Raisin, a German financial technology firm that helps savers find better rates, is betting that the end of cheap central bank cash will prompt lenders to seek alternate funding, boosting the amount of money sourced via its platforms.
(Bloomberg) — Raisin, a German financial technology firm that helps savers find better rates, is betting that the end of cheap central bank cash will prompt lenders to seek alternate funding, boosting the amount of money sourced via its platforms.
The Berlin-based company, which counts Goldman Sachs Group Inc., Deutsche Bank AG and PayPal Holdings Inc. among its investors, expects deposits for which it acts as intermediary to increase above €50 billion ($56 billion) this year, from €43 billion currently, Chief Executive Officer Tamaz Georgadze said in an interview. More than half of the growth will come from outside the euro region, mainly the UK and US.
Central banks around the world are increasing interest rates and unwinding economic stimulus to fight inflation, handing lenders both windfall profits as well as higher funding costs. Following the collapse of several US regional banks including Silicon Valley Bank, regulators are tightening oversight of bank liquidity, with deposit brokers and marketplaces like Raisin at risk of being caught up in the scrutiny.
Georgadze pushed back against a perception deposits that placed via his firm are especially flighty, a concern raised by a senior European official last week. Raisin isn’t a deposit broker as defined by the US, for example because its fixed-term deposits aren’t tradeable securities, he said. Less than 1% of its clients are so-called “interest rate hoppers” who constantly shift funds between overnight funds, he added.
“These deposits are actually stickier than others in crisis situations,” he argued. “The further away the client is, the more detached they are from events at the bank. They don’t look out the window and see a line of people outside a bank branch.”
Banks saw their net interest income surge last year as the European Central Bank joined the Federal Reserve in rapidly increasing interest rates. Yet the industry kept most of the benefit for themselves and lenders are only passing on a fraction of the rates to retail clients.
“Whether in wealth management or corporate banking, if you’re a large customer, you get rates passed through. But where are the higher rates for smaller depositors?” asked Georgadze. “We’re doing the work of passing on the ECB’s rates more rapidly than the market on average.”
Raisin expects to add 25 to 30 banks this year to its platform, a large number of which will be in the US, according to Georgadze.
He said deposits sourced via Raisin are a cheaper source of funding for banks than bonds. That’s especially relevant in Europe, where banks are repaying hundreds of billions of euros of ECB stimulus loans.
“Wholesale funding was free before at the ECB,” he said. “That time has gone.”
–With assistance from Steven Arons.
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