By
Godfrey Benjamin
May 13th, 2024
Raisin has ambitious expansion plans to add 25-30 new banks to its platform this year, with a particular focus on the United States.
Raisin, a German fintech firm specializing in financial technology solutions, expects a surge in deposits this year as banks seek alternative funding options amid the end of cheap central bank cash. The Berlin-based company, formerly known as SaveBetter, was launched in 2013 and is backed by notable financial services companies, including Goldman Sachs, Deutsche Bank, and PayPal. The fintech firm anticipates that the deposits it facilitates will exceed €50 billion ($56 billion) by the end of the year, surpassing its current €43 billion mark, Bloomberg reported Monday, citing an interview with the company’s CEO.
According to the report, Raisin CEO Tamaz Georgadze shared these projections in an interview, emphasizing that more than half of the growth is expected to originate from countries outside the euro region, particularly the United Kingdom and the United States.
The company’s projection comes as central banks across the globe raise interest rates and unwind economic stimulus measures to combat inflation. Banks find themselves faced with both profitable prospects and higher funding costs. Against the backdrop of recent bank failures, including that of Silicon Valley Bank and Silvergate Bank, financial watchdogs are intensifying their oversight of bank liquidity, potentially leading to increased scrutiny of deposit brokers and marketplaces such as Raisin.
Fintech Firm Raisin Sets Itself Apart from Deposit Broker Status in the US
During the interview, the Raisin CEO refuted concerns a senior European official raised last week regarding the stability of deposits facilitated through the company. He clarified that Raisin does not fall under the definition of a deposit broker in the US, as its fixed-term deposits are not tradable securities. Furthermore, Georgadze stated that less than 1% of the company’s clients engage in constant fund transfers between overnight funds, commonly called “interest rate hoppers”.
Contrary to the notion that deposits facilitated by the fintech firm Raisin are prone to rapid withdrawals, Georgadze argued that they tend to display greater resilience during times of crisis. He further explained that clients geographically distant from banks are less influenced by local events, reducing the likelihood of impulsive reactions.
“These deposits are actually stickier than others in crises. 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,” Georgadze said.
While banks witnessed a considerable increase in net interest income last year due to interest rate hikes by central banks such as the European Central Bank and the US Federal Reserve, they have been slow to pass on these benefits to retail clients, with only a fraction of the increased rates being offered to them. Georgadze raised pertinent questions regarding the lack of higher rates for smaller depositors and underscored Raisin’s ability to outperform the market average by promptly implementing the European Central Bank’s rates.
Raisin Plan to Onboard More Banks on Its Platform This Year
Raisin has ambitious expansion plans to add 25 to 30 new banks to its platform this year, with a particular focus on the United States. Georgadze stressed that deposits sourced through the company offer banks a more cost-effective funding option compared to bonds. This holds special significance in Europe, where banks repay hundreds of billions of euros in European Central Bank stimulus loans.
Commenting on the changing landscape of wholesale funding, the Raisin boss acknowledged the end of the era of free funding from the European Central Bank. In light of this, Raisin’s role as an intermediary has become increasingly valuable for financial service companies seeking affordable funding sources.
Earlier in March, the company secured €60 million in a series E funding round from new and existing investors. According to the company CEO, the funds will be used to increase its product offerings to strengthen its position in the financial market further.