Contact details IR
Head of Corporate Communications
Tel. +49 (0) 30 / 420 86-1936
Mobil +49 (0) 151 / 5804-1936
The Hypoport Group is an internet-based financial service provider whose business model consists of two mutually supportive pillars:
- Dr. Klein & Co. AG, which distributes retail financial products via the internet,
- and an online B2B financial marketplace for brokering financial products.
Internet-based distribution of financial products
Hypoport's wholly owned subsidiary Dr. Klein acts as an intermediary for selling banking and financial products to private clients. Products ranging from current accounts and insurance to mortgage finance are sold online or, if they prefer, clients can obtain advice by telephone or face to face. As an independent distributor, Dr. Klein selects the best products for its clients from a broad selection offered by more than 100 leading banks and insurance companies. The cost benefits generated by using the EUROPACE B2B financial marketplace are passed on directly to private clients, so Dr. Klein often offers better terms and lower prices than local banks and insurance agencies. Furthermore, Dr. Klein is a market leader in arranging finance for municipal and cooperative housing companies thanks to its Institutional Clients business unit, which was established in 1954.
EUROPACE B2B financial marketplace
The EUROPACE B2B financial marketplace operated by Hypoport is Germany's biggest online transactions platform for selling financial products. The fully integrated EUROPACE system puts several thousand financial advisors in touch with more than 40 product suppliers, such as banks, building societies and insurance companies enabling its users to close deals quickly and directly. As a result, the platform's highly automated processes generate significant cost advantages. Around 400 financial transactions are now settled via the platform every day.
EUROPACE also enables Hypoport's Institutional Clients business unit to assist European banks in the analysis, data management and reporting of transactions in their European portfolios.
Germany has the biggest financial services market in mainland Europe. According to Deutsche Bundesbank statistics, financial services institutions held the following portfolios at the end of 2008:
- €966 billion in home loans to private clients
- €169 billion in home loans to housing companies
- €448 billion in consumer loans and other loans to private clients
- €506 billion in deposits made by private clients
- €120 billion in home savings deposits made by consumers
Furthermore, according to statistics compiled by the German Insurance Association (GDV), insurance companies in Germany reported the following:
- premium income of €165.3 billion (of which €76.2 billion was for life insurance)
The financial product distribution market segment
In many developed markets such as the USA, Australia and the UK, independent financial product distributors already have a higher market share than conventional bank branches. By contrast, the financial product distribution sector in Germany is still in the early stages of its growth trajectory. The market share held by distributors in the home loans segment, the most important product for Hypoport, was less than 10 per cent in 2000, but now we estimate that their market share is in excess of 20 per cent. We believe that this market share has the potential to double again in the next few years. Most of the major financial product distributors in Germany are linked into their product partner's computer systems and they perform the bulk of their sales functions for them. Hypoport has been particularly instrumental in this market trend.
In addition to the growing networks of numerous small agents, strong financial product distributors with their own market niche have emerged in Germany. Most of them tie their sales staff exclusively to their own brand. Unfortunately, many of these relatively large financial product distributors have now lost their independent status, a feature that is so important for their customers, and they have been taken over by banks and insurance companies.
The retail banking market segment
Germany's multibranch retail banks are slowly but surely undergoing a process of consolidation. Many small institutions do not have the critical mass to provide banking products at market prices, so they are starting to act as intermediaries for larger partners. Although they work with the smaller banks, they are increasingly focusing on the growing financial product distributor segment. Nowadays, insurance policies are increasingly sold via bank branches.
Growing importance of the internet
The internet has now become the most important medium for consumers to obtain information about financial services. A study undertaken by Mercer Oliver Wyman in 2007 showed that the internet is the most important source of information for one in every two home loans and the primary introductory tool. Nonetheless, most deals are closed at the branch office, so the internet can get customers interested, but a branch office is often needed to close the deal.
Hypoport's B2B financial marketplace has added greatly to the importance of the internet as a settlement tool among professional market participants.
Only a few countries in mainland Europe have achieved the same market level as Germany. The volume in the eastern European countries is currently too low to justify setting up B2B financial marketplaces and intermediaries do not yet play a major role in the region. The Scandinavian markets are also very small and their oligopoly-like structures frequently mean they are transparent. The south-east European markets are completely insignificant in this respect. The only interesting market is in the small Benelux countries. There is a high proportion of owner-occupied homes in the Netherlands, making the Dutch property finance market about half the size of the German market. In absolute terms, the intermediary segment is actually bigger than that in Germany because intermediaries have such a large market share.
Internet-based financial product distribution
Hypoport specialises in generating large numbers of online customer enquiries via its subsidiary Dr. Klein & Co. AG. These customer contacts then become leads. Unlike many other financial product distributors, we concentrate on private clients who already require a financial service. Leads are converted into deals using various online distribution channels, telephone advice or advice provided in-branch, depending on the product and the customer's preference. Our fast-growing branch network is therefore not reliant on "passing trade"; it has access to leads generated on the internet. We also sell surplus leads to smaller, independent financial product distributors, who can obtain their products from us at the same time.
Our product range includes banking and financial products – including current accounts, insurance and mortgage finance – provided by more than 100 reputable banks and insurance companies. The web-based processes on the EUROPACE platform and our purchasing volume generate cost advantages that are passed on to private clients so Dr. Klein frequently offers its customers better terms and lower prices than local banks and insurance agencies.
Dr. Klein's institutional clients division, which was established in 1954, also acts as a financial service provider for property investors. We are the leading distributor of finance for municipal and cooperative housing associations. Our customer relationship management is based on highly professional regional distribution that focuses on the client. During the years that we have been active in the corporate client sector we have established relationships with more than 500 customers who regularly source their financial services via Dr. Klein.
B2B financial marketplace
The EUROPACE B2B financial marketplace operated by Hypoport is Germany's biggest online transactions platform for selling financial products. Over 100 IT staff continuously adjust and refine EUROPACE. Key-account managers regularly recruit financial product distributors and product suppliers as new platform users, and they also focus on intensifying our business relationships with existing clients. As well as managing individual customer relationships we also hold two EUROPACE conferences a year to consolidate our network.
EUROPACE is a fully integrated system that links several thousand financial advisors with more than 40 product suppliers, such as banks, building societies and insurance companies and it enables its partners to close deals quickly and directly with each other. The highly automated processes used on this platform generate significant cost advantages. The system encompasses all the processes used by financial product distributors and product suppliers in connection with new business origination. Some product suppliers already use EUROPACE for all their origination processes because of its comprehensive functionality.
EUROPACE is also used for data management and portfolio transaction analysis in Europe. The Institutional Clients business unit supports European banks in the financial reporting of securitisations and portfolio sales.
Synergy of business models
The Financial Product Sales corporate division (Dr. Klein) benefits from the EUROPACE B2B financial marketplace because it uses the latest technology and also because it provides access to a broad range of products offered by a large number of suppliers. In return, the practical experience of a strong financial product distributor within the group is beneficial for the enhancement of EUROPACE.
Generation of leads on the internet and distribution capacity
The Financial Product Sales corporate division (Dr. Klein) is particularly strong on generating leads by using numerous online marketing channels. In recent years it has steadily developed its websites, networks and downstream processes to optimise conversion rates. Our constantly growing distribution network converts leads into deals and the resulting increase in our business volume is increasingly strengthening our market position which enables us to negotiate advantageous terms with product suppliers.
Unique technology for processing financial services
EUROPACE is Europe's biggest B2B financial marketplace for linking financial product distributors with suppliers. We dominate the distribution market in Germany and our importance to branch-based retail banks is increasing. In the Netherlands we are at the market launch stage but we have already won an innovation award.
EUROPACE gives our product suppliers access to all the major financial product distributors and conversely it gives our financial product distributors access to all the key suppliers, so our competitors face an extremely high barrier. From our point of view, a second benchmark in the market is unnecessary – and impossible in the short term.
By 2014, we plan to be among the top five non-captive financial service providers in Germany. We would also like to gain sufficient critical mass in all our business units to be able to exploit economies of scale.
Widening product range
The merger with Dr. Klein has already moved Hypoport closer to becoming a distributor of a full range of financial services. In 2003, we were still a specialist home loans supplier but today we offer a broad range of products and we already generate more revenue from other financial services than from our former core business.
The EUROPACE B2B financial marketplace is also moving in this direction. In addition to home loans, the platform can now also handle personal loans, building finance products, current accounts and property-related insurance. EUROPACE is becoming the workplace standard for the non-captive financial product distribution sector.
Expansion of distribution capacity
Dr. Klein is currently expanding its branch network on a massive scale to increase our financial product distribution. Demand, particularly from non-captive distribution partners, is increasing as a result of our new franchise system which involves us supplying partners with leads.
We have also taken on additional key account management staff for EUROPACE, so that we can further improve our response to customer requirements.
Growth in the intermediary market
Independent studies predict that the intermediary market in Germany will virtually double in size in the next few years, and we intend to grow at least in line with the market. However, given that the selection process favours larger financial product distributors, we believe we have a good chance of growing even more strongly than the market. Our EUROPACE B2B financial marketplace will benefit both from its financial product distributors growing with the market and also from a greater proportion of their business being processed using EUROPACE.
Recruiting branch-based retail banks
Because branch-based retail banks increasingly refer financial services to other product suppliers – frequently in their own network - we have entered a new market segment to tap into their potential. EUROPACE technology enables retail banks to process business on their own books as well as agency business using the same system. We are focusing on cooperative banks and savings banks in this area.
As a German company, our attention is focused on our home market of Germany where there is still great potential for growth. We plan to expand gradually into other countries, starting with the Netherlands where we are currently launching EUROPACE. Our Institutional Clients business unit already operates across Europe – paving the way for the Group.