Former BCG and Strategy& partner Thomas Achhorner joins additiv

14 August 2017

Former BCG partner Thomas Achhorner has joined additiv, a Zurich-based provider of technology solutions to the financial services industry. Achhorner, who joins from Strategy&, assumes the role of Global Head of Solutions, taking responsibility for additiv’s Software-as-a-Service offering (SaaS) and leading a team of 20 product managers, consultants and experts.

Thomas Achhorner brings with him a wealth of experience from across the banking industry. In his most recent role he served as Head of Digital Financial Services at Strategy& – the strategy consulting arm of PwC. In the role, he spearheaded a range of initiatives that are re-shaping the Australian banking landscape. Prior to this, Achhorner worked just over a year for Witena, a Swiss interim management firm focuses on executives in the digital space, and over twenty years with The Boston Consulting Group (BCG) in Switzerland, Hong Kong, China and Australia, where he advised on major IT transformation, post-merger integration and digital business programmes.

Based in Zurich and Singapore, Achhorner will in his new role focus on developing additiv’s SaaS offering across banks, asset managers and insurance firms, as well as on the roll-out of a line of Robo Advisor products (ranging from retail to HNWIs segments). Additiv’s service portfolio includes services such as customer-bank-interaction models, digital marketing, sales, advice, service and performance management solutions, all implemented within the firm‘s proprietary Digital Finance Suite (DFS).

The firm is tapping into the growing ‘digital disconnect’ in the financial services industry, as players are struggling to realise their digital aspirations and their ability to meet client expectations in the face of compliance, regulation and cost reduction, including even the likes of the mighty Swiss banks. A recent report from BCG for instance found that delivering on the client experience is a key success factor for banks and wealth managers in their bid to ramp up profits, while another study, by EY, highlighted that digital and compliance are among the top three strategic priorities for banking executives globally.

Thomas Achhorner, a former BCG and Strategy& partner, joins additiv

“additiv has listened to the market. It understands the need for secure, compliant, easy-to-launch, cost efficient solutions. And it is delivering on those needs. This is what drew me to the company and it’s why I am proud to be leading our cutting-edge SaaS division, helping to maintain the innovation that has put additiv firmly on the map of the FinTech universe”, remarked Achhorner.

Michael Stemmle, CEO of additive, said he is delighted with the addition of the experienced management consultant, stating: “Thomas’ experience in C-level consulting, digitisation, and international business was the perfect formula for us. His experience is second-to-none and we’re confident he’ll be a great addition.”

The move is part of additiv’s wider expansion plans – in May the company, founded in 1998, received a capital injection of $21.3 million to fuel accelerated growth. With the funds, additive will in the coming months open offices in Frankfurt and London, Europe’s largest financial services hubs, and bolster its sales team to cater for growing demand in Europe, the UK and South-East Asia.

Last month another former partner at a strategy consulting firm joined a financial services player. Tim Welsh, who was a senior partner at McKinsey & Company and served the American consultancy for over 25 years, joined US Bancorp, US’ fifth largest bank, as Vice Chairman of Consumer Banking Sales and Support.

Related: Asian banking industry assets breaches $50 trillion barrier, top 30 banks.


The business and operating models of digital-only banks

04 April 2019

In recent years, several digital-only banks have successfully managed to nestle themselves in the banking landscape, with their popularity continuing to increase. Looking at it from the customer’s point-of-view, there is little difference between these FinTech unicorns; looking at the bigger picture, however, reveals significant variation in their business models. Matyas Fekete, a consultant at KAE, explores some of the main similarities and differences in digi-bank business and operating models. 

What about the profit?

Unlike in the UK, in most of continental Europe, bank accounts and corresponding banking services are historically paid-for services. The fact that digital banks offer most of their services free of charge has undoubtedly helped them build a large customer base. On the other hand, despite comparatively low set-up and minimised operational costs compared to that of traditional banks, and given the lack of revenue stemming from the typically no-fee model, profitability has proved difficult to achieve. Monzo, for instance, recorded a net loss of £30+ per customer in its most recent financial year. 

In the start-up world, it is customary to focus on expansion rather than profit – see the case of Uber, for instance. Still, while profitability might not be their number one priority in their early stages of development, it must be a long-term goal of any business. With their ever-growing customer base, digital banks are increasingly under pressure to turn their business from loss- to profit-making. 

Credit where credit is due

Digital banks pride themselves on their fair (often meaning “free”) proposition and have so far stayed clear of offering loans (including credit cards & overdrafts), traditionally amongst the most lucrative products for traditional providers. Though somewhat reluctantly, newcomers are also realising that offering lending products is one of the most straightforward ways to offset losses made on their free, often high-cost services (e.g. overseas ATM withdrawals). Monzo, N26 and Starling have recently started offering credit products to their customers, with their loan offering expected to be extended to a wide range of services, from mortgages to overdrafts. Correspondingly, creating a lending portfolio can also pave the way for launching an interest-paying savings offering – a proposition seen as a basic banking product that is yet to feature in most digital banks’ portfolios. 

The business and operating models of digital-only banks

The premium customer

While most digital banks offer most of their products for free, some have extended their offering by paid-for premium services in order to create a revenue stream. As these premium features – including different types of insurance, unlimited free transfers/withdrawals, faster payment settlement or concierge services – are often offered in a subscription format, customers are typically prompted to pay for the full package rather than just the desired service(s), providing a significant revenue stream for the bank. Revolut, for instance, was amongst the first digital banks in Europe to break even earlier this year, a feat largely due to revenue from its premium subscription.

SMEs like digital too

Traditional banks typically service small and medium sized businesses under their retail rather than corporate banking arm. Having their product offering tested with consumers, and consequently gaining a reasonable customer base, digital banks have also identified SMEs as an ideal segment to extend their target audience to. The five FinTechs profiled have already gone, or plan to go, down this path by following up their consumer solution with a business account. While both propositions are typically built on similar features, some providers charge businesses a monthly subscription (e.g. Revolut), while others apply additional fees to specific services (e.g. TransferWise), banking on the expectation that businesses are more likely to be willing to pay for banking – something they are already used to doing. 

The marketplace model

While most digital banks offer a wide range of banking services, some of these tend to come from partnering with third-party providers. For instance, Starling Bank’s only proprietary product is its current account, which serves as a basis for the provision of ancillary services, ranging from loans to insurance, to investment opportunities. Instead of developing these services in-house, Starling enables a select group of partnering financial service providers access to its platform in exchange for a fee. In effect, Starling is using its customer base to create a market for its partners, charging a commission for each acquired customer. 

In such cases of digital banks applying this marketplace model, the majority of their income often comes from partners rather than customers. Naturally, only banks with a large enough customer base can be successful in this set-up, underlining the current intensity of competition amongst digital banks.

Banking as a Service

While customer-centricity is heralded amongst the main USPs of digital banks, some are looking beyond offering consumer-facing services to diversify their revenue streams. Starling, which is among the few digital banks built on its own proprietary platform, has recently leapt into the Banking as a Service (BaaS) industry, making its technology available to other start-ups looking to launch a digital bank. Naturally, this raises the question whether the two offerings could threaten each other’s success. Generally, as long as such partners operate in different markets, the two business lines should be able to thrive alongside each other. Further along the line, however, such partners could easily end up expanding their banking solution into the same market(s) as they aim for global success, and by doing so, becoming direct competitors. 

Different approach, same result?

It is fair to say that consumers in Europe looking to bank with a digital-only provider would have a difficult time finding relative advantages/disadvantages amongst the leading players in the industry. Still, despite the limited surface-level variety, exploring the business models of leading digital banks reveals different approaches to the challenge of making money. Alongside the more straightforward method of offering paid-for premium features/subscriptions, some are banking on the value that access to their customer base offers to third-parties, while others outsource their technology to neobanks wanting to focus on the Fin rather than the Tech. With competition amongst digital banks heating up, it will be interesting to see which business model(s) prove to be the winning formula in the long term.