12. July 2017

Cheers, here‘s to digital banking!

Here’s how micro breweries and digital banking pioneers are related

Maybe the secrets of hidden economic mechanisms lie somewhere between ales and account movements, since there are some striking parallels between the global beer industry and the banking business. Find out about which economic laws and product strategies are connecting the craft beer movement and fintechs.

Outta my way, ya big lunk!

What you see is not what you get. While there are many different beer brands on the supermarket shelves, most of them belong to same big brewery groups, operating worldwide. Mass production and low prices made it hard for small breweries to survive. Many of them had to throw in the towel and sell out to the ‘big guys’. A market concentration with far-reaching consequences for the product: where once thousands of different beers were available in Germany, each with its own taste and time-honoured recipe, the need for efficiency reduced that number significantly. Brewing beer was only lucrative in big kettles and huge production plants. The small brands vanished – and with them regional identities and individual traits.

A trend which is also coming into effect in the world of banking. Just a few years ago nearly every town had its own savings bank (‘Sparkasse’), the big banking houses having local branches as well. Cost pressure led to a market concentration, with local savings banks merging into regional savings banks and then regional savings banks merging with each other. And nobody was in the least interested in what the customers thought.

A man walks into a pub …

By now, we have reached the point where the bank customer walks into the nearest pub and orders a craft beer. These hand-crafted ales made by enthusiastic micro-breweries turn out to be a high-quality alternative to the mass products churned out by the big breweries. Applied to the world of finance, it means that because the conventional range of banking products and the respective fees are so similar that especially younger and tech-savvy customers are open to new approaches. Just as beer aficionados are looking for new kicks, as far removed from the mainstream – where only the label on the bottle suggests an alleged identity – as possible.

Number of micro-breweries on the rise

New players have entered the market – whether it’s beer or finances. And they are devising and defining their products and services in a new way.

Craft beer is brewed in small quantities and it’s

  • local
  • adventurous
  • creative and
  • surprisingly different.

Small wonder then that craft beer is becoming more and more popular. In 2005 a total of 1,985 German breweries had a yearly production of up to 50,000 hectolitres – a small output compared to the rest of the industry. By 2016 that number had climbed to 2,332 and is still rising. The number is even more remarkable when you consider that beer consumption in generally trending down in Germany. Of course, these small breweries are nowhere near the well-established brewery groups, but they are successfully staking new claims and placing market signals. The big breweries are reacting and are beginning to produce brands in smaller quantities. The long-neglected mass-product beer is in the midst of a renaissance.

The new digital services offered by fintechs are just as hip and successful as craft beers. These start-up-companies are also

  • adventurous
  • creative and
  • surprisingly different.

Fintechs are setting new benchmarks

Fintechs are setting new benchmarks within their markets; benchmarks which the big financial institutions have to follow. The fintechs have an ideal starting point: with a growing database at their disposal they know their customers quite well and can tailor their services to the customers and their needs. Thus they establish a new reality and change the rules of the markets – and these changes also apply for their big competitors. This development can be seen in Germany, Europe and the USA.

Whether it’s money or malt – not every service or product is made for a mass-market. And some breweries and fintechs are actively targeting niche-sectors. But both examples show that certain markets can be tackled when the industry leaders are becoming sloppy and only look to expand while neglecting customer needs as well as new trends. That’s when fintechs enter the market, conquer a sizable portion – and have a craft beer later.

picture: Fotolia, lukeruk, 160967670

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