By Heinz-Roger Dohms and Caspar Schlenk
It’s an extremely spectacular relationship: Berlin’s billionaire neo-broker Trade Republic is partnering (see our exclusive report yesterday morning) with Deutsche Bank. What’s behind? And what will become of Solarisbank now?
Our frequently asked questions:
1.) What really happened?
As a fintech broker, Trade Republic not only needs a custodian bank (Germany’s HSBC), but also a bank for what are traditionally known as “settlement accounts”, the hinge between the end customer’s checking account and his or her account. custody. So far, these “settlement accounts” are all with Solarisbank. In the future, however, Trade Republic will also partner with Deutsche Bank and major US bank Citigroup.
After the financial scene and Finance Forward made the spectacular link public yesterday morning, Trade Republic emphasized that it was only about expanding the circle of partners: Solarisbank would not be replaced. However, according to our information, de facto not only new customers, but also a considerable number of the more than one million existing customers are connected to Deutsche Bank and Citigroup. In other words: there is a migration out of Solarisbank.
The first customers, some of whom have been there for many years, were already informed yesterday. This is what it says verbatim in a Trade Republic client letter we received:
“Starting today, we will keep your credit in an account with Deutsche Bank AG. Therefore, you will receive a new Trade Republic IBAN. There are no changes for you. Of course, there are still no custody fees or negative interest. In addition, the total deposit guarantee of €100,000 applies. Please note that you must adjust your standing orders to Trade Republic.”
Trade Republic moves from Solarisbank to Deutsche Bank
2.) Will Deutsche Bank become a “Banking as a Service” specialist?
In a way, it already is. Because even if terms like “banking as a service” are mostly used in the media for fintech banks, what Deutsche Bank does in transactional banking, for example, differs little from what some new financial start-ups do as a banking business. services. offers
As for the specific case, Deutsche Bank has reinforced its corporate banking in recent years with a whole range of fintech and payment experts (see here, for example). Many of these newcomers came from Wirecard (see, among other things, our report here). This is also interesting because Wirecard was not only a payment service provider, but also acted as a “banking as a service” provider with its own Wirecard Bank, i.e. operating exactly the kind of business that Solarisbank does today.
In the course of staff expansion, Deutsche Bank has elevated a customer segment that previously loosely catered to a central target group, namely fintechs and platform operators. The idea boils down to offering these corporate banking players, who are often new, exactly the same products as classic corporate clients. In this sense, it is said that Trade Republic is a client like any other, and the service offered normally falls within the “Cash Management” solutions.
The impression that a fintech client in the Trade Republic category is new to Deutsche Bank is contradicted in financial circles. In recent years, the institute has already gained several well-known fintechs as clients, including German fintechs. What is unusual about Trade Republic is that the matter was made public in this case.
And even more pay nerds! Deutsche Bank is poaching on Wirecard
3.) What exactly does Trade Republic need Deutsche Bank for?
To explain this in detail, we would need more knowledge of the subject, but here is at least a rough attempt: the service provided by Solarisbank (ie, to put it very simply, the management of deposit clearing accounts) somehow It was always thought of as a mainly technical and normative service presented. In fact, however, as we were told yesterday, it’s also about managing large flows of money. Especially since Trade Republic, unlike 1-2 years ago, is no longer a startup, but one of the largest European retail brokers with presumably more than a million clients and consequently huge trading volumes.
As a result, during the development phase, Trade Republic’s natural banking partner, so to speak, was Solarisbank. In the meantime, however, the Berlin neo-broker has reached a stage where it is more obvious to entrust payment processing to a major international bank. So it is no coincidence that Trade Republic has chosen Citigroup in addition to Deutsche Bank. Both institutions had extensive experience in handling large-volume cash and a wide range of products, including, for example, credit products that could be used to secure short-term liquidity for trade settlement.
4.) Is Solarisbank the big loser now?
So it’s certainly not a winner if clients are now being migrated off of it…
However: Yesterday, two different readings circulated about how serious the loss of supposedly hundreds of thousands of accounts really affects Solarisbank:
- Interpretation A) To become really big, Solarisbank (which had achieved unicorn status last year) also needs correspondingly big clients. However, it has now lost one of its biggest, which is not reflected well in the story of growth and scale.
- Interpretation B) Although Trade Republic is a prestigious client, low-margin bulk trading with clearing accounts is not really attractive. So: Solarisbank has long proven that it can handle large accounts. That’s why it’s more about proving that you can actually make money with your partners right now. And that goes much better in the “accounts and cards” business, which Solarisbank operates with neobanks like Vivid Money or Penta
5.) Why did Trade Republic get two new banking partners?
That is not clear. In the course of the desired Europeanization (Italy, France, Spain…) it probably doesn’t hurt to partner with two big payment processors at the same time. Especially since large retailers have also been known to often cooperate with not just one, but two acquirers (you never know…). However, from what we understand, there is no need to incorporate Citigroup together with Deutsche Bank.
How customers are divided between the two banks is beyond our knowledge. As little as we know if any of the institutes have some sort of “Privilegedstatus” enjoys. Yesterday, only this was said on behalf of the Trade Republic: no clear division between regional markets is planned.
6.) What does the passage say about Trade Republic?
- In any case, the cooperation with Deutsche Bank and Citigroup underlines the huge ambitions of the $5 billion fintech.
- Yesterday, it was said that the move was not an anticipation of a possibly far-reaching expansion desire (UK?)…
- …and interpreting the association in such a way that a preliminary decision could have been made on possible future bank IPOs: this interpretation is also nonsense.
Trade Republic brings in veterans from Deutsche Bank and Erste Group