Patrick Stäuble from Teylor AG talks about the importance of digitalization in the banking sector and how tokenization will lead the future of fintech industry.
1. Tell us about your role at Teylor?
I am the founder and CEO of Teylor. When we started two years ago as a small team, there were only two engineers and me. Today, we are a team of around 30 people and an established company with a strong Board of Directors, offices in three locations, and very fast growth. So my role has changed over the past two years and will keep changing as we grow.
2. Can you tell us about your journey into this industry?
I previously worked at Numbrs Personal Finance AG in Zurich, where I first was a product manager and later became Head of Business Development and Sales. During this time, I got in touch with many banks in Germany and noticed that they still lack digital tools, especially regarding SME financing. That’s when I came up with the idea of Teylor – I believed (and still believe) that there is a massive opportunity to digitize the SME lending sector in Europe. We founded the company in 2018 and gave our first loan in early 2019 and immediately saw the demand for automated lending, and we saw that our solution works. At that point, several banks came to us and inquired about our technology. We then launched the Teylor Lending Cloud, a Software-as-a-Service solution for banks to digitize and automate their own lending processes.
3. How do you think technology is upgrading the financial sector?
Take SME lending as an example: The SME lending space today is dominated almost entirely by traditional banks. Fintechs account for less than one percent of overall lending activity. Almost none of these banks have taken significant steps to automate or digitize their financing solutions for small and medium-sized businesses. Instead, they process loan applications manually, which takes time, meaning SMEs have to wait, and which is expensive for banks. Technology will thus upgrade the lending space in two ways: First, it will create faster and better services for customers. Second, it will significantly decrease banks’ operational costs. Considering the lack of profitability that banks face today and the persistent low interest rate environment, digitalization is not an option or a nice-to-have anymore, but absolutely essential for survival.
4. How has digitalization empowered SME lending processes?
Digital processes are faster, cheaper, and more convenient – for both the customer and the bank In Germany, it takes up to 12 weeks for SMEs to get a loan from a traditional bank. That’s because of slow processes, and it’s because banks prefer to grant high-volume loans as they come with higher margins. SMEs then have to wait in line. With that in mind, bring in digital technology: Our application process takes less than 10 minutes and requires minimal human involvement. Customers don’t have to wait anymore, loans will become cheaper, and the amount of paperwork and organizational effort is greatly reduced.
5. What is the significance of automating SME business loans for banks?
Our software replaces or digitizes the entire credit department of a bank, which will cut the costs of lending to a minimum. It also reduces the probability of human error and dramatically speeds up the process. Still, the banks remain in full control of the process. We provide the software, and banks can integrate their own risk criteria, and they will always make the final lending decision. That makes switching to digital processes a no-brainer: Lower costs, better service, no risk. In the next 3 to 5 years, every bank will be forced to automate their SME lending, or they simply won’t be competitive anymore in this market.
6. What is Teylor’s process of Credit Scoring?
The actual scoring is similar to the way traditional banks are operating. We analyze the creditworthiness of the borrower by looking at their annual statements and credit history. In the case of loans, we broker for partner banks, we then automatically apply the criteria of the partner bank. For loans that we fund ourselves, we use our own proprietary scoring system we have developed. The key difference to traditional banks is that this process is entirely automated, meaning it happens within milliseconds instead of weeks. If borrowers come to Teylor, they instantly get an offer, given that they meet the banks’ or our lending criteria.
7. Can you explain to us in detail about your KFW Corona Emergency Loans?
We started offering KFW loans during the corona crisis. KFW is the German government bank, and it supports SME loans by insuring the credit risk. The problem with these loans is that it takes a long time and a huge amount of paperwork to get through the application process. As that’s too much headache and takes too long, especially in times of crisis, firms often choose not to apply in the first place. When we saw this becoming a major issue during the pandemic, we used our digital technology to digitize the KFW application process. Applicants can now go to our website at www.teylor.io and fill in the form. We then automatically create all the documents and distribute them within our network of financing partners. That’s our way to contribute during the corona crisis, and it worked.
8. What features of your SME lending SaaS differentiates it in the market?
There is no other company in Germany that does what we do. Typically, companies in our space are either lenders or software providers. We do both. We use our own software every day to provide loans. This hybrid business model gives us a tremendous edge because we know exactly what our banking customers need. We also continuously update our software, because if it weren’t the best in the market, our own lending business would suffer as well.
9. What advice would you like to give to new fintech solutions entering the market?
Be clear about your use case.
You don’t want to provide a solution that seeks a problem. You want to do it the other way round: Look for the problems, then come up with a solution.
Also, I would not go with a me-too product. Do something truly innovative that provides a real USP.
10. What is the Digital innovation in investment according to you that will mark 2020?
I think the whole tokenization space will get a tailwind. Low interest rates will continue to weigh on the banks’ profitability, so they have to cut costs wherever they can. Automation is one way to do so, and tokenizing investment products will enable a higher degree of automation. Stocks, currencies, real estate, we will see a lot of traditional investment products move to a digital format.
11. Can you tell us about your team and how it supports you?
We have a really great team, and I am genuinely grateful for that. Our engineering team works hard every day to make sure Teylor stays the best software on the market. We are currently also expanding our sales and marketing team to increase our loan volume and to onboard more banks to our SaaS-solution. The team has also done a great job during the crisis. Luckily, as a digital company, we have always had a more decentralized operation, so working from home is common at Teylor anyway and isn’t much of a challenge during the pandemic.
12. What book are you currently reading?
Great question! I read a lot as it is my favorite way to calm down after a busy day at work. Therefore, I am usually reading 2-3 books at a time. Currently, I am re-reading a great science fiction book called “Old Man’s War” by John Scalzi. The second book I am reading is “High Financier – The lives and time of Siegmund Warburg” by one of my favorite authors, Niall Ferguson. I can definitely recommend both books.
13. Can you give us a glance of the applications you use on your phone?
I live on my phone for work but generally try to minimize the time I spend on my phone otherwise. I have parental locks in place so that I can only use “time-wasting” apps for a total of 20 minutes a day, so this keeps me from using Instagram, Reddit, etc. too much. The result is that outside of using it for calling and SMS and Email, I mainly use it to read and check the news.
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