.   You are now offering USD accounts through Germany’s Greensill Bank as well as Norwegian kroner denominated accounts through BN. Do you expect people will begin using Raisin more to protect against a declining euro or speculate on currency and less as a way to earn a few more basis points on their savings? This feels like it could represent a fundamental shift.

A.   We believe our customers are grown-up individuals who can walk, think, and do their banking business on their own.

We think that giving our customers more options is better than fewer options. We want to give as many savings options as possible, some of them being same currency, no risk, or higher margin, and some of them being opportunities to invest in other currencies. We give options and clarify the risk. If you want to choose a U.S. dollar option, then you will go through a process giving a clear indication of risks and upsides.

In our thinking, we are giving people opportunities. There is a significant portion of our customers who think that U.S. rates are going up. That’s why we offer this option to our customers. Whether it is right for them, is up to them to decide. We just give them the opportunities.

Q.   Raisin is now offering Spanish savers a Spanish-language platform. Which country-specific platforms are next?

A.   We are working on a couple of them. We are looking at Italy, Belgium, The Netherlands, UK – markets which are large and seem attractive based on interest rates and saver profiles.

Q.   I’m curious as to why you’ve opted to offer separate web sites in German, French, Spanish, and English, as opposed to a single site with the option to choose your language.

A.   You could do it as you describe with almost the same effect. We have a different brand in Germany and Austria versus the rest, so that’s the first thing. The second thing is we have a different legal appraisal and the way we advertise and market each platform varies country by country.

Q.   Are you planning to offer Raisin to U.S. savers?

A.   Unfortunately it is not planned. You asked about tax. For U.S. savers there is great tax complexity. At some point we might think about this, but not now.

Q.   Will Brexit mean loss of access to the Raisin platform for UK banks? For UK customers? Any idea how that may play out?

A.   We hope not. As you might think, we are very pro-European and pan-European and we think a common market makes a lot of sense. It doesn’t make any sense to leave the common market and give people less success and fewer options. On a meta level, we like Europe and we prefer fewer borders.

On Brexit, we think it would be irrational on both sides to cut off customers from the single market and we think there will be different treatment of existing business and new business. Once the customer is your customer, it could be judged by the past legal situation, so even in the case of the so-called hard Brexit, banks could be allowed to maintain previously established customer relationships. At least for the existing business, it would mean no harm.

Q.   Are you planning to offer additional products?

A.   We are considering additional options. We are confident that once customers have invested significant household assets on the platform, and find they like the platform’s services, that there will be a lot of potential for other investment products.

In terms of the types, we are by far the largest FinTech in terms of assets gathered in Europe. We have a lot of customer acceptance and so a lot of potential. We will definitely enlarge our savings and investment universe, with two restrictions: new products will have to be easy to understand and transparent, and they have to be meaningful for every-day savers. So, mainstream products. Not high end.

Q.   I know you are you hiring. (See: Are you able to find all the talent you need to grow in Berlin, or are you recruiting talent from other countries within the EU?

A.   We are recruiting throughout the EU and also outside the EU. The good thing about Berlin is it is a magnet for people who want to experience new stuff, professionally and personally. The cultural scene and the party scene are really remarkable, so the city attracts a lot of people.

We have about 20 nationalities in our team of 70. We have people from everywhere – Romania, Ukraine, U.S., Argentina, Egypt.

Q.   The attractiveness of Berlin and the ability of people to move there – is it fair to say this gives you an advantage over startups based in countries that want to restrict immigration or prevent talent from moving to places where it’s in demand?

A.   I would strongly think that they have more difficulty compared to us. Berlin is very open for people coming here to contribute know-how to the startup community and to contribute to the tax system.

Q.   What can you tell me about the FinTech ecosystem in Berlin? Have you found it to be very supportive?

A.   Definitely. Berlin is very conscious of the international aspect of what it has, especially inside Germany as a startup ecosystem.

Although the city is notorious for being slow and bureaucratic on many dimensions (like in building an airport), on things like attracting new employees the city is flexible and helpful, helps with advertising and in marketing the city’s advantages. They also do a lot to make the city attractive for new arrivals. The mindset is the right one.

In terms of bureaucracy, and in investment in resources, there is room to improve. Many things are good; some things can be made better.

Q.   What about access to capital? You have raised $32MM. Has any of it come from German investors? Did you look outside Germany for your institutional leads because venture capital wasn’t available in Germany?

A.   Our lead investors in our Series B are Ribbit Capital and Index Capital, both non-German. But in reality, we have in our seed round a lot of German capital. The earlier the round, the easier it is to get German capital. In our early rounds we have both private seed investors and institutions from Germany. In the later rounds, it becomes more difficult to find the clear lead investor contributing €10 million or more because the size of the local funds is still not big enough.

For an early-stage startup it is good enough, and people understand the business models very well. Especially for us; we had many professionals investing who understand the financial markets. In the later rounds, you find larger funds outside Germany.

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