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Opportunities of digital business models for established companies and start-ups

Driven by the Corona crisis, the digital transformation went into turbo gear. From one day to the next, home offices were the order of the day, schools switched to e-learning, meetings were held online only. What seemed impossible until recently has become part of everyday life.

In recent years, it has been hip to talk about disruptive technologies and deal with start-up issues – but in politics and in the boardrooms of many companies, digitisation was only a sideshow. That has now changed abruptly.

The Covid crisis is a turning point in digitalisation. The connection between the degree of digitalisation and competitiveness is becoming increasingly clear. Amazon, Digitec Galaxus and other e-commerce providers continue to expand their market power, while some traditional companies are facing extinction. A digital business model, automated processes and data-driven decisions are becoming a competitive advantage – not only in the Covid 19 crisis, but sustainably and in the future.

Example of winners: the fintech industry

Another example of an industry that has received a strong boost thanks to the digitalisation wave is the fintech industry. A few days ago, a study by the Swiss Finance Startups industry association was published: 83% of the members surveyed stated that they see great to very great opportunities for the fintech industry, especially during the crisis. The local start-ups are also using the time to identify new opportunities and further expand their digital offering. They are also continuing to invest: 55% of the companies surveyed are currently hiring, and only 7% are initiating cost-cutting measures.

In addition, 65% of members said they are experiencing (strong) growth. This coincides with the results of a fintech survey in Germany conducted by the industry medium Finance Forward at the end of March. According to this, more than 40 per cent expect sales to increase in the next three months (compared to the previous three months). Furthermore, 80 percent of the respondents still want to hire new employees in the next six months. In the long term, a majority of German fintech companies believe that they should benefit from the Corona crisis.

This is also reflected in the current development on the debt capital market platform Loanboox. On this, large companies and public-sector borrowers are brought together with institutional investors and banks

Demand for digital financing on the platform peaked during the Corona crisis. In March and April 2020, the volume of financing requests increased by 100% compared to the previous year, and the closed volume by as much as 125%. A total of 250 requests were made for a volume of CHF 4 billion, of which 103 were closed, representing CHF 1.7 billion. It was observed that both public-sector borrowers and large companies were increasingly seeking liquidity. Investors were somewhat more cautious with offers, but they have become more active again in recent weeks. Spreads have moved noticeably upwards and are on average about 45 basis points higher than in February. So it is an exciting time, especially for investors who are looking for safe investment opportunities.

Collaboration instead of competition

Understandably, many large companies, especially in the financial sector, have their hands full trying to deal with the effects of the crisis on their daily business and their employees. That’s why pragmatic solutions are needed. In many cases, this is where cooperation comes in, for example with start-ups that drive innovation.

One example of such cooperation is the collaboration between Deutsche Kreditbank AG and Loanboox. On 2 April, in the middle of the Corona crisis, the two companies launched a new product on the German market: direct loans. This reverses, digitalises and simplifies the common borrowing process. So far, around 60 loans with a total volume of 500 million euros have been brokered. The connection of further lenders is planned for the future.

Some other successful examples are Sonect with Hypothekarbank Lenzburg, VIAC with WIR-Bank as well as Lendico with ING and Penta with Volksbank Bielefeld-Gütersloh. 

Things are moving. And there are numerous other starting points for established companies to work with start-ups to make their own business models more crisis-resistant and digital. After all, the crisis is also an opportunity and enables a realignment of strategy. How should things continue after Covid-19? With which partners? With which technologies and companies?

Our doors are open – since Monday even physically again. We look forward to the discussions and suggestions.

 

This article first appeared on the InTech website on 09.06.2020.

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