Raisin has acquired specialist startup Fairr as it eyes the European pensions market

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German savings marketplace Raisin acquires specialist startup Fairr as it eyes the mammoth European pensions market. The terms of Raisin’s acquisition have not been disclosed, reports Techcrunch.

The pan-European savings and investments marketplace, which has secured $206 million in funding to date, including $142 million across two rounds in 2019, says the acquisition is part of its strategy to enter Europe’s €12 trillion ($13.3 trillion) pension and retirement savings market. Fairr is a Germany-based fintech that provides specialized pension products, among other offerings.

Raisin, like many of its fintech peers, initially started out with a narrow focus. Despite deep political and economic integration, Europe’s banking market is still, by and large, run along national lines. For consumers, this means the interest rates they have access to are generally limited to within the bounds of their home country.

Raisin’s model targets this lack of integration by providing Europeans with access to savings accounts from providers across the continent. Relatedly, across major European countries like the UK and Germany, banks have long paid minimal interest.

As a result of this model and persistently low interest rates from established lenders, the firm has managed to achieve considerable traction, having brokered over €14.5 billion ($15.9 billion) in deposits for more than 195,000 customers at 81 partner banks across 31 European countries. It has since expanded into longer-term investments: Last-year, via a partnership with Vanguard, it began offering users access to longer-term investment products.

Moving into pensions and retirement savings offerings is a natural next step. Much like its current product offerings, Raisin wants to offer a marketplace that will enable consumers to access a range of pension products.

And the pension segment is ripe for disruption with these products, as they are currently neither low-cost or transparent, according to Raisin Founder and CEO Tamaz Georgadze, cited by Sifted. Moreover, with authorities across European countries pushing younger consumers to save more for their retirement amid a state pensions gap, there’s a significant opportunity for Raisin to tap into.

The bigger picture: Fintechs have shown there’s appetite for their services; now, they need to scale their businesses and make money — and that could drive a flurry of fintech-fintech acquisitions.

Fintechs like Raisin began with a narrow focus, and while that’s been successful in how many users they’ve signed up, profitability remains a challenge. We’ve seen fintechs across the financial services value chain achieve significant traction among consumers: A number of neobanks, for instance, have acquired millions of users.

But despite strong customer acquisition, the majority have struggled to turn a profit. This is because while their overheads tend to be considerably lower than their established peers’, their services are also significantly cheaper or even free. As a result, they need huge numbers of customers to begin generating meaningful revenue.

As they bid to become profitable, we anticipate many will try to become a one-stop shop for financial services — and that could result in plenty more fintechs following Raisin’s footpath. From neobanks to investment-focused startups, we’ve already seen a slew of fintechs broaden their focus by bolstering their product suite to attract new customers and take advantage of cross-selling opportunities with their existing ones.

Revolut, the UK-based neobank that started out with prepaid cards, recently rolled out trading services, for instance. One way we anticipate these players will try to realize this ambition is by acquiring specialist fintechs, as Raisin has done with Fairr.

Such a move makes sense because it enables the likes of Raisin to side-step the heavy development costs of building and trialing these solutions in-house, while also enabling them to scoop up their peers’ tech-savvy employees. Crucially, it will enable them to bring products to market at a rapid pace: To this end, Revolut took more than a year to roll out its trading services — slow, in the context of fintechs.

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