A fintech from Estonia wants to make companies their own banks

Modular bench

  • The Estonian Fintech Modularbank is now entering the German market and opening an office in Berlin.
  • The startup offers a platform for all core banking processes that corporate customers can integrate into their own infrastructure.
  • The managing director and co-founder, Vilve Vene, told in an interview how she does not want to attack traditional banks, but rather wants to support digitalization.

Estonia is often used as a role model for digitization. No wonder, because on the one hand the small Baltic state has almost completely automated its administration, on the other hand it has produced some interesting European startups.

This also includes the Fintech modular bench. The startup has developed a cloud-based core banking system with which it can quickly offer its customers tailored financial services. In principle, the modular bank wants with its software solution to enable every company or organization to become its own bank – all products, sales channels and control modules included. Modularbank is aimed at corporate customers such as dealers, telecommunications providers, but also traditional banks. Unlike many other fintechs, the startup does not see the traditional money houses as competition, but rather as customers.

Modularbanks strongest selling point is the speed and maneuverability of the young start-up compared to large corporations with rigid structures, says Modularbanks co-founder and managing director Vilve Vene. Because in the competitive financial services market, a quick market launch is crucial. “The systems of the banks are very inflexible, old, partly from the 1970s,” she says. The startup could provide its customers with a tailor-made banking system within a few weeks, and they can choose their desired services according to the modular principle.

On expansion course

Customers of Modularbank already include one of the largest financial services groups in Finland, a leading Baltic retail group and a fintech listed on the Frankfurt Stock Exchange that operates in 23 countries. Vein does not name names.

So far, the startup has been active in its home market of Estonia, Finland and now also recently in Great Britain and since January also in Germany. Canada will also be on the expansion list in the future.

In Europe, however, the modular bank already has competition: With its model, the Estonian startup is attacking its competitors Mambu or the Solarisbank. “Our strength is that we deliver particularly quickly,” says Vene. Mambu, for example, has already provided the digital infrastructure for the Neo-Bank N26, but above all offers standard banking services and therefore differs from the modular bank, according to Vene. “We believe that the market itself is big enough, that there is enough space for even more offers,” says Vene.

The modular bank has also been in Germany since January

For the attack in the German market, Vene recruited ex-Paypal manager Lukas Huth, who is still the only employee in the Berlin office. Modularbank is currently hiring new employees and is still looking. The Estonians are already in talks with German corporate customers, said Vene.

What differentiates the small state in the Baltic States from Germany? “In Estonia, we think we have the right to do everything online,” says Vene, laughing. At the same time, she knows that the comparison is a problem, because the Baltic state is many times smaller than Germany. “Testing things is much easier here,” says Vene. Estonia has only been independent for 25 years. The country used the restart to make all administrative structures available online and to focus fully on digitization. “The way of thinking is also changing more and more in Germany,” says Vene. Therefore now the entry into the local market. “Germany is an extremely interesting market because it is not yet too developed in our field, but it is definitely further than a few years ago,” says Vene.

This development would be accelerated again by the Corona crisis. Vene therefore sees the crisis as a great opportunity for digitization: “I think many countries will push ahead with the digital transformation even faster and faster during or after the pandemic.”

The potential in the German market is huge, because there are many large corporate customers and especially classic banks that need help with digital transformation, says Vene. In fact, Modularbank is already advising Volkswagen’s financial division, VW Financial Services, on digital transformation. The managing director is currently in talks with the VW division as a potential customer in the USA.

Business partners asked them to bring coffee

However, the modular bench is not Vilve Vene’s first startup. After gaining initial experience in software programming, in 1992, just one year after Estonia’s independence, Vene started with the start-up Hansabank. Hansabank already offered PC banking to business customers in 1993. In 2002, the then head of IT development at Hansabank quit and founded Icefire – a kind of fintech consultancy that is responsible for the digital infrastructure of the Estonian tax system and has now built up more than 15 banks and financial institutions. With Icefire, Vene makes around ten million euros in sales a year, writes the finance news portal “Finance Forward”. In 2018, the modular bank was founded. Back then, the start funding came from Vene herself and her co-founders Rivo Uibo, Ove Kreison and Jan Lakspere. Long before “fintech” became a popular term, vein developed new technologies for the financial world. She has 25 years of experience overall.

However, as the often only woman at the negotiating table in the male-dominated financial sector, it was not always easy. Vene tells of a meeting in which she was asked to fetch coffee as a matter of course. Now she can laugh about it. “My biggest learning is that you have to believe in diversity. It won’t get you anywhere if you only hire people who only think like you, ”says Vene. She pays attention to this in her own team, says Vene.

Modularbanks target is all of Europe

And even with her new project, the modular bench, Vene is far from finished. In the first financial year 2019, the company had sales of almost one million euros and “a small profit”, as Vene reveals. The modular bank is also currently in the middle of the process for external financing rounds.

By the end of the year, Vene wants to have won two to three corporate customers in Germany and five banking customers by 2021.

Vene’s plans for the modular bank are ambitious: “Our goal is to be able to cover all of Europe in the future.”


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