A deposit is a super standard service. In one bank, the customer deposits 100 dollars today and gets 103 dollars in six months, in another bank, they get 105 dollars in a year – that’s about all the difference. Within realistic limits, all deposits are insured by the state for the majority of the population, the bank’s reliability plays no role.
A rational consumer chooses a deposit by the interest rate, a lazy one – by the number of ads and force of habit. Ultimately roughly speaking, the former find themselves at the tiniest bank, the latter – at the biggest one, and both get disappointed, one with the service quality, the other one with the conditions. Deposit Solutions, the European startup of the day, came up with a way to make them both happy: let a big bank sell deposits at a small bank. The customer will have an office right next door, the operations people will be polite, and the rates will be high. The big one supports brand loyalty and earns off someone else’s product, the small ones attract a deposit at acceptable conditions.
The startup gives banks the technological platform for integration and decreases the number of connections, each participant merely connects to the common hub and not to all the future partners. One cannot charge too much for this – at high prices, it becomes very tempting to get rid of the intermediary. Any development works can be recreated, and it’s possible to negotiate the terms with the banks, a working service needs dozens or hundreds of integrations – not so many. Deposit Solutions dodges the issue by means of its proprietary client product, it has integrated banks with good deposit terms and it offers them online directly, without an intermediary layer. Thus the startup brought in EUR 9B. It sounds very impressive, but we must adjust for near-zero profitability of European deposits, the company’s revenue is measured in dozens of millions.
The company spent USD 43M of investments, it got another 100M in its recent round at the valuation of half a billion.
This is a rerun from 2018. One year after this post, Deposit Solutions cost over half a billion already, and two years after, it merged with Raisin – a similar startup but with a B2C model. Today, in the cycle where interest rates grow, the product should become even more timely.
Alexander made his career in Russian internet companies including Mail.Ru, Rambler, RBC. From 2016 to 2018 he was Chief Strategy and Analytics officer in Mail.Ru Group. In this position, he worked on M&A, investments, and new project launches. In 2018 he became Deputy CEO in Citymobil, a Russian Uber-like company that was invested by Mail.Ru Group and Sberbank (the biggest Russian bank), then he left the company to launch his own projects. Now Alexander is a co-founder of United Investors – the platform for co-investments in Russian early-stage startups. His blog #startupoftheday (#стартапдня) is one of the most popular blogs about startups in Russia.